What happened
During the Aug 24–28 week, U.S. and A-share markets firmed relative to the prior week, while Hong Kong stocks weakened. The Shanghai Composite gained 1.2% and the STAR 50 added 0.5%, but the Shenzhen Component fell 1.0% and the ChiNext dropped 3.4%.
The report identifies sustained volume shrinkage and confidence in the AI industry chain as key limits on the A-share recovery's upside. Compared with the April rebound, trading volume has kept contracting since Aug 4, reflecting caution around earnings season, overseas geopolitical risks, and monetary policy uncertainty.
The market still shows broad bullish intent in intraday pricing, but short-term pressure is concentrated at the industry level, especially the AI-linked tech manufacturing chain. Crowded trade unwinding, valuation pressure from U.S. Treasuries and policy swings, and a possible shift from inflation-expectation trading to Fed-hike-expectation trading after Jackson Hole are all weighing on sentiment.
Why it matters
The report suggests the near-term recovery height depends on whether trading volume returns and whether AI-related manufacturing confidence stabilizes. Until then, rebounds may be short-lived and require lower expectations.
On earnings, several industries beat expectations even on already high growth forecasts, pointing to selective structural opportunities. The medium-term thesis remains that the bull market logic is intact, but returns should come more from re-screening within technology than from broad market beta.
Key facts
Shanghai Composite +1.2%, STAR 50 +0.5%, Shenzhen Component -1.0%, ChiNext -3.4% for the week of Aug 24–28.
All-A shares ex non-bank financials posted 10.8% cumulative net profit growth in H1 2026, with Q2 up 3.2 percentage points from Q1.
As of Aug 21, top 5% stock turnover concentration fell to 47.5% from around 50%, with 40%–42% seen as a key reference for fuller congestion relief.
What to watch next
Whether turnover concentration moves toward the 40%–42% range, which would signal meaningful progress in unwinding crowded trades.
Earnings-beat sectors: electronics, defense, computers, petroleum and chemicals, non-ferrous metals, and non-bank financials.
AI-related directions highlighted for allocation: AI materials, domestic and overseas computing chains, PCB, optical module upstream, agent applications, and tech-spillover areas such as power equipment and liquid cooling.