Shenwan Hongyuan Group: The bullish atmosphere of A-shares will not easily disappear. Technology and manufacturing industries are expected to become the main themes of the bull market, reversing the trend of internal competition.

Shenwan Hongyuan Group released a research report stating that the bullish atmosphere in the A-share market is unlikely to easily disappear, and the condition favorable for maintaining market activity is stable. In the short term, the strong sectors include healthcare and overseas computing power, which are high prosperity directions and reflect the market's expectations for a bull market. However, the relative cost-effectiveness of these sectors has decreased, and they may rise and fall together with the market in the future. Before early September, the defense industry may have repeated opportunities. At the same time, the short-term sector rotation is becoming more stable, and the currently more cost-effective direction is new consumption, which may see a rise. In the future, the market may go through a period of consolidation, and high dividend stocks may once again have an advantage in a phased manner. In the medium term, the structural direction is expected to be domestic technology and manufacturing, which are more likely to become the main themes of the bull market. The group believes that Hong Kong stocks could lead the bull market. In the short term, the pricing of Hong Kong stocks is more in line with expectations based on fundamentals. There are many long-term narratives in Hong Kong stocks, but the main pricing is still based on trends in prosperity, with little impact from bullish market expectations. This means that Hong Kong stocks are becoming a direction with relatively high cost-effectiveness in the short to medium term. Shenwan Hongyuan Group's main points are as follows: 1. Investors generally have expectations for the bull market, but there is a growing divergence in the short-term market outlook. The consensus in the market is gradually forming that the bull market is starting, but there is still a significant divergence among investors in the short term. The group summarizes the resistance faced by the short-term market: 1. The reinforcement of anti-inversion strengthens the expectation of supply clearing in the mid-range manufacturing in 2026, but there is still a lack of confidence in demand-side confidence. Clues to demand improvement in 2026 are still not clear. This macro combination may temporarily not support an upside breakthrough in the index. 2. The main themes of the bull market have not been established yet. In a bull market, momentum needs to be built, but the strongest momentum should be directly related to the core narrative of the bull market. Healthcare trends more towards independent industry trends. The overseas computing power chain is part of the global AI diffusion market, but for A-shares, the investment opportunities in the overseas computing power chain are converging and differentiating. The structure clues that can serve as the main themes of the bull market should be divergent and resonant. Therefore, healthcare and overseas computing power are undoubtedly high-quality prosperity opportunities, but are unlikely to be the main themes of the bull market. The group believes that the main themes of the bull market need to be internal and external, and need to have greater depth, which has not yet been established. There are two main potential directions that could become main themes of the bull market: one is breakthroughs in domestic technology (typical ones are AI and Siasun Robot&Automation), leading to diffusion of infrastructure hardware equipment software applications business models. Currently, the decisive catalysis (AI basic layer large models, computing power, technical conditions of Siasun Robot&Automation) has not yet emerged. The second direction is the high market share manufacturing industry globally, undergoing anti-inversion, with the core path being mergers and exits of production capacity industry concentration improvement industry joint price support. Market price support downstream will affect both domestic and overseas markets. Therefore, the anti-inversion of manufacturing is a direction directly related to the main logic of the bull market. Currently, advanced manufacturing anti-inversion is still in an exploratory phase, with the specific levers of anti-inversion and key indicators for tracking effects not yet clear. The managerial level is not yet sufficient to immediately break through the resistance. The policy drive for anti-inversion is still in the early stages, and patience is needed for future progress. 2. The bullish atmosphere will not easily disappear. While there is an increase in short-term divergence, the group advises that the bullish atmosphere will not easily disappear, and the condition favorable for maintaining market activity is stable. Changes in the macro environment in the third quarter will not affect the projection of the supply-demand structure in 2026. This is a typical combination of short-term downward and medium to long-term upward expectations, which will not bring about large-scale adjustments. In addition, the decline in external demand is a common concern, but there may be resonance in fiscal stimulus between China, the US, and Europe in 2026. External demand could exceed market expectations. At the same time, China's influence on non-US countries (including Europe, Japan, South Korea) is linearly rising, and the market tends to overestimate the impact of US economic disruptions while underestimating the resilience of Chinese exports. The group believes that even if there is an adjustment in the market, there will still be opportunities in the future. Before the main themes of the bull market are established, the market can maintain its current characteristics for some time (sector rotation becoming stable, high micro-activity, small-cap growth remaining advantageous). This market environment is based on: lack of demand highlights, supply adjustments requiring time + future improvements not being refuted + controllable downside risks in the stock market. In this environment, new opportunities should still be actively sought, and logic driven by individual stock events will also have good elasticity. The core point of the overall trend judgment remains unchanged: before early September, A-shares may have repeated market activity. After early September, there may be internal adjustment pressure in A-shares. Stable capital market expectations may be further strengthened. Time is already a friend to the bull market, and the key is that time is a friend to fundamental improvement and incremental capital inflows. We continue to maintain that Q4 of 2025 will be better than Q3 of 2025, providing a better judgment for 2026. 3. In the short term, the strong sectors of healthcare and overseas computing power are high prosperity directions, reflecting the market's expectations for the bull market. In the process of independent market trends, the relative cost-effectiveness of sectors has decreased, implying that continuing to develop independent market trends will become more challenging, and they may rise and fall along with the market in the future. Before early September, there may be repeated opportunities in the defense industry. At the same time, the short-term sector rotation is becoming stable, with high-cut and low-interest trends shifting from large to small levels. The currently cost-effective direction is new consumption, which may see a rise in the future. In the future, during a period of market consolidation, stable capital market policy may once again take the lead, and high dividend stocks may again have an advantage in a phased manner. The recommended structural direction in the medium term remains unchanged: domestic technology and manufacturing are more likely to become the main themes of the bull market. The suggestion continues that Hong Kong stocks may lead the bull market. In the short term, the pricing of Hong Kong stocks is more in line with expectations based on fundamentals, and there are many long-term narratives in Hong Kong stocks. However, the main pricing is still based on trends in prosperity, with little impact from bullish market expectations. This implies that Hong Kong stocks are becoming a direction with relatively high cost-effectiveness in the short to medium term. Risk warning: Overseas economic recession exceeds expectations.