Analysts bullish on equities' performance after Spring Festival

Although the A-share market dipped on Wednesday, experts said they remain optimistic on the market's performance after the upcoming Spring Festival.

The benchmark Shanghai Composite Index dropped 0.72 percent to 2575.58 points on Wednesday, while the Shenzhen Component Index fell 1.07 percent to close at 7470.47 points.

Companies with positive interim full-year financial results for 2018 saw their prices surge on Wednesday, according to Shanghai-based information provider Wind Info.

The soaring prices of photovoltaic silicon wafers and iron ore globally helped to boost the prices of related listed A-share companies.

Dongxing Securities wrote in a note that the upcoming Spring Festival, which falls on Feb 5 this year, will facilitate A shares' best performance in the past three years.

Most institutions will have adjusted their investment portfolio before the market closes for Spring Festival holidays on Feb 4. Institutional and individual investors will enter the market with additional capital when trading resumes on Feb 11, according to Dongxing.

The consumption sector in particular will post strong performance during the festive period, given that it is one of the peak seasons in the year. As the Shanghai Composite Index has risen over 3.9 percent so far this year, the market will probably perform better than the same period in the past two years, according to the note.

Investors can look for opportunities among securities firms, property developers and the infrastructure sector, Dongxing suggested.

Cinda Securities agreed that investors should focus on consumption industries with stable profitability, such as the food and beverage, home appliances and pharmaceutical sectors. But it recommended caution investing in the media and communications, coal and engineering sectors.

According to a report from Guotai Junan Securities, increased risk appetite is a major reason for market fluctuations around the Spring Festival, based on figures from 2010 to 2018.

The current market resembles that in 2012, when risk appetite increased but market expectations were relatively low. In this sense, there will not be a spike in the A-share market soon, the Guotai report said.

Yang Delong, chief economist at Shenzhen-based First Seafront Fund, predicted that the A-share market is likely to show more signs of recovery in February.

For one thing, MSCI is set to increase its weighting of A shares from 5 percent to 20 percent, which will bring additional capital inflows of 360 billion yuan ($54 billion). In addition, uncertainties such as the trade frictions between China and the United States are likely to be addressed with a framework agreement, which will also be an impetus for A shares, he said.

"The A-share market has survived various risks. Although it is not yet completely prepared for a bull market, it is now a good time for mid to long-term investment," Yang added.