MCP wishes everyone a prosperous Chinese New Year as we are now over a week into the Year of the Fire Horse, a “Double Fire” combination symbolising energy and volatility.
In markets, “fire” could either symbolise a continuation of last year’s blistering rally or a crash and burn. Reflecting on China’s performance last year, the market appeared driven more by sentiment and liquidity injections than by earnings growth or fundamental re-ratings. The Fire Horse also symbolises independence, a theme likely to remain central to China’s strategic direction, particularly in the technology sector amid increased geopolitical tensions with the US.
The last year of the Fire Horse in 1966 stands as one of the most volatile, defining, and ultimately tragic periods in China’s modern history, marked by the beginning of the Cultural Revolution. The movement was launched by Chinese Communist Party Chairman Mao Zedong, with the stated goal to preserve communism and purge those “who have followed the path of capitalism”. Beyond the profound human tragedy, with an estimated 2 million lives lost, the revolution caused a severe economic contraction as industrial production, agriculture, and the education system were all majorly disrupted by the social and political turmoil.
China has since undergone extraordinary transformation becoming the world’s second-largest economy and home to some of the largest capital markets, such as the Shanghai Stock Exchange, only opening in 1990.
As we enter the Year of the Fire Horse, 2026 reflects the continued structural rebalancing of China’s growth drivers. GDP growth is projected at around 4.5%, with export momentum moderating and the property sector remaining a drag, albeit a diminishing one. Domestic activity is expected to remain broadly resilient, supported by measured policy actions and ongoing expansion in innovation-driven sectors. At the same time, uncertainties surrounding trade and technology policies, the trajectory of the property adjustment, and global macro conditions may contribute to continued market volatility. In this environment, a disciplined and selective approach remains warranted.
