A recent report from Orient Securities Company Limited suggests the fundamentals of the brand apparel sector remain in a bottoming phase for the second half of the year. The firm expresses a relative preference for outdoor sports, mid-to-high-end niche fashion brands, functional home textiles, and mass-market extreme value-for-money brands.

Within the export manufacturing segment, the report highlights investment opportunities in leading midstream manufacturing companies. The analysts believe the long-term competitive positions of these firms in their respective global sub-sectors remain unchanged. Coupled with favorable shareholding structures, they anticipate these stocks will deliver better relative returns in the second half. For the gold and jewelry sector, the report notes a lack of broad-based investment opportunities in the near term, advising a focus on companies with strong brand differentiation, robust retail execution, or clear potential for future channel expansion.

Brand Apparel: Persistent Structural Divergence, Fundamentals Bottoming Out in H2

First-half retail data shows that the brand apparel sector's growth in the second quarter was weaker than in the first, though overall growth remained stable. The brokerage estimates that retail sales in July will continue the weak recovery trend seen in the second quarter, impacted by weather events like typhoons and heavy rain. Maintaining its previous outlook, the report states the most difficult period for brand apparel retail has passed. It predicts the industry will sustain a pattern of weak recovery and K-shaped divergence throughout 2026. With fundamentals still in a bottoming phase for the second half, the firm's preferences lie with outdoor sports, mid-to-high-end niche fashion brands, functional home textiles, and mass-market extreme value-for-money brands.

Export Manufacturing: Investment Opportunities in Midstream Leaders

From the current standpoint, beyond continuing to favor cotton and wool textile leaders benefiting from upstream inflation, the report suggests investors can strategically allocate to midstream manufacturing leaders whose valuations and fund holdings are at historical lows. The analysis notes that midstream textile manufacturing leaders faced significant operational pressures in the first half of 2026 due to a combination of slowing overseas demand, rising upstream costs, RMB appreciation, and the ramp-up of new factories. However, the sustained decline in their share prices has largely priced in these pressures. Looking ahead to the third quarter, with easing geopolitical pressures on upstream costs, a gradual demand recovery driven by improved inventory management among downstream brand clients, and the passing of the difficult initial period for new factories, the outlook for a sequential operational improvement for these leaders is clear. Some companies have reportedly seen an acceleration in orders since the second quarter. The report reiterates that the long-term competitive positions of these firms in their global sub-sectors remain intact, and combined with favorable shareholding structures, they are expected to deliver better relative returns in the second half.

Gold and Jewelry: Focus on Brands with Distinct Differentiation and Strong Retail Capabilities

The rapid surge in gold prices over the past two years and the significant volatility seen this year continue to reshape the industry. The market's shakeout is proceeding slower than expected. However, a few outstanding companies are actively optimizing their channels, adjusting product mixes, and enhancing their retail capabilities. The report concludes that a broad-based investment opportunity is lacking in the sector for the near term, advising investors to focus on selecting companies with distinct brand differentiation, strong retail capabilities, or future potential for channel expansion.

Risk Warning

Risks include a potential relapse in domestic apparel consumption demand recovery, gold price fluctuations, exchange rate volatility, and the potential impact of recurring geopolitical turmoil on upstream prices.