Key market strategy insights are currently being highlighted.
Insight One suggests that June saw significant market volatility. Influenced by multiple domestic and international factors, A-share market fluctuations notably intensified during the month. The first half of the year was characterized by pronounced overall market divergence, with significant disparities observed among broad-based indices, sector performances, and individual stock movements. This phenomenon is likely underpinned by a dual divergence in fundamental conditions and capital flows, leading to a K-shaped divergence in market performance across different sectors.
Insight Two posits that this year's market trend may be primarily driven by corporate earnings. From a macroeconomic perspective, the recovery in the Producer Price Index (PPI) remains a core market theme, with its year-on-year increase gradually reshaping the profit structure of listed companies. Concurrently, economic data exhibits a marked "domestic weakness, external strength" divergence. Considering the full-year earnings recovery trajectory, the mid-year reporting season still represents a relatively certain window for earnings validation. Profits are expected to become a core factor supporting the market this year, a characteristic observed during three major upward phases of the Shanghai Composite Index in 2007, 2017, and 2021, where the annual market trends were predominantly led by earnings performance.
Insight Three questions the future direction of the technology sector's momentum. Recent volatility in the technology sector has increased significantly, potentially linked to elevated valuations and substantial prior gains, while also being noticeably affected by external risk sentiment factors. Referencing historical patterns from two AI sector adjustments in 2025: during short-term AI pullbacks, capital did not exit the growth style but instead rotated towards lower-valuation segments within the sector. In 2025, new consumption, innovative drugs, commercial aerospace, and precious metals all became important rotation targets. Following the adjustment, AI often re-emerged as a market leader, though the focus of the rally might shift. In terms of allocation, beyond the core technology theme, it is advisable to focus on the export chain and resource products: the export chain benefits from resilient external demand and ongoing positive trends in global supply chain restructuring; resource products show stronger certainty for profit improvement against the backdrop of accelerating PPI recovery. Additionally, attention can be paid to previously lagging thematic directions such as innovative drugs and robotics.
Market style and specific sector recommendations are also provided. The market style is anticipated to lean primarily towards growth. Industries ranking high on a five-dimensional comparative framework include non-ferrous metals, national defense and military industry, power equipment, computers, electronics, and communications. These sectors may warrant particular attention in July. Should the market adopt a more defensive style, focus could shift to non-ferrous metals, transportation, national defense and military industry, banking, non-bank financials, and pharmaceuticals and biotechnology.
Risk factors are outlined as follows.
First, external risk factors could lead to fluctuations in market expectations.
Second, market performance may not align with historical seasonal patterns.
Third, overseas markets might experience significant volatility.
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