Swipe left or right to view more. Looking ahead at the A-share market outlook, our market assessment indicates that, domestically, the improvement in industrial enterprise profits from January to July remains largely concentrated in AI, high-tech manufacturing, and select upstream resource sectors, while recovery in industries tied to domestic demand has been relatively subdued.

In terms of specific data, profits at scale-up industrial enterprises grew 17.6% year-on-year during the January-to-July period, with standout performances in the electronics, high-tech manufacturing, and raw materials sectors. AI-related industrial chains, including integrated circuits, continue to serve as the primary pillar of support. In contrast, the property chain, automotive, and some consumer-facing industries have faced earnings pressure, highlighting a clear divergence in sector momentum. Looking forward, whether corporate profit improvements can broaden from a partial recovery to a wider range of industries will hinge critically on the strength of domestic demand repair. On one hand, momentum in AI, high-tech manufacturing, and certain price-rising categories is expected to persist, underpinning corporate earnings. On the other hand, weakness in property and consumption may continue to constrain profit recovery in mid-to-downstream sectors. As fiscal funds are deployed more quickly, new policy-based financial instruments are advanced, and counter-cyclical policies are further implemented, infrastructure, manufacturing investment, and corporate demand are expected to gradually improve, allowing profit structures to potentially spread from upstream and tech sectors to a broader set of industries. For investments, focus areas may include AI, high-tech manufacturing, equipment renewal, and select resource products, while closely monitoring the pace of domestic demand repair and any signs that the property chain's drag is easing at the margin.

On the overseas front, U.S. PCE inflation remained elevated in July, while consumer momentum showed signs of cooling, presenting a mixed picture of inflation and growth signals. The July PCE price index rose 0.2% month-on-month and 3.7% year-on-year, with core PCE up 0.2% month-on-month and 3.3% year-on-year. Core inflation aligned with market expectations but remains notably above the Federal Reserve's 2% target. Meanwhile, inflation-adjusted real personal consumption expenditures were flat month-on-month, interrupting two consecutive months of relatively strong growth. Private sector wage growth moderated from 4.6% to 3.8%, and the savings rate rebounded from low levels, indicating that household consumption is turning more cautious. Going forward, slowing consumption and income growth provide some room for the Fed to hold rates steady, but inflation remains well above the 2% objective, leaving monetary policy to strike a balance between sticky inflation and cooling demand in the near term. If inflation continues to run hot while employment and economic resilience hold up, rate hike expectations could resurface. Conversely, if consumption and employment weaken further, the case for holding rates unchanged would expand accordingly. Key focus areas ahead include inflation and employment data for further confirmation of the policy path.

On investment strategy, looking ahead: 1) With the mid-year report season drawing to a close, full-A profit growth for the first half of 2026 has surged to over 15%, confirming that Chinese assets' earnings are stabilizing and rising, which provides fundamental support for further market repair. 2) Entering September's earnings vacuum period, market pricing weight will shift more toward macroeconomic policy and industry narratives. The convergence of near-term overseas risk expectations, along with positive developments in China's macroeconomic policy and capital markets, will help stabilize market sentiment and boost trading activity. First, earlier panic has subsided, and factors such as rising U.S. Treasury yields and U.S.-Iran tensions have not deteriorated further. Although the Jackson Hole central bank symposium opened the window for rate hike policy, shifts in rate hike expectations still depend on subsequent macroeconomic data, with near-term risk expectations overall converging. Second, the August 28 property policy reform has reshaped China's real estate development model. The policy reasonably constrains the expansion capacity of the property credit vehicle, which also limits the boundaries of property risk contagion, aiding in the repair of capital market risk premiums. Third, the China Securities Regulatory Commission recently fast-tracked approval of 16 ChiNext ETFs focused on computing power and fintech, reflecting the regulator's supportive stance and environment for the capital market. For asset allocation, we continue the "style rebalancing" approach that has been in place since late June, considering maintaining a certain position level. For the tech theme, tilt toward leaders with "volume certainty"; for non-tech, lean into lithium batteries, innovative drugs, and the export chain. MACD golden cross signals have formed, and these stocks are performing well!