China Securities Co., Ltd.: Balanced allocation in September, focusing on low-allocation varieties in institutional investment.

China Securities Co., Ltd. released a research report stating that in August, the overall A-share market recovered, with small and medium-sized growth stocks showing strong resilience, and sector performance spreading towards resources and low-price directions. The Shanghai Composite Index and the Eastmoney Total A Index rose by 4.02% and 4.71%, respectively, while the CSI 1000 and CSI 2000 rose by 9.82% and 13.20%; electronic, coal, telecommunications, machinery, and non-ferrous metals outperformed. The mid-year report for 2026 further confirms the continued improvement in A-share earnings, although sector differentiation remains prominent. AI hardware, non-ferrous resources, certain financial sectors, and overseas manufacturing remain concentrated directions for profit growth. NVIDIA's financial reports continue to validate the high prosperity trend of AI computing power. In terms of high-frequency data tracking, AI hardware and resource products still show relative superiority, with storage prices continuing to rise and high demand for optical module exports; non-ferrous metals are supported by low inventories and supply constraints, with strong price centrality; battery and energy storage demand in advanced manufacturing remains resilient, while sectors like engineering machinery and automobiles are cooling in the short term; overall consumption and real estate remain weak, with live pig production undergoing capacity reduction and profit bottoming stages. Looking ahead to September, the market is still characterized by stock game dynamics and structural trends. In terms of allocation: on one hand, it is recommended to retain sectors such as AI computing power, non-ferrous metals, innovative pharmaceuticals, and certain overseas manufacturing, which continue to show prosperity confirmation; on the other hand, it is important to pay attention to low-allocated varieties by institutions, including banks, insurance, and securities that possess defensive attributes with high dividends, as well as sectors with improving profitability such as batteries, industrial metals, energy metals, basic chemicals, and cyclical turning points like steel and live pig breeding. China Securities Co., Ltd.'s main points are as follows: August Market Review: In August, broad market indices generally rose, with strong resilience among small-cap stocks, and growth, resources, and some low-price sectors rose together. Sector-wise, growth and resource directions were jointly dominant, gradually shifting the market from previous concentrated adjustments to multi-sector recovery; as of the end of August, the margin balance was approximately 2.63 trillion yuan, accounting for 2.56% of the A-share circulating market value, a slight decrease from the previous month. On the macro side, the manufacturing PMI rebounded to 49.8% in August, with marginal improvements in prosperity but still below the expansion line; July exports grew by 23.9% year-on-year, maintaining strong resilience in external demand, while the recovery of internal demand remains moderate. September Focus: The recovery of mid-year earnings and the rebalance of institutional holdings will jointly determine the industry allocation direction for September. TMT remains the most prominent sector for profit growth, with electronic revenue and profits increasing by 31% and 103% year-on-year, respectively; cyclical resources also performed strongly, with non-ferrous metal revenues and profits increasing by 27% and 89%; some financial and manufacturing sectors have also shown significant improvements, with non-bank financial and power equipment profits growing by 68% and 39%. NVIDIA's latest financial report and guidance continue to exceed expectations, confirming the sustainability of AI computing power demand. On the other hand, after the recovery in August, valuations and institutional allocations for sectors like electronics and telecommunications are at relatively high levels, reducing the room for valuation increases. Against the backdrop of market rebalancing, low-allocated directions for institutions are expected to open up valuation recovery space, with banks, non-bank financial institutions, and certain cyclical and agricultural sectors still being under-allocated. Prosperity Tracking: Structural differentiation remains a major characteristic, with AI and resource products relatively superior. In the TMT sector, storage prices continue to rise, semiconductor sales maintain high growth, and the prosperity of optical module exports continues; in advanced manufacturing, battery demand remains robust, while engineering machinery and automobiles are weakening due to seasonal effects. The price recovery of the photovoltaic industry chain is ongoing. In the resource sector, non-ferrous metal inventories remain low, coal inventories are declining, and prices maintain resilience, while the profitability of basic chemicals has improved; overall consumer recovery is weak, with live pig production still undergoing capacity reduction and profit bottoming stages, and real estate has not yet formed a clear fundamental turning point. Valuation and Trading Comparison: After the rebound in August, the valuations of high-prosperity sectors have markedly increased, with the trading structure gradually shifting from an initial focus on TMT to spreading across resources, pharmaceuticals, and low-price industries. Valuations in electronics, telecommunications, and some advanced manufacturing have reached historically high levels again; valuations in resource sectors like coal and petroleum & petrochemicals have also shown significant recovery. There is internal differentiation in finance, with securities and insurance valuations at relatively low levels. The overall TMT sector remains active, but funds have begun to flow towards agriculture, pharmaceuticals, and resources, with the trading heat of low-allocated financial sectors like securities and insurance still low, presenting further room for rebalancing. Allocation Recommendations: Rebalance allocations around marginal improvement in prosperity + low allocation by institutions + defensive base (1) Technology Growth: Remains the core of prosperity, focus on global AI capital expenditure and the continued fulfillment of domestic production in optical modules, high-end PCBs, high-speed copper connections, storage, semiconductor equipment, and advanced packaging and testing, as well as innovative pharmaceuticals supported by policy, R&D demand, and improvements in License-out; (2) Advanced Manufacturing: Focus on battery and energy storage with resilient demand, as well as AI devices, renewable energy equipment, and globally competitive overseas manufacturing; (3) Cyclical Resources: Pay attention to low inventories, supply constraints, and the low institutional allocation ratio of non-ferrous metals like copper, aluminum, and tin, and the improving profitability of basic chemicals, as well as coal with an optimized supply-demand pattern; (4) Low-price Catch-up: Under the background of market rebalancing, focus on under-allocated varieties by institutions, emphasizing banks and non-banks with high-dividend defensive attributes, steel driven by supply contraction and policy improvement, and live pig breeding, which is undergoing continuous capacity reduction and approaching cyclical turning points. Risk Warning: 1) Statistical data may have error risks: Relevant data in the report mainly comes from third-party databases such as Choice, iFinD, and Wind. Influenced by factors such as data collection methods, statistical standards, and industry classification criteria, there may be some deviations among different databases. Meanwhile, there may be delays in updates for some high-frequency and fundamental data; conclusions derived from historical data calculations and analyses may not fully reflect current market changes, and related judgments are for reference only. 2) Risks of domestic and international economic fluctuations: The current global economy still faces many uncertainties, with divergent growth momentum among major overseas economies, and the risk of global economic recession has increased. At the same time, there remains uncertainty regarding the Federal Reserve's monetary policy path; changes in interest rate cuts and inflation may affect the global liquidity environment and further disrupt the performance of risk assets. 3) Market liquidity risks: Equity market performance is closely tied to the funding environment, and if macro expectations change, risk appetite declines, or market fund inflows slow down, this may lead to a tightening of market liquidity, consequently impacting asset valuation levels and market trading activity, bringing about phase adjustment risks. 4) Risk of intensified overseas geopolitical conflicts: The current global political and economic landscape is complex and changeable, with regional conflicts, trade friction, and changes in major country relations likely to continue impacting market expectations. If geopolitical risks escalate or spread further, it may influence global energy prices, supply chain stability, and investor risk appetite, exacerbating fluctuations in the financial market.