Founder Securities has released a research report indicating that the market showed a pattern of initial gains followed by losses this week. After a rapid rebound in the early period, major indices entered a phase of adjustment, with the Wind All-A index closing the week down 1.5% and trading activity cooling off. Rising U.S. Treasury yields, a loosening of the overseas tech narrative, and weak domestic economic data have all weighed on risk appetite, prompting a shift in capital flows toward sectors like resources and banking. Looking ahead, short-term risks have been partially released, but external interest rate pressures and the strength of the domestic peak season still warrant close observation. On the allocation front, strategists suggest selectively buying into tech sub-sectors, assets benefiting from a weak dollar, and core pharmaceutical leaders at lower valuations.

Market Review: During the week of August 17-21, 2026, the market experienced a rise followed by a fall. The Wind All-A index dropped 1.5% for the week, with the Shanghai Composite Index down 0.6% and the ChiNext Index down 2.2%. Average daily turnover fell by approximately 85.5 billion yuan to 2.27 trillion yuan, indicating a renewed decline in trading activity. By sector, petroleum, petrochemicals, non-ferrous metals, and banking led the gains with increases of 5.4%, 2.5%, and 2.4%, respectively. Conversely, media, computer, and defense industries led the declines, falling 5.5%, 5.0%, and 3.8%. Active themes included shipping, gold jewelry, and vaccines.

On Monday, the market opened high and moved higher, breaking upward driven by a "bull market" sentiment. Nvidia announced that its Spectrum-X co-packaged optics switches had entered mass production, and SK Hynix declared a $38.4 billion investment in a new wafer fab in South Korea, leading to gains in previously lagging tech stocks. However, Moutai's weaker-than-expected interim results dragged down the baijiu sector. Tuesday saw the market dip and recover, with divergence intensifying due to weak domestic economic data and sluggish performances in Japanese and Korean markets. JPMorgan released a report titled "Food Security as National Security," warning of a potential global food crisis next year, which kept the agriculture sector strong throughout the day on the back of El Ni帽o and food crisis narratives. Oil prices surged again after the 60-day U.S.-Iran memorandum of understanding expired without extension, supporting the broader energy complex.

Wednesday brought a low open and low close as the 30-year U.S. Treasury yield climbed to 5.30%, its highest level since June 2007. Negative news on the tech narrative emerged from Anthropic's lower-than-expected ARR and OpenAI's announcement to pause frontier model training. Thursday saw a weak recovery. SK Hynix announced a large-scale buyback, the U.S. Treasury bought back long-term bonds, and Moderna's cancer vaccine showed positive results in Phase 3 trials. The implementation of the 15th Five-Year Plan for medical insurance also boosted non-tech sentiment in the A-share market. On Friday, the market traded sideways on shrinking volume. SK Hynix, along with researchers from the University of Virginia, published a next-generation CPO roadmap extending optical interconnect from network switching to memory interfaces. A new wave of semiconductor price hikes was anticipated, strengthening the tech sector once again. Additionally, the Trump administration announced "the most severe" economic sanctions on Iran, Treasury Secretary Bessent hinted at expanding long-term Treasury buybacks, and the slower-than-expected resumption of production at the Jianxiawo mine collectively drove non-ferrous metals to lead the market.

Market Outlook: The market hit its peak for this round of oversold rebound in the first half of last week, with major indices and sectors having risen roughly 15% from their recent bottoms in a relatively short period. After this rebound stalled, the market entered an adjustment phase in the latter half of the week, primarily due to the disturbance from U.S. Treasury yields and cracks emerging in the tech narrative. At this stage, it may be prudent to wait for new market entry opportunities. Although the sharp decline on Wednesday released most of the risk, rising oil prices complicate the Fed's policy choices, and pressure from U.S. Treasury yields is unlikely to dissipate easily. On a positive note, the weak dollar trade has mitigated some of the negative impacts. As the economy gradually enters its peak season, high energy prices could pressure fundamentals. The effectiveness of policies following the July Politburo meeting needs verification, and the risk of a lackluster peak season should not be underestimated.

Allocation Strategy: With a focus on buying on dips, three allocation opportunities are highlighted. First, during the interim earnings disclosure window, tilt toward tech sub-sectors with pricing power and volume growth potential. This includes core overseas computing assets with low crowding and good chip structures, as well as domestic computing sectors like semiconductor equipment and materials with strong certainty. Also consider AI applications at relatively low positions and the Hang Seng Tech Index. Second, focus on opportunities in HALO assets under a weak dollar. As concerns over U.S. Treasury and dollar credit resurface and Fed rate hike expectations weaken further, beyond core resources like non-ferrous metals and chemicals, look at new and traditional energy sources including storage, grid equipment, and coal. Third, consider core pharmaceutical leaders with good business momentum, low crowding, and easing negative pressures.