To The Moon

On July 30, 2026, the Politburo meeting set the tone for economic work in the second half of the year, clarifying the general approach to macroeconomic regulation. Subsequently, the National Development and Reform Commission followed up by releasing related policies and making specific deployments. The current policy cycle generally continues the regulatory thinking of improving the quality of existing stock and making structural fine-tuning.

Against this backdrop, market sentiment around the intensity of policy implementation has been heating up. Regarding the current policy cycle and the direction of the economy, industries, and capital markets in the second half of the year, Morgan Stanley's Chief China Economist, Xing Ziqiang, provided a systematic assessment. He believes that the current policy cycle will not replicate the broad-based easing pace of 2024, and that the domestic economy will continue to exhibit a typical K-shaped structural divergence pattern.

In his analytical framework, the core driver for stabilizing growth in the second half of the year comes from over two trillion yuan in fiscal capacity that can be accelerated for use. Funds will be directed primarily towards new infrastructure and hardcore technology sectors. At the industry level, the AI sector has entered a short-term valuation adjustment phase, but the long-term growth logic of the industry has not weakened. The domestic demand and real estate sectors continue to bottom out, with a relatively slow pace of recovery.

Overall, against the backdrop of micro-adjustments in policy and structural economic divergence, the market is unlikely to see a broad-based rally. Structural investment opportunities will dominate the overall market trend in the second half of the year.