Brokerage Morning Meeting Highlights | Relatively undervalued varieties are more worthy of allocation.

Yesterday, the three major indices of A-shares opened lower and closed higher collectively, with the transaction volume in the Shanghai and Shenzhen markets reaching approximately 2.13103 trillion yuan. In terms of sectors, short dramas, AI datasets, film and television box offices, cultural media, and publishing industries saw significant gains; meanwhile, gold, non-ferrous metals, antimony, tumor treatment, precious metals, bioproducts, and chemical pharmaceuticals experienced notable declines. By the close, the Shanghai Composite Index rose by 0.86%, the Shenzhen Component Index increased by 0.44%, the ChiNext Index was up by 0.42%, and the Sci-Tech Innovation 50 Index surged by 1.34%. As August comes to an end, all three major indices closed higher, with the Shanghai Index gaining over 4%. Additionally, the CSI 2000 Index rose over 13% this month. CITIC SEC believes that relatively undervalued stocks are more worthy of allocation; Huatai believes that insurance funds will continue to increase their positions in dividend stocks in the first half of 2026; East Money Information suggests focusing on sectors such as coal, banking, and utilities. CITIC SEC: Relatively undervalued stocks are more worthy of allocation Currently, many sectors show performance and growth potential, but in the short term, there is little room for upward adjustment of profit expectations. For instance, North American AI, domestic computing power, non-ferrous metals, energy storage, and innovative drugs share similar characteristics, leading to their valuations fluctuating within a fixed range, which accelerates the rotation of sectors in the overall market. Investors should be more cautious when optimistic narratives prevail, as risks of valuation contraction may present buying opportunities. Historically, such periods have often been relatively effective for value and reversal factors. Therefore, outside the AI sector, it is advisable to allocate to relatively inexpensive stocks in aviation, copper, spandex, MDI, and energy storage, which have a high probability of upward adjustment in profit expectations. In the AI sector, a more balanced and reasonably valued allocation is suggested, including upstream uranium mines and electronic fabrics, midstream servers and gas turbines, and downstream cloud service providers. Huatai: Insurance funds continue to increase positions in dividend stocks in 1H26 Entering 2026, insurance funds have a clearer and more determined understanding of dividend and income strategies. In the first half of the year, even amid a surge in tech stocks, listed insurance companies firmly increased their allocation to dividend stocks, reaching an investment amount of 288.5 billion yuan, accounting for 6.3% of total investment assets. The total position of secondary equity (stocks + funds) also slightly increased to 19.4% in the first half, reaching a historical high, indicating that the insurance industry is actively pushing funds into the capital market. However, the net investment yield (NIY) is still rapidly declining, with the weighted average annualized NIY for seven major listed companies estimated to have dropped to 2.8%, nearing guaranteed costs. The upcoming implementation of the "Insurance Company Asset-Liability Management Measures" will drive the industry to focus on improving net investment yields; increasing allocation to dividend stocks to enhance dividend returns has become an industry consensus. It is estimated that by the end of 1H26, the insurance industry had already allocated 2.1 trillion yuan to dividend stocks, with a potential shortfall of 1.9 trillion yuan that may be gradually completed in the next 2-3 years. East Money Information: Focus on coal, banking, and utilities Aside from silicon-based upstream sectors, many industries have shown that numerous companies have second-quarter report growth rates exceeding market expectations, such as non-bank financials, coal, and pharmaceuticals. The consumer sector also shows divergence, and with the stabilization of the real estate market and the completion of inventory cycle adjustments in related industries, the profit expectations for A-shares still have room for upward movement. The re-evaluation of carbon-based assets and structural rebalancing are still ongoing. On Friday, relevant Chinese ministries announced a series of new policies for the real estate sector, including requirements for commodity housing projects to implement pre-sales, completion of the main structural capping for single buildings, allowing new homebuyers to extend their mortgage terms up to 40 years, supporting new homebuyers in negotiating refinancing to replace high-interest existing mortgage loans with banks, and increasing support for developers' capital market financing and bank loans. The new policies will help reduce the monthly payment pressure for first-time homebuyers on the demand side, but the ceiling on pre-sales will constrain developers' turnover on the supply side, potentially compressing new housing supply in the short term; if the transaction volume decreases significantly more than price recovery, developers' sales may not improve. In contrast, the transaction brokerage services for existing homes are less constrained by pre-sales, making the benefit logic relatively more straightforward. The sectors to focus on for A-share investments include coal, banking (large state-owned banks, high-quality joint stock banks, city commercial banks), utilities, pharmaceuticals, agriculture, food, and non-banking. Thematically, attention should be paid to the trading heat of applications in AI and the super El Nio phenomenon. This article is reprinted from "Cailian Press," edited by Jiang Yuanhua.