On July 15th, China's major A-share indices opened with mixed performance. The Shanghai Composite Index edged down by 0.09%, while the ChiNext Index rose by 0.74%.
In terms of sectoral activity, lab-grown diamonds, memory chips, semiconductors, and optical fibers were among the more active gainers. Conversely, sectors such as oil and gas, traditional Chinese medicine, and baijiu (distilled spirits) were among the leading decliners.
Brokerage Perspectives on Market Outlook
CMSC views July as a critical window where significant domestic and international policy meetings overlap with the interim earnings reporting season. This confluence is expected to lead to market expectation adjustments and volatility, resulting in increased short-term market fluctuations and a phase of style rebalancing. However, the firm believes it is not yet time for a definitive shift from growth to value stocks. Following this period of volatility, growth stocks are anticipated to regain their dominance.
The analysis points to three key factors: First, during the interim report window, the tech sector, led by AI, is expected to show strong earnings growth. However, due to stretched expectations and high trading concentration, whether solid fundamentals can continue to outperform lofty expectations remains to be seen, likely increasing volatility in tech and growth stocks. Second, with exports remaining robust and the new export orders sub-index of the June PMI rising above 50, exports may continue to exceed expectations. Consequently, the July Politburo meeting is likely to focus on accelerating the implementation of existing policies, with domestic demand potentially remaining relatively weak. Third, the weaker-than-expected US June non-farm payrolls data and falling oil prices suggest future inflation data may cool, creating room for market expectations regarding Fed rate hikes to adjust. The Fed is likely to hold rates steady in July, with short-term focus on the upcoming US June inflation data and testimony by Fed officials, which will influence future rate hike expectations.
Orient Securities suggests that the short-term market low has largely been identified, and stock indices are expected to gradually stabilize and seek opportunities for recovery. The firm notes that recent earnings pre-announcements from several PCB industry chain companies indicate strong performance. The rapid development of AI, demanding high computing power, is driving new growth in PCB demand, with high-frequency, high-speed PCBs poised to become a mainstream trend. This is expected to reshape demand for related materials in the PCB supply chain, offering high certainty for future performance and making it a key focal point for short-term capital.
Overall, the brokerage believes sectors with high景气度 (prosperity) and strong earnings growth certainty will be the short-term outperformers as the market stabilizes from its recent low.
Founder Securities argues that the recent market adjustment is not due to fundamental changes but is more influenced by market sentiment and liquidity factors. Investors are advised to patiently await a stabilization in sentiment. The firm sees support near the annual moving average and notes a certain degree of global联动性 (correlation) within the tech sector.
Technology remains the market's main theme, and the recent pullback may present布局 (positioning) opportunities. The firm recommends continuing to focus on computing power hardware and domestic computing power solutions. Additionally, investors can monitor轮动 (rotation) opportunities in sectors like innovative drugs and securities firms.
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