Shenwan Hongyuan Group Co., Ltd. has released its latest market outlook, analyzing recent trends and providing forecasts for the coming months. The foundation for the significant divergence in market performance seen in May-June lies in existing fundamental disparities, with an even more pronounced split in capital flows. Unstable market microstructure means that divergences in funding can easily lead to negative secondary derivative effects.
The firm anticipates an adjustment phase in June-July. In the short term, a synchronized correction in the global AI computing supply chain is expected. Subsequently, the potential listing of a leading domestic memory chip company could create a siphon effect, potentially disrupting the trading patterns of retail investors in technology-themed funds. This situation warrants attention to the possibility of a short-term oversold condition.
Since mid-May, the A-share market has exhibited extreme divergence within this corrective phase. A select few technology sectors have stood out, but overall market profitability has retreated to low levels, while downward momentum has reached historically high readings. This indicates that most market segments have clear room for an oversold rebound. Following the amplification of volatility in tech stocks, the broader market's corrective phase is likely nearing its end. While vigilance against oversold conditions is warranted given the significant divergence in capital flows, the adjustment window may be brief.
The verification period for second-quarter corporate earnings reports begins in mid-July, potentially reopening a favorable time window. At that point, the A-share market may restart an upward trajectory.
Market Outlook for the Coming Period
The overarching view that there is no need to fear waiting for a major upward wave remains unchanged. Following short-term fluctuations, the A-share market is poised to embark on another advance during the Q2 reporting season. Mid-term opportunities persist; the major market upswing is not over, nor is the technology-led rally concluded. If short-term market inertia is broken, the subsequent上涨 phase could see broader participation across sectors, allowing the technology rally to extend further.
Amidst the current short-term adjustment, the firm reiterates its judgment that patience is warranted for the major上涨 wave. Over time, several positive factors are expected to converge: further progress in AI industry trends; a deceleration in supply growth for midstream manufacturing and upstream cyclical sectors in the A-share market to low levels; the passing of the window for highly volatile short-term data, making export chain alpha more identifiable; and a likely increase in sectors showing cyclical fundamental improvement.
While overall A-share earnings growth is projected to be relatively high in Q2 2026 and lower in Q3 2026, the period from 2026-2027 is generally seen as a window for solidifying the bottom of profitability metrics, with a slow recovery anticipated. Concurrently, the focus of incremental capital is shifting from institutional allocation to equities towards increased household allocation. There remains clear room for households to raise their equity asset配置, and the cumulative effect of positive market returns has reached a qualitative turning point. Short-term microstructure instability does not negate the mid-term potential for further capital inflows.
Therefore, mid-term opportunities and the major market wave remain intact. Simultaneously, the technology sector's leadership role is likely not over. A rally driven by genuine industrial progress and earnings delivery can sustain for longer. Currently, the significantly divergent supply-demand dynamics in capital (prone to turning negative in the second derivative) may not support a steadier, longer-lasting tech rally. Breaking the short-term capital flow inertia and transitioning to a more diversified inflow pattern could ultimately be beneficial.
The analysis emphasizes the importance of distinguishing between the "significantly divergent adjustment phase" and a potential "more diversified上涨 phase." The market characteristics of May-June were highly unusual and unlikely to become the norm. When a new上涨 wave arrives, the categories of capital experiencing accelerated marginal inflows are expected to broaden. This would likely include increased activity from trading funds and a wider rotation within technology themes, alongside sectors like financials, basic chemicals, and non-ferrous metals, which are also suited for positive single-theme feedback loops. The onset of a new上行 phase should coincide with a broadening of sectors capable of participating in the gains.
Potential Opportunities Post-Adjustment
Following the conclusion of the significantly divergent adjustment phase, a more broad-based上涨 wave may emerge. The firm maintains that the AI industry trend remains the primary battlefield in this major market cycle. Within that, segments experiencing "computing power inflation" offering both earnings growth and valuation re-rating present the main source of high-elasticity investment opportunities. For the broader "百花齐放" scenario, securities firms are the preferred choice, with additional focus on export/globalization chain alpha, new consumption trends, and strategic resources.
The report concludes with risk warnings concerning potential overseas economic recessions exceeding expectations and domestic economic recovery falling short of forecasts.