Why does the A-share market tend to see a “spring rally” around Chinese New Year each year?

What happened: Historical data show that A-shares have exhibited a certain positive calendar effect around the Spring Festival: across multiple samples, the probability of gains was approximately 70%–80% during the five trading days before the holiday and the 5–20 trading days after it. However, this pattern does not occur every year, and its strength and duration are affected by the macroeconomic cycle, policy expectations, valuations, earnings trends, and overseas conditions.

Conclusion: The “spring rally” is most likely the result of several factors converging around the turn of the year, rather than an effect caused by the Spring Festival alone. Liquidity management and the return of funds around the holiday create supportive conditions; the lull in macroeconomic data and earnings disclosures broadens the scope for trading on expectations; policy expectations ahead of the Two Sessions and institutions’ asset allocation at the start of the year further boost risk appetite. When pessimistic expectations have already been substantially priced in, the market may also see a valuation recovery.

CONFIDENCE

Medium

The underlying materials support the relatively high probability of gains around the Spring Festival, the need for cash injections and liquidity management during the holiday period, the combined release of January macroeconomic data, and the timing of the Two Sessions. However, these factors overlap considerably, and public evidence makes it difficult to distinguish each factor’s independent contribution to stock-market gains precisely. Historical counterexamples also show that this mechanism does not reliably translate into a sustained rally.

CAUSES

Candidate causes

PrimarySeasonal improvement in liquidity and reallocation of funds at the start of the year

Before the Spring Festival, cash withdrawals by households, wage and bonus payments by companies, and tax payments increase demand for funds. Funds return after the holiday, while the central bank and banking system typically need to maintain stable liquidity. First-quarter credit expansion and institutions’ reallocation of funds may also improve the funding environment for equities.

Evidence

Before the 2025 Spring Festival, the People's Bank of China conducted a large-scale 14-day reverse repo operation, explicitly intended to offset factors such as cash injections and maintain ample liquidity ahead of the holiday.
The underlying materials note that the Spring Festival affects cash injections, household savings, and interbank interest rates, while the return of funds after the holiday and a first-quarter credit “good start” may change funding conditions.
This factor can explain the funding conditions needed for gains, but the underlying materials also note that interbank liquidity does not necessarily flow directly into the stock market.

PrimaryLull in macroeconomic data and earnings information

January macroeconomic data are generally not released separately; data for January and February are reported together. There is also a gap between the release of annual earnings forecasts and the publication of full-year reports. With less information available temporarily, the market is more likely to trade on expectations of an economic recovery over the year, additional policy support, and industry trends.

Evidence

Since 2012, the National Bureau of Statistics has not separately released January data on industrial production by enterprises above designated size and other indicators; it has instead reported January–February data together.
Production, consumption, exports, and financial activity around the Spring Festival are disrupted by the holiday, making single-month data less comparable.
The underlying materials note that annual earnings forecasts are concentrated around the turn of the year, while a window for trading on expectations exists between the Spring Festival and the full release of annual reports.
This mechanism only indicates that the market is more likely to trade on expectations; it does not guarantee that those expectations will be realized.

PrimaryRising policy expectations ahead of the Two Sessions

The Spring Festival usually falls relatively close to the annual Two Sessions. The market may trade in advance on expectations for economic growth targets, fiscal arrangements, industrial policy, and capital-market policy, creating a temporary policy-expectations rally.

Evidence

The National People's Congress opened on March 5 in both 2024 and 2025. After the Spring Festival, there is typically a policy-expectations window lasting several weeks to more than a month.
The underlying materials identify growth targets, the fiscal deficit, and technology and industrial policies around the Two Sessions as common catalysts.
Policy announcements at the Two Sessions do not exceed expectations every year, and external shocks may outweigh domestic policy expectations. This factor is therefore more of a catalyst than a consistent cause.

SecondaryInstitutional asset allocation and portfolio rebuilding at the start of the year

After year-end rankings, redemptions, and risk controls have run their course, institutions may formulate new annual allocation plans at the start of the year, prompting shifts among defensive assets, large-cap value and small-cap growth, and technology themes.

Evidence

Research cited in the underlying materials found that large-cap, value, and low-volatility assets tended to outperform before the holiday, while small-cap, growth, and high-beta sectors were relatively active afterward.
Some statistics show relatively high historical win rates or excess returns after the Spring Festival for the CSI 1000, Guosen 2000, and sectors such as computers, communications, electronics, machinery, defense, and media.
The underlying materials explicitly note that the flows of funds from public funds, insurers, wealth-management products, and private funds are difficult to fully trace, and that inflows may reflect reallocations between sectors rather than net additions to the market as a whole.

SecondaryValuation recovery and mean reversion after year-end risk reduction

If the market has undergone a substantial correction and pessimistic expectations have already been fully priced in, valuations may recover around the Spring Festival even without an improvement in earnings, in response to marginal improvements in policy, liquidity, or risk appetite.

Evidence

The underlying materials note that the spring rally occurred in some years when earnings remained weak, indicating that the rally did not depend entirely on current earnings growth.
The underlying materials cite 2019 as an example combining valuation recovery, policy expectations, and improved liquidity.
This mechanism requires a sufficiently large prior decline and low valuations; low valuations alone do not guarantee gains.

UncertainBehavioral-finance and cultural sentiment effects associated with the Spring Festival

Before the holiday, investors may be less inclined to trade pessimistically or sell. They return to the market afterward, and holiday- and New Year-related sentiment may amplify short-term risk appetite and return patterns.

Evidence

Academic research and dissertations show that abnormal returns may be concentrated in a small number of trading days around the Spring Festival.
The underlying materials note that lower trading volume and reduced selling pressure before the holiday, as well as the return of funds afterward, may produce similar return patterns, making it difficult to isolate the role of cultural sentiment.
The growth of institutional investors, quantitative trading, and ETFs may also weaken simple holiday effects.

UncertainRobust Spring Festival consumption directly drives gains across the stock market

Spring Festival spending and travel may affect sectors such as tourism, food and beverage, home appliances, and commercial retail, but the underlying materials do not provide sufficient evidence to support this as an explanation for the spring rally in the A-share market as a whole.

Evidence

The underlying materials only support the possibility that Spring Festival spending may affect some consumer and travel-related sectors.
The underlying materials explicitly state that consumption data and stock-market gains may occur at different times, making it difficult to explain broad gains across the overall market index.

Caveats

There is no uniform definition of the “spring rally.” Returns narrowly defined around the Spring Festival should not be conflated with the broader market performance around the turn of the year.
A historical probability of gains of approximately 70%–80% does not mean that the market rises every year, nor that average returns are consistently positive; performance was weak or lacked momentum in years such as 2014, 2018, and 2022.
Liquidity injections, credit growth, or the return of funds do not necessarily translate into incremental investment in stocks; funds may instead flow into bonds, bills, loans, or other assets.
Policy expectations may be priced in ahead of time, and positive news may be fully reflected in prices; formal policy implementation may not continue to drive the rally.
The relative outperformance of small-cap growth and technology stocks after the holiday is more likely one manifestation of the spring rally than its underlying cause.
A spring rally does not predict the full-year market trend; significant corrections may still follow gains in the spring.

Research sources

This page was generated by AI with web research from a user-submitted prompt and shared publicly by the submitter. It is not investment advice.

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