A report from Sinolink Securities indicates that the clearing process for A-share AI-related stocks is slower than in overseas markets, resulting in a weaker rebound this week. From a fundamental perspective, recent earnings reports from major tech firms have "eased" concerns rather than "eliminated" them. These fundamentals support a rebound but are not strong enough to drive a reversal. Before the next key verification point, rebounds across markets may align in direction but differ in magnitude. The peak for high real interest rates in the U.S. appears to have passed, but a decline is not yet assured. The bottom for non-AI sectors globally has been established, but these areas remain in a state of fluctuation. Patience, and more patience, is required.
How to View the Differences Between Domestic and Overseas AI Chains
From a clearing perspective, domestic AI chains show weaker signals of completion compared to overseas, making this week's rebound more akin to a "post-crash recovery." The current state of domestic holdings includes: (1) Institutional investors, such as public funds, have increased positions in the AI chain despite already high holdings (possibly due to passive redemption behavior); (2) Individual investors using margin trading have reduced leverage but have not yet stabilized; (3) Absolute return funds (e.g., "fixed-income plus" funds) significantly increased allocations to AI chain sectors in Q2 2026, and declines in these sectors could trigger stop-loss orders and subsequent exits, which have not yet occurred; (4) ETF subscriptions and redemptions, acting as a support mechanism, may have slowed the clearing process.
In contrast, overseas markets have experienced more pronounced and definitive clearing signals, leading to stronger rebounds in South Korean and U.S. stocks on Friday. South Korea's week included: two consecutive days of market circuit breakers, followed by a finance minister's emergency meeting and apology with a pledge to "implement corrective measures to restore market normalcy," a purchase of SK Hynix shares by SK Group's chairman, and a government capital injection into the sovereign wealth fund. These events resemble a scenario where clearing has been completed, followed by an influx of new funds. The U.S. market also displayed typical "clearing signals," such as a hedge fund's situational awareness-driven liquidation, where its entire asset portfolio was sold to Citadel.
From a fundamental perspective, earnings reports from major tech firms have "eased" rather than "eliminated" concerns. AI investments are generating quantifiable revenue returns, but high capital expenditures are eroding profits. Investors are now focusing on the relative speed of "order backlog growth versus capital expenditure growth." Meanwhile, progress in domestic large language models is challenging industry profit margins. Thus, fundamentals support a rebound but are insufficient to drive a reversal. The market needs to see improved AI investment returns for more companies, with the next key verification point being Nvidia's earnings report in late August. Before that, rebounds across markets may align in direction but differ in magnitude.
Why the Non-AI World Has Bottomed Out but Full Recovery Awaits
This week, the Federal Reserve's "hold steady but divided stance" combined with the Politburo's "increased counter-cyclical adjustment" sends mixed signals. The former indicates that strong AI investment continues to support high real interest rates but is not strong enough to justify a rate hike. The suppression of high rates on non-U.S. economies and non-AI sectors is gradually peaking yet persists. The Politburo's renewed emphasis on "increasing counter-cyclical adjustment" aligns with the July 31 release of the official manufacturing PMI for July, which fell below the 50-point threshold. This reinforces expectations for Q3 reserve requirement ratio and interest rate cuts, as well as fiscal stimulus in the second half of the year. However, domestic demand remains in a "strong expectations, weak reality" phase, as evidenced by June's industrial enterprise profit growth declining by 6 percentage points to 15.1%.
Overall, the current fundamentals are in a "transitional period." In other words, no clear "new consensus" strong enough to signal a shift has emerged in either economic growth or stock investment. A left-side opportunity worth monitoring, as discussed in last week's report "Patience," is that if AI investment slows, it could catalyze a decline in current high U.S. real interest rates. This would release pent-up demand in emerging markets, narrowing the K-shaped divergence in China's external demand. Broader export sectors beyond the AI chain would then show resilience, boosting global demand for physical goods.
Why the Energy Chain Serves as a "Certainty Anchor" in Defensive Strategy
Against the backdrop of incomplete deleveraging in the AI chain and a shift in market style, the energy chain—including coal, power, and oil and petrochemicals—could become a core destination for capital exiting tech. This is due to its triple advantages: supply rigidity, earnings certainty, and high dividends. Coal's supply rigidity is highlighted by Shanxi's "17-point" safety regulations, which elevate supply constraints from temporary safety inspections to a permanent institutional mechanism. The power sector benefits from dual drivers of "thermal power transition and demand growth." Unlike the initial U.S.-Iran ceasefire period in May-June, the oil and petrochemical sector now has an opportunity for valuation recovery. With faster global restocking demand and shrinking supply, oil prices are expected to remain above pre-conflict levels. Additionally, domestic refinery operating rates and spreads are likely to recover simultaneously.
Why Defensive Strategy Is Key in a Transitional Market
The strength of global rebounds is likely to vary. Fundamentally, a comprehensive improvement in the non-AI world still requires time, but clear signals have emerged in some areas. Our recommendations are: First, with energy prices gradually stabilizing at low levels, assets benefiting from China's manufacturing flow—coal and power—form a strong absolute return combination. The oil and petrochemical sector also offers earnings and valuation recovery opportunities as energy prices bottom out. Second, Southern countries and China's manufacturing sector remain in a fluctuating period under high real interest rates, but the bottom may have been reached. Focus on industrial metals, engineering machinery, grid equipment, and refining sectors. Third, dividend-style assets benefit from the shift by absolute return investors. Against the backdrop of incomplete deleveraging in the AI chain and increased market volatility, high-dividend, low-volatility, and stable cash-flow dividend assets will become a key allocation target for absolute return funds.
Risk Warning: Domestic economic recovery may fall short of expectations, and overseas monetary policy could tighten more than anticipated.
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