Chen Guo suggests that with the current A-share index having retreated over three hundred points from its recent high of 4259, a strategic shift in perspective is now warranted. Regardless of potential future external volatility, he believes it's no longer the time to maintain a bearish outlook on the broader A-share market.
Conversely, he argues that over the next quarter, the potential upside for the index significantly outweighs the downside risk. The focus should therefore shift to actively identifying structural opportunities to go long.
Following the previously mentioned principle of focusing on a concentrated 5% of opportunities while selecting from the broader 95%, the subsequent market style is not expected to be as extreme as it was in May. The next phase of the market's upward movement is anticipated to feature a more balanced style.
Within the technology sector, the strategy favors discerning genuine quality from hype. The focus is on selecting high-quality companies within China's AI industrial chain that meet specific criteria: their revenue and profit growth are not expected to peak this year; their market capitalization has not overextended relative to their industrial and economic standing; their interim reports are likely to exceed optimistic market expectations; and their profit forecasts for next year are not subject to downward revisions.
Simultaneously, there is a particular optimism for the performance of leading A-share carbon-based stocks in the second half of the year. Key areas of focus include assets in both the A-share and Hong Kong markets, such as leaders in traditional and new energy, finance and real estate, new consumer sectors, and internet companies. These areas are seen as having the potential for a systematic revaluation.
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