Shenwan Hongyuan Group: Federal Reserve's first interest rate decision may reduce risks, A-share market may still move forward in inertia.

Shenwan Hongyuan Group Securities issued a research report stating that although there is an expectation of a trend towards easing tensions between the US and Iran, the validation of the Federal Reserves decision on June 18 is still more hawkish. However, Shenwan Hongyuan Group Securities believes that the risk of the Federal Reserves interest rate decision in Washington has been downgraded. Originally, the combination of "unclear boundaries between US and Iran conflicts + Federal Reserve hawks" may have led to an unstructured extrapolation of interest rate hike expectations; however, with tensions between the US and Iran easing, the market will focus on the potential for a single interest rate hike in 2026 and is also willing to believe in the Federal Reserve's dot plot indicating a rate cut in 2027. The inability to extrapolate interest rate hike expectations from the Federal Reserve has not disrupted the market's existing inertia, and A-shares continue to advance along the market's characteristics since May. Shenwan Hongyuan Group Securities reiterates that the market characteristics of A-shares focusing on "a few technology sectors + leading companies in advantage" are supported by the micro-level fact that single-track funds and some multi-track technology funds have become marginal funds. At the same time, on the liquidity front, there is a "three-tier fund differentiation" from top to bottom: 1. After the fermentation of expectations of the Federal Reserve's tightening, funds have flown back to US stocks, drawing capital away from other stock markets. In the loose period of the Federal Reserve, funds flowing into US stocks and other markets exhibit large-scale directional fluctuations. 2. Since mid-January 2026, funds have flowed into industry ETFs + technology-themed funds, while funds have flowed out of broad-based ETFs and traditional weighty stocks. 3. Since Q2 2026, technology-themed funds have attracted funds from industry ETFs, and small and medium investors have focused on trading in technology-themed funds at the margin, resulting in a short-term marginal trading fund. The turnover rate of this type of fund investors is significantly higher, increasing market potential volatility. Once the positive circulation of funds is disrupted, there is a need to be wary of the oversold conditions that negative fund cycling may bring. Currently, external risks have been downgraded, and the capital positive loop continues to play out. The market continues to move forward along its existing inertia, maintaining characteristics of profit concentration and preference for leading companies. Shenwan Hongyuan Group Securities' main points are as follows: 1. Given the easing of tensions between the US and Iran, Federal Reserve hawks are unlikely to be extrapolated in an unstructured manner, the risk of the Federal Reserve's interest rate decision in Washington has been downgraded, and the market's existing inertia remains intact (technology-themed fund marginal pricing, profit concentration focusing on a few technology sectors). Before new changes occur, the market may still move forward along its inertia. 2. Considering the short-term risks in the market: The secondary derivative of the fundamentals turning negative in the short term is unlikely to happen; the inflection point of the second derivative of the capital aspect turning negative needs to be observed, and the source may be the gradually dominant risk aversion sentiment of the market, with the inflow rate of funds from small and micro investors slowing down. The upcoming listing of leading domestic storage companies, high valuations and high turnovers in the new listing sector may create the next short-term disturbance. With the arrival of the second-quarter report period in July and August, if the market's inertia remains intact, the market may take another step forward. 3. Short-term adjustments in the market: The differentiated market trend is becoming more intense, with profit concentration focusing on a few directions. However, overall, the profit concentration has contracted to a low level, with high momentum falling from its peak and low momentum rebounding from its low point (there is room for oversold rebounds). In the short term, the market is generally in a low-level range. In conclusion, the market continues to follow its original path, suggesting that this round of significant market trends in the AI industry is the main battleground, with the trend of computing power inflation and industry performance and valuation being the main investment opportunities. Medium-term market trends are opening up to upward potential, with more diverse structures being a key direction. Focus on non-bank financial institutions, new consumption, the export chain Alpha, and strategic resources as key components of the market's major uptrend. In the short term, the market has returned to its original path, and attention is still needed for the potential fund suction effect brought about by major IPOs in the future. In the medium term, opportunities in AI trends remain promising and continue to be the focus of the major market trends, with the trend of computing power inflation in industry performance and valuation being the main sources of high elasticity investment opportunities. Focus on optical communications, PCB, MLCC, storage, energy storage, gas turbines, and computational synergy. In the medium term, the market's upward potential is opening up, with a more diverse structure being a necessary component. Focus on non-bank financial institutions as the top choice, as the only "low PB, high ROE" primary industry, compounded with microstructure improvements + upward trend in beta attributes + self-operated, venture capital, and other investment opportunities providing alpha sources. Additionally, based on performance growth + reasonable valuation (eliminating base factors, a 15% growth in 2026 + PE valuation below 30 times), select sub-industries that are expected to perform well, with a focus on new consumption, the Alpha of the export chain and economic cycles. New consumption will await the restart of consumer IPOs and the approval of new consumer funds. The export chain Alpha needs to wait for short-term disturbances caused by US-Iran tensions to pass + a clear indication of potential new trade frictions, with a strengthening upward trend in the medium term. Strategic resources benefit from easing US-Iran tensions, and if boundary expectations for interest rate hikes reappear in the future, upward resistance may further decrease. Risk warning: Overseas economic recession exceeds expectations, domestic economic recovery falls short of expectations.