Shenwan Hongyuan Group Co., Ltd. held its 2026 Capital Market Summer Strategy Conference in Shenzhen on June 10. Fu Jingtao, the firm's chief A-share strategist, delivered a keynote speech titled "The Depth and Fluctuations of a Bull Market."
In his annual 2026 strategy, Fu Jingtao proposed a core "Two-Stage Bull Market" thesis. This view posits an initial structural bull market followed by a comprehensive bull run, with a significant period of consolidation and adjustment in between. Based on this framework, Fu Jingtao indicated that the market's first phase of gains has now reached a zone of low risk-reward attractiveness. The potential for the second phase of gains is yet to be realized, and June-July could present a window for rapid adjustment. He suggested that during this period, combined with stretched valuations in tech sectors, microstructures implying high volatility, and adjustments in overseas tech stocks, the A-share market might experience sharp, intermittent corrections.
Key Investment Considerations
Regarding investment analysis, Fu Jingtao stated that the market has fully entered a phase where earnings are needed to justify current valuations. He emphasized the need to wait for further advancements in industrial trends and for more sectors to demonstrate cyclical improvements.
Outlook for the Second Phase
On the prospects for the second stage, Fu Jingtao pointed out that the subsequent upswing might gain momentum around July-August. This period is expected to bring a more balanced market style, with a broader range of sectors joining the rally. He noted that this phase would require a longer time horizon to unfold and would need to develop a deeper logical foundation, forecasting a new round of market gains in the second half of 2026.
Strategy for the Latter Half of the Year
For the investment strategy in the second half, Fu Jingtao stressed that patience remains key, as the "major cyclical uptrend is not afraid of waiting." He believes that over time, the structure of this major uptrend can become more diversified, and diversification within the technology sector itself will also increase. He highlighted two promising positive factors to anticipate.
The first is further progress in new economy industrial trends. Fu Jingtao mentioned that financing scale in China's domestic venture capital primary market is already on an upward trajectory. Funding for new energy industries and high-end equipment manufacturing has reached record highs, while information technology financing has recovered to about 95% of its historical peak. At the sub-sector level, areas showing a clear uptrend in venture capital financing include upstream optoelectronic chips and power semiconductors in the AI industrial chain, midstream large language models and downstream robotics, as well as satellite/rocket manufacturing and drones. He argued that the depth of China's domestic technology industry is currently underestimated. Fu believes technology will likely remain the main theme of the major cyclical uptrend, but as the uptrend extends, growth opportunities within tech should diversify rather than concentrate. While tech leaders may rise, the potential for a broader tech diffusion rally could be even greater.
The second factor is the validation of more widespread fundamental improvements. Fu Jingtao stated that the conditions for this are not unfavorable. Among 133 A-share sub-sectors with leading/lagging supply-side relationships, only 10 sectors (about 8%) had completed supply-side consolidation. By 2026, the number of sectors expected to have undergone supply rationalization could rise to 60, accounting for approximately 45%. Over time, the number of sub-sectors experiencing improved supply-demand dynamics will continue to increase. In this scenario, more industries could participate in the sector rotation of the major cyclical uptrend, thereby lifting the overall market level. Fu Jingtao added that, for the market, the validation of further progress in technology industrial trends would also proceed more steadily. Building on this foundation to initiate a positive cycle of incremental capital inflows, the structure of this new capital is expected to be relatively balanced, ultimately driving the A-share market toward a comprehensive bull market.