Huatai Securities: The foundation of the upward trend remains unchanged; pay attention to signals from the Q3 policy window and the breadth of profit recovery.

According to a report from Huatai Securities, last week saw an increase in overseas disturbances, with Japan's interest rate hike expectations tightening global liquidity expectations. Hong Kong stocks, especially the Hang Seng Technology Index, are under pressure, while A-shares are experiencing fluctuating divergence, with a lack of strong continuity in the main lines. In the short term, the rebound of the innovation and entrepreneurship sector is approaching its end, and the market is entering a phase of stabilization and rebalancing. In the medium term, July's economic data shows robust external demand but weak domestic demand, with effective demand awaiting catalysis. However, the improvement in the macroeconomic landscape is spreading, and the upward revisions in profit expectations align with the clues of economic recovery. The foundation for the upward trend remains unchanged, and attention should be paid to signals from the policy window in the third quarter and the breadth of profit recovery. In terms of allocations, the AI chain remains the top choice, led by communication equipment, followed by domestic computing power chains and AI power; other areas of focus include leading CXOs with strong profit expectations, non-ferrous metals, and leading companies in the overseas sector; maintain the dividend bottom position and allocate low-volatility banks and transportation.