Huajin Securities: A-shares may continue to fluctuate and build a bottom, with certain sectors such as technology growth and consumer goods relatively outperforming in the short term.

Huajin Securities released a research report stating that, upon reviewing history, during periods of turbulence in the A-share main sectors, industries with strong industrial trends and catalysts, high earnings growth, and low valuation sentiment tend to outperform. Currently, in the short term, certain technology growth and consumer sectors may be relatively dominant. First, the AI industry trend may continue to rise in the short term; secondly, the operating conditions of Siasun Robot & Automation, smart driving, and innovative pharmaceuticals may improve in the short run. The A-share market may continue to experience fluctuations and consolidation in the short term, while the long-term trend of a slow bull market remains unchanged. Industry allocation: short-term balanced allocation of technology growth, some consumer, and cyclical sectors. Historically, during periods of turbulence in the A-share main sectors, industries that performed well were often not the main sectors. Since 2015, there have been 18 periods of turbulence in A-shares, with 15 instances dominated by non-main sectors. Industries with strong industrial trends and policy catalysts, high earnings growth, and low valuation sentiment tended to outperform during main sector fluctuations. Firstly, industries with strong trends and catalysts might outperform. Secondly, high-performance industries may show stronger performance during fluctuations: out of the 18 instances, 12 saw the top three earning growth sectors during that period rank among the top ten for price increases; additionally, in 8 of the 18 instances, the top three earning growth sectors led in price increases. Thirdly, sectors with low valuations and sentiment might show stronger performance during main sector turbulence. Currently, certain technology growth and consumer sectors may be relatively dominant in the short term. (1) In the short term, trends or operating conditions for some sectors in technology growth and consumer industries may continue to rise. Firstly, the trend in the AI industry may continue to grow; secondly, the operating conditions for Siasun Robot & Automation, smart driving, and innovative pharmaceuticals could improve in the short term. Secondly, consumer sectors such as agriculture, forestry, animal husbandry, and fisheries may see improved conditions. (2) Short-term policy support for technology growth and consumer industries may continue. Firstly, technology growth support policies may accelerate implementation. Secondly, support policies for certain consumer sectors may also continue to be enforced. (3) Some cyclical industries in the technology growth sector may experience relatively high earnings growth in the short term. Firstly, in terms of current earnings growth, high earnings growth is seen in sectors like non-ferrous metals, electronics, non-bank financials, computers, and power equipment. Secondly, looking at short-term earnings expectations, certain cyclical industries in technology growth may have high earnings growth. (4) Currently, some financial sectors, certain consumer, and cyclical industries have low valuations and sentiment. Firstly, industries such as non-bank financial, automotive, beauty care, and food and beverage have historical low P/E ratios based on predicted earnings for 2026. Secondly, cyclical and consumer sectors such as steel, construction, food and beverage, home appliances, and beauty care have low historical turnover rates. In the short term, the A-share market may continue to experience fluctuations while consolidating, maintaining the long-term trend of a slow bull market. (1) In the short term, both the economy and earnings may continue to recover. Firstly, the short-term economic atmosphere may continue to show signs of recovery: manufacturing conditions have seen some improvement; secondly, infrastructure investment and consumer growth may stabilize and rebound. Secondly, corporate earnings may continue to recover in the short term. (2) In the short term, liquidity may remain loose. Firstly, macro liquidity is likely to remain loose: we believe the possibility of a rate hike by the Federal Reserve in September remains low; secondly, the risk of U.S. debt remains high, and the dollar may maintain a weak and fluctuating trend in the short term. Secondly, there could be a certain level of capital inflow in the stock market in the short term. (3) Short-term policies are likely to remain relatively positive, and external risks may be limited. Firstly, policies are still likely to remain proactive. Secondly, external risks may be limited: both the U.S. and Iran are still seeking negotiations, and oil prices may have retreated after a short-term spike; thirdly, both China and the U.S. are still preparing for a heads-of-state meeting, and the China-U.S. relationship may remain stable in the short term. Industry allocation: short-term balanced allocation of technology growth, some consumer, and cyclical sectors. (1) The current PEG and sentiment for technology growth sectors such as automotive, computers, and new energy are relatively low, while sectors like banking, food and beverage, home appliances, and petrochemicals currently have high dividend yields. (2) In the short term, it is recommended to continue to allocate during dips: firstly, industries with upward trends in policies and industrial conditions such as electronics (semiconductors, AI hardware), communications (AI hardware), computers (AI applications), media (AI applications, gaming), innovative pharmaceuticals, military industry (commercial space), non-ferrous metals (minor metals, precious metals), new energy (AI power, lithium battery), etc.; secondly, blue-chip industries such as large finance, agriculture, petrochemicals, and consumer goods that are likely to see fundamental improvements.