Since August, the A-share market has rebounded amidst volatility, with previously beaten-down communication and electronics sectors leading a recovery. Building materials, pharmaceuticals, and other industries have also warmed up in tandem. As of the close on August 17, the Shanghai Composite Index returned to near the 4,000-point mark, closing at 3,982.65 points, up nearly 4% for the month, while the STAR Composite Index and ChiNext Index have surged over 15% and 11%, respectively, during this period.
According to an analysis by the Zhang Qiyao team at兴业证券策略, there is a "hidden thread" behind this seemingly rotational repair: the return of the fundamental beta. In the recovery since August, fundamental factors such as revenue growth, net profit growth, and order growth have become the primary pricing drivers for most industries. Looking ahead, the core market debate centers on whether this rebound can evolve into a trend reversal.
The recovery rally is deepening in its scope. After a notable correction in global equity markets in July, a rebound arrived in August. Taking the A-share market as an example, Wind data shows that from August 1 to 17, the Shanghai Composite Index and the Shenzhen Component Index rose by 3.92% and 8.29%, respectively, while the ChiNext Index and the STAR Composite Index gained 11.85% and 15.34%. Although tech stocks continue to lead this rebound, unlike the first half of the year when the AI trade shone alone, this recovery covers a broader front.
As of August 17, since the start of August, communications, electronics, and machinery have advanced 19.30%, 17.88%, and 13.15%, respectively, making them the three best-performing CITIC first-tier industry indices during the period. Building materials and non-ferrous metals followed, rising 12.07% and 10.42%, respectively, within the month. Notably, electronics, communications, and building materials were the three worst-performing sectors in July. Additionally, since August, pharmaceuticals, defense and military, and basic chemicals have posted gains between 8% and 10%, while real estate, power equipment and new energy, light manufacturing, and computers have risen between 6% and 8%.
"During the recent market uptrend, industry rotation intensity remains at a yearly high, indicating that the market is rotating across sectors to seek opportunities," noted the Zhang Qiyao team at兴业证券 in a research report. The team believes that behind this seemingly rotational repair lies a "hidden thread": the return of the fundamental beta. From a factor perspective, in the recovery since August, fundamental factors such as revenue growth, net profit growth, and order growth have once again become the market's "watershed," serving as the main pricing drivers for most industries. Fundamentals remain the core of market trading.
It is worth noting that overseas tech assets have rebounded faster than their A-share counterparts recently. Xia Fanjie, an investment strategy analyst at中信建投证券, suggests that the A-share tech recovery has been noticeably slower, not due to a reversal in industry trends, but rather due to differences in trading pace and capital structure between domestic and overseas markets. Overseas tech leaders entered corrections earlier, while A-shares continued to accelerate upward, with concentrated capital inflows accumulating trading crowding and margin financing pressures. After proactive regulatory cooling, A-shares need more time to digest positions, making short-term recovery elasticity weaker than overseas markets.
"At present, the core segments of computing power have not been fundamentally disproven, and demand and earnings expectations for key domestic and international companies remain robust. The A-share tech recovery is not over. As the trading structure gradually stabilizes, core companies with higher earnings certainty are expected to converge back toward the global tech industry trend," he analyzed. Wei Jixing, chief strategy analyst at开源证券, stated that in the short term, until crowding significantly eases or a strong tech narrative emerges, the broad beta of a comprehensive tech rally may be hard to replicate.
Whether individual segments can break through previous highs is essentially a result of two dimensions rising in tandem. The first is the fundamental dimension, i.e., fundamental delivery, reflected in signals such as steeper price increase trajectories and sustained growth exceeding expectations, testing whether hard indicators like orders, prices, and shipment volumes can continue to validate earlier industry narratives. The second is the expectation dimension, i.e., position in the industry chain, reflected in the reshaping of competitive dynamics through technological breakthroughs, enhancement of industry chain bargaining power and scarcity, thereby breaking through original valuation and ceiling constraints.
Institutions are debating the post-rally main line. The market's current key focus is whether this rebound can further evolve into a trend reversal. In the short term, verification signals from policy or fundamentals will be pivotal variables. The strategy team at方正证券 points out that if this is merely a oversold rebound, the time and space for the current market rebound have been fairly fully realized. A shift from rebound to reversal requires clear catalysts and a defined market main line, which are still awaited.
An official at金鹰基金 expects that indices may continue to consolidate around key levels in the short term. As August's latter half enters the peak period for interim report disclosures, the market's pricing focus is expected to shift further from sentiment and valuation repair to earnings delivery, with sector divergence likely to intensify. The asset allocation research team at招商证券 notes that with mixed bullish and bearish factors, the market is unlikely to continue rising sharply and rapidly, yet overseas risks are gradually dissipating, and prices and sentiment have not weakened significantly, making it hard to justify excessive caution. The team focuses on whether subsequent policy measures or earnings reports can "assist" in further market warming.
On a medium-term horizon, the strategy research team at国泰海通 believes that the Chinese stock market will gradually usher in a "golden autumn rally." Qiu Xiang, chief A-share strategist at中信证券, mentioned that while industry trends in many sectors remain upward, factors constraining valuation expansion are increasing, potentially slowing the upward pace. The phenomenon of doubling valuations in a single quarter, seen in Q2, is extremely rare on a decade-long scale, and investors need to recalibrate to reasonable expected returns.
"Market opportunities may increasingly manifest as valuation repairs for assets with earnings support. The subsequent process of market volatility reduction is also one of optimizing chip structures and repricing quality assets, laying a solid foundation for the continuation of the medium-to-long-term rally," Qiu Xiang stated. Regarding positioning for the autumn rally, Wang Li, senior macro strategy researcher at长城基金, recommends focusing on three directions: first, emerging technologies, where enterprise-side AI penetration is accelerating, coupled with improvements in domestic open-source model capabilities, the AI industry and computing power investment are entering a growth supercycle. Attention can be paid to semiconductor equipment, domestic chips, communication equipment, non-ferrous metals, and non-metallic new materials.
Second, advantageous manufacturing, where China's electromechanical manufacturing and pharmaceutical industries are highlighting global competitive advantages, with strengthening momentum for overseas expansion. Attention can be paid to pharmaceuticals and biotechnology, and power grids. Third, the financial sector, focusing on securities firms and banks that have completed microstructure clearing and show stronger earnings resilience. Additionally, the Zhang Yidong team at海通国际 judges that across major global stock markets, new market main lines are gestating. The medium-term opportunity worth seizing is the diffusion of capital from previously crowded old logics to new fundamental logics. In particular, Hong Kong stocks have become more attractive for allocation, having bottomed out earlier than overseas markets. For value investors, it is advisable to counter-cyclically position during market volatility, without fearing short-term missed opportunities, and certainly avoiding chasing highs after rapid rebounds.
Specifically, two main lines deserve attention: first, the TMT market is focusing on "differentiation," moving from thematic investment to earnings validation, with the AI industry logic shifting from infrastructure-centric to application-centric. Second, along the "AI+" main line, there is diffusion toward "non-AI tech" sectors, where hardcore assets in non-AI tech industries may see "old trees bloom anew" and undergo value reassessment.
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