What happened
In a strategy report released after the 2026 second-quarter earnings season wrapped up, Shenwan Hongyuan said revenue and net profit growth for its all-A-share universe continued to improve, in line with expectations. Revenue growth widened for cyclicals, stable industries and TMT, while net profit growth widened for cyclicals, TMT and financials; midstream manufacturing saw both metrics slow.
The broker maintained its medium- and short-term view that once the second bottoming-out is confirmed, the market rebound is likely to last until late September. It argued that expectations for steady and far-reaching policy support could trigger a concentrated burst of optimism that marks the rebound's peak. Still, it does not expect the AI chain to make new highs in September, and sees another adjustment wave and a possible quarter-long tech correction.
Shenwan Hongyuan also laid out conditions for AI strength to resume, including an oversold rebound, a second bottom, and Q3 earnings digesting valuations, with a major industrial catalyst needed for new highs. It recommended focusing on non-institutional-heavy AI names, domestic compute chains and AI small caps, as well as overseas AI computing-chain segments with fresh catalysts such as the Nvidia chain, storage and PCB.
Why it matters
The report suggests that while A-shares may keep rebounding through late September, the AI trade faces an unusually high bar to reclaim prior peaks. The firm links that caution to unresolved macro questions, especially high US Treasury yields and their compatibility with fiscal sustainability and corporate credit risk.
The strategy shifts attention toward less crowded areas, including non-institutional-heavy AI stocks and domestic compute chains, while also highlighting non-tech plays such as innovative drugs, CXO and precious metals. That implies any next phase of gains may be narrower and more selective rather than a broad AI re-rating.
Key facts
Shenwan Hongyuan expects the A-share rebound to last until late September after the second bottom is confirmed.
The firm believes September will not bring new highs for the AI chain and that another adjustment wave is likely.
The report highlights risks including a worse-than-expected overseas recession and weaker-than-expected domestic recovery.
What to watch next
Investors will watch whether policy expectations intensify during September and whether a concentrated optimistic burst marks the rebound's peak, as Shenwan Hongyuan predicts.
On the AI front, watch for fresh industrial catalysts and whether Q3 earnings reports help digest valuations, especially for overseas computing-chain segments such as Nvidia-linked names, storage and PCB. The firm also flags the risk of a quarter-long tech adjustment after September.
Outside tech, the report highlights high-dividend assets identified via the gap between CSI 800 index weights and Q2 fund holdings, including banks, non-bank financials, food & beverage and utilities, along with industrial metals and basic chemicals.