On November 10, Shenwan Hongyuan Securities held its 2027 Capital Market Investment Annual Conference in Shanghai, where Shenwan Hongyuan Group Co.,Ltd. (Shenwan Hongyuan) chief industry comparison strategy analyst Lin Limei delivered a presentation titled "Rebalancing Still in Its Early Stage: Shenwan Hongyuan 2027 A-Share Industry Allocation Outlook."
She stated that in the short term, conditions for a technical rebound exist after extreme liquidity pressure: 1) In the past, when highly crowded A-share industries formed a secondary high after an M-shaped top at elevated levels, they typically returned to about 85% of their previous high, with a median interval of 83 days. In this round, AI sub-sectors only rebounded to 75% of their previous high after the M-shaped top, with an adjustment period of just 54 days, similar to the internet sector correction in June-July 2015. However, after hitting a secondary high on September 22, this round of AI fell another 40%, a decline that has already exceeded the internet sector's renewed downturn in August-September 2015. Meanwhile, margin financing has seen a net outflow of 250 billion yuan year-to-date (close to the scale of 2022 and 2024), indicating that current sentiment and liquidity conditions are more severe. 2) Since October, equity ETFs have accelerated inflows, with cumulative net purchases exceeding 600 billion yuan, constituting a force supporting the market on the downside.
The A-share market as a whole has not yet reached historical bottom levels: as of the end of October, the proportion of A-shares trading below net asset value was only 10%, stocks with a P/E ratio below 10 times accounted for only 3%, and low-priced stocks below 5 yuan accounted for 18%.
2027 A-share industry prosperity outlook: 1) The peak of A-share earnings growth may appear in 2026 amid mild macroeconomic inflation, and will decline somewhat in 2027. 2) The current ranking of industries by the number of improving financial indicators, from most to least, is: pharmaceuticals and healthcare (6) > technology (5) > cyclicals and advanced manufacturing (2) > financials and real estate (1) > consumer (0). 3) The supply side of consumer and pharmaceuticals and healthcare sectors (capital expenditure and construction-in-progress growth rates) is at historically low levels.