How to Allocate Assets During the A-Share Interim Report Season? What Are the Main Investment Themes? Strategies from Ten Major Securities Firms Are Here

The latest strategic insights from the top ten brokerage firms have been released, as follows:

CITIC Securities: Prioritize the North American AI hardware supply chain for mid-year report season allocation

Before the mid-year report season, we have summarized the five questions that investors are most concerned about recently and provided our judgments. Firstly, which industries are suitable for allocation during the mid-year report season? Our top recommendation remains the North American AI hardware supply chain, which can still be participated in after the pullback. Industries with expected good mid-year report performance and relatively reasonable valuations (such as wind power, gaming, pets, minor metals, rare earths, and securities firms) or those that have exited the market more thoroughly (such as lithium battery equipment and inverters) are also worth noting. Secondly, what are the reasons for the recent weakness in Hong Kong stocks? Are there still opportunities ahead? We believe that expectations of tightening Hong Kong dollar liquidity, share placements, and increased share reductions will constrain the beta of Hong Kong stocks in stages. However, after the correction of industry momentum, alpha opportunities will become more prominent in the next two months, especially in the fields of electric vehicles, innovative drugs, and new consumption.

Thirdly, domestic price signals are relatively weak. What is the current attitude of foreign investors towards Chinese assets? We believe that the biggest change in foreign investors' attitude towards Chinese assets so far this year lies in their attention, patience, and long-term recognition. However, in the short term, due to a series of factors, actual capital inflows are not significant, and a trend of capital inflows needs to continue to be awaited. Fourthly, will the decline in micro-cap stocks trigger systemic volatility? We believe the probability is low. With the experience from early last year, many quantitative products have already made risk control preparations in advance. However, in an environment of high valuations, high congestion, and weak fundamentals, valuations will continue to be revised downward during the mid-year report season. Fifthly, what are the potential external risks during the mid-year report season? We believe that Trump's use of Section 232 investigations to replace executive orders to promote the implementation of industry-specific tariffs, as well as the temporary repatriation of funds to US dollar assets after the implementation of the tax cut bill, may have an adverse impact on non-US markets.

Hua'an Securities: Gathering strength for an upward breakthrough amidst volatility

While loose liquidity supports the market from falling, the slow recovery of endogenous growth momentum and the need to balance long-term and short-term policies constrain the market's rapid upward movement. The full-A earnings forecast indicates that the trend of earnings improvement since hitting bottom in 2024Q4 can basically be established in H2, which may become an important force for the market to break through upwards. Overall growth shows a steady pullback trend, and the achievement of the annual target is not in doubt. The growth pressure in H2 is certain to increase. Consumption will continue to improve with policy support, but its "slow-moving variable" nature will ultimately be unable to offset the rapid decline in exports and real estate. There are also policy reserves and responses, with fiscal and monetary policies both expected to be further strengthened.

Industry allocation: Prioritize three major directions. In terms of style dimensions for H2, finance outperforms growth, which outperforms consumption, which outperforms cyclicals. In terms of industry dimensions, we continue to be optimistic about high-dividend industries represented by banks and insurance, as well as industries with good prospects represented by new metal materials. The growth-oriented and active themes are expected to experience a downturn followed by an upturn. 1. Stabilizing the market, high dividends, and strategic value: banking and insurance. With an improving economy and a macro environment characterized by loose liquidity, seasonal opportunities typically arise in the banking and insurance sectors. 2. Growth drivers: new metal materials, minor metals (rare earth permanent magnets), precious metals, engineering machinery, motorcycles, and agrochemical products. 3. Growth-oriented and active themes: AI + robotics, and military industry.

China Securities: Hong Kong stock market adjustments drag down A-share sector rotation

The new consumption and innovative drug sectors in the Hong Kong stock market, which had performed strongly in the early stages, have recently experienced significant adjustments, leading to substantial fluctuations in related A-share sectors. Currently, both liquidity and risk appetite in the Hong Kong stock market are under pressure, a situation that may persist for some time. The domestic fundamental landscape continues to be characterized by weak domestic demand alongside structural growth. The "science and technology innovation" topic gained renewed attention at the Lujiazui Forum. The US Fed held interest rates steady at its June meeting, with uncertainty surrounding the US economic outlook remaining high. Tensions in the Middle East have escalated, with attention focused on subsequent US actions. The allocation strategy maintains a focus on dividend-yielding assets and new sectors. On one hand, dividend-yielding assets continue to serve as the core holding, while on the other hand, new sectors may become the key to investment success. In the short term, AI, semiconductors, and science and technology innovation themes are more highly recommended, with new consumption and innovative drugs remaining a mid-term focus.

Key industries to watch: banking, non-banking finance, transportation, public utilities, electronics, communications, computers, discretionary consumption, pharmaceuticals, etc.

Zhongtai Securities: What impact will the reform measures for the Science and Technology Innovation Board (STAR Market) have on the market?

The "1+6" reform stimulus policy package {{specifically referring to the economic stimulus policies of the People's Bank of China}} for the STAR Market, introduced at the Lujiazui Forum, has once again elevated the intensity of capital market reforms to a new level. It is expected that over the next year, supporting details aimed at facilitating financing for private science and technology innovation enterprises, easing mergers and acquisitions (M&A) and restructuring, and enhancing trading activity will continue to be implemented, catalyzing three main investment themes: 1. Private technology leaders in the Hong Kong and A-share markets: From the policy direction this year, signals supporting private technology enterprises have become increasingly clear. Especially under the guiding principle of "encouraging private leaders to grow bigger and stronger," technology leaders in the Hong Kong stock market may become the most direct beneficiaries. Marginal improvements in the policy environment may provide support for their valuation recovery and earnings expectation adjustments, potentially forming the main trend in 2025. 2. Technology leaders with financing/investment needs: It is expected that support for private enterprises in the capital market will increase in the future, with capital tools such as M&A, restructuring, and initial public offerings (IPOs) gradually being liberalized. This trend will significantly benefit leading technology enterprises with clear financing or investment needs. 3. The securities sector may benefit: With the gradual implementation of a series of capital market reform measures, overall market activity is expected to increase in stages in 2025. As market volatility rises, the securities brokerage sector may benefit from increased trading activity, the recovery of investment banking operations, and the enhancement of capital intermediation functions, becoming one of the directions for phased allocation.

Guotai Haitong: Limited Impact from External Disruptions, Stock Market Rally Not Yet Over

After the release of short-term risks, the core contradiction of China's stock market remains internal rather than external. We remain more optimistic than the consensus on market trends: 1) Investors have a sufficient understanding of the complexity of the economic and international situations, while business opportunities in new technologies, new consumption, and other areas are beginning to emerge, driving economic expectations to stabilize and rebound; 2) After interest rates have fallen to low levels, with long-term government bond yields breaking below 2% and deposit rates breaking below 1%, the risk-free interest rate in China's stock market has substantially decreased, reducing the opportunity cost of investing in stocks. This marks a historical turning point for long-term and retail investors entering the market; 3) Timely, appropriate, and reasonable macro policies, along with reforms to the basic institutional framework of the capital market that place greater emphasis on investor returns, are crucial for reducing the assessment of economic and social risks and changing investors' conservative attitudes towards risk. Both market expectations and micro liquidity in the stock market are on an upward trend, and we continue to maintain a bullish outlook.

Theme Recommendations: 1) Digital Currency: The implementation of legal regulations for stablecoins accelerates industry growth, and the launch of cross-border payment channels facilitates cross-border settlements. We are optimistic about blockchain/clearing system/security protocol service providers. 2) AI Agents: The accelerated implementation of vertical scenario applications makes us optimistic about internet leaders with capital expenditure and user advantages. 3) Mergers and Acquisitions: The optimization of policies for the acquisition of unprofitable non-core assets makes us optimistic about the restructuring and integration in the technology manufacturing and energy resources sectors. 4) Domestic Consumption: The issuance of policy documents by the General Office of the CPC Central Committee and the General Office of the State Council to further safeguard and improve people's livelihoods makes us optimistic about childcare/elderly care/education, etc.

Huaxi Securities: The "1+6" Policy System Focuses on Hard Technology, Further Releasing Institutional Dividends in the A-share Market

The "1+6" policy system introduced by the China Securities Regulatory Commission (CSRC) can be seen as the implementation of deepening reforms in the Sci-Tech Innovation Board (STAR Market) under the "1+N" system of the capital market. Since 2024, the "1+N" policy system, with the "New Nine Measures" as its mainstay, has continued to improve. The CSRC has focused on serving the real economy, particularly supporting technological innovation, and has successively issued and implemented policy documents such as the "16 Measures for Technology," the "Eight Measures for the STAR Market," the "Six Measures for Mergers and Acquisitions," and the implementation opinions on the capital market's role in "writing five major articles." These efforts have continuously improved the institutional framework and market ecosystem supporting technological innovation. This time, the CSRC has further introduced the "1+6" policy system for deepening reforms, focusing on providing full-chain, life-cycle financial services for technology-based enterprises. The dividends of capital market institutional reforms are being further released, which is conducive to enhancing the medium and long-term allocation value of A-shares and increasing their attractiveness in the international capital market.

Policies are focusing on enhancing the inclusiveness and adaptability of the capital market system, with the listing of high-quality core technology enterprises expected to accelerate. The Lujiazui Forum proposed the establishment of a Science and Technology Innovation Growth Tier, the restart and expansion of the application of the fifth listing criteria for the Science and Technology Innovation Board (STAR Market), and the official adoption of the third criteria for the ChiNext Market, marking significant breakthroughs in the reform of the capital market's inclusiveness and adaptability. The restart of the fifth criteria for the STAR Market, the expansion of its application from the pharmaceutical industry to sectors such as artificial intelligence, commercial aerospace, and the low-altitude economy, as well as the adoption of the third criteria for the ChiNext Market, will further enhance the inclusiveness of the multi-tiered capital market system. Subsequently, IPOs in technology sectors such as artificial intelligence, commercial aerospace, and the low-altitude economy within the dual-innovation boards are expected to accelerate, better supporting the financing needs of high-quality technology enterprises.

Cinda Securities: Can the rally in bank stocks spread to non-banking sectors?

Considering the significant presence of quantitative funds and the new assessment regulations for public funds, there is a possibility that the rally in bank stocks could spread to the overall financial sector. While valuation recoveries in most sectors occur near inflection points in business conditions, the experience with bank stocks suggests that fund behavior could also be a crucial factor. We believe that for the rally in bank stocks to spread to the entire financial sector, attention should be paid to quantitative and public funds at the funding level. In the process of continuously seeking momentum opportunities, quantitative and other funds may focus on financial stocks at certain stages, as banks have already demonstrated strong momentum. If the momentum within the growth and consumer sectors gradually weakens, financial stocks may strengthen. Meanwhile, the new assessment regulations for public funds are also an important factor. Banks are the industry with the largest underweight in public fund holdings compared to their index weights, followed by non-banking sectors.

Outlook on Allocation Style: During the July earnings reporting season, styles are prone to temporary shifts between high and low valuations. There are similarities between the investment approaches for new consumption and AI: both involve a combination of a small number of companies' performance and industrial logic, with many second- and third-tier stocks experiencing pure valuation recoveries. Based on this, it is inferred that there will be an adjustment in new consumption around the earnings reporting season, with the possibility of a second wave of rally afterward. AI technology is at the end of a quarterly consolidation. The consolidation over the past quarter was mainly due to the lack of diffusion in AI performance. Referring to the experience from 2013-2015, there will likely be another performance after 1-2 quarters of consolidation. In the financial cycle, banks can continue to be overweight, while other financial cycles may experience a similar market trend to that of Q4 2014 in Q4, potentially driven by a combination of new economic policies and inflows of incremental funds from residents.

Bank of China Securities: Guard against short-term volatility adjustments and allocate for medium-term elasticity at opportune times

The A-share market is expected to continue its consolidation pattern in the short term, with limited adjustments in the main industries of this round. In the medium to long term, industry styles are expected to revert to elasticity, and allocations can be made at opportune times during the volatility adjustment period. The logic of the short-term market's sideways consolidation pattern has not undergone fundamental changes, but market sentiment is approaching a short-term cyclical peak: the current risk premium level of stocks and bonds in the market is close to the 10-year average +1 standard deviation (STD). Except for a temporary breach of this upper limit by market sentiment in Q4 2024 over the past two years, market sentiment has struggled to surpass this threshold in most cases. Currently, there is still uncertainty in the fundamental environment, while short-term market sentiment is moderately high, limiting the market's short-term upside room. However, with the support of the funding situation, the downside risk is manageable.

China Merchants Securities: The Impact of May's Economic Data and Industry Prosperity Changes on A-shares

From January to May, economic data continued to slow down compared to the previous period due to tariff disruptions. The structural changes are mainly as follows: 1. The growth rate on the production side slowed down, with the midstream manufacturing sector leading in growth, but most sectors experienced a slowdown, and prices continued to decline; 2. The growth rates of infrastructure and manufacturing investment both slowed down, with only the textile industry, transportation, and high-tech service sectors seeing an expansion in investment growth; the decline in real estate investment widened, with both domestic loans and self-raised funds weakening; 3. The growth rate of total retail sales of consumer goods continued to improve, particularly in home appliances, communication equipment, etc.; 4. Export growth narrowed, with significant growth in exports to non-US markets, and exports of automobiles, integrated circuits, etc., continued to improve against the trend.

Based on the profitability of industrial enterprises and industry prosperity, it is expected that the sectors with relatively high growth rates in mid-year reports will mainly be concentrated in: TMT (semiconductors, optoelectronics, consumer electronics, operators, software), midstream manufacturing (automobiles, PV, automation equipment), consumer services (agricultural and sideline food processing, beverage and dairy, home appliances, furniture, entertainment goods, gold, silver, and jewelry, etc.), and others (precious metals, gas, electricity, agrochemical products, fluorochemicals).

SDIC Securities: The economic slowdown in Q2 is relatively mild, and tail risks are manageable with policy support

Recently, major economic data such as industrial production growth, total retail sales of consumer goods, and commercial housing sales in May have been released. It is worth noting that with the support of the trade-in policy, total retail sales of consumer goods have continued to exceed expectations. However, some regions have suspended national subsidies, and a certain degree of pullback may follow. Under the impact of tariffs, the growth rate of industrial production has gradually slowed down. The real estate market is facing a dilemma of shrinking volume and prices. After the weakening of sales momentum, prices have declined, with second-hand housing prices in first-tier cities falling for two consecutive months, raising concerns about the resulting slowdown in credit growth. There are divergent characteristics in prices, with core CPI stabilizing and excellent performance in the service sector, but the decline in PPI exceeded expectations. However, considering the positive progress in tariff negotiations and the introduction of growth-stabilizing policies, it is expected that the extent of the economic slowdown in June will be relatively mild, and the risk of an economic downturn will be manageable. From a macro perspective, attention needs to be paid to the erosion of corporate profits caused by the low-inflation environment.

According to the four-stage pricing model for replacing old growth drivers with new ones in the Japanese stock market, the stages are "intertwining of old and new," "new surpassing old," "the swan song of the old," and "the era of the new." Currently, the A-share market is in the "new surpassing old" stage of replacing old growth drivers with new ones. Here, the basic meaning of what we refer to as "new" is as follows: 1) New trends: Hong Kong stocks are expected to gradually become China's new core assets; 2) Going global will become a new determinant of success for the growth of the A-share market; 3) New technologies: A-share hardware technologies (AI semiconductors, military + innovative drugs) + Hong Kong stock software technologies (Internet + intelligent driving); 4) New models: New-era consumer investment centered around the New Consumption 50 Portfolio.