China Merchants Securities released a research report stating that the short-term A-share adjustment is approaching its conclusion, transitioning to a more sustainable lower-gradient upward trend. Following the adjustment, market sentiment may moderately decelerate, and incremental capital flow patterns could become healthier. The firm believes there is a high probability that the market will shift to a lower-gradient upward trajectory. The market remains in the second phase of the bull market, with the core post-adjustment strategy being to "embrace low-penetration sectors." Current focus areas include solid-state batteries, AI computing power, humanoid robots, and commercial aerospace. Additionally, from a medium-term perspective, high intrinsic return quality growth strategies are also worth attention.
**Key Investment Views**
**Market Strategy: Has the A-Share Adjustment Ended? How Should We Navigate the Future Market?**
The firm characterizes the recent A-share adjustment as a correction within an upward trend. The market remains within the upward cycle that began in September 2024, and this overarching view remains unchanged, as the three primary drivers of this A-share rally have not altered.
The firm believes the short-term market adjustment is nearing completion, with a transition to a more sustainable lower-gradient upward movement. The core post-adjustment strategy is to "embrace low-penetration sectors." Based on current industry trends, September should continue to focus on AI computing power, solid-state batteries, humanoid robots, and commercial aerospace/satellite internet. Additionally, strategies focusing on high intrinsic return quality remain effective, with particular attention on CSI 300 Quality Growth and CSI 500 Quality Growth indices.
Regarding interim earnings, sectors showing upward revisions and new highs are primarily concentrated in TMT (Technology, Media, Telecommunications), mid-to-high-end manufacturing, and pharmaceuticals. Recommended focus areas include digital chip design, communication network equipment and components, gaming, chassis and engine systems, specialized equipment, lithium batteries, chemical pharmaceuticals, and gold.
**Market Review**
This week's A-share market performance was generally weak, primarily due to: (1) Intense market speculation around the military parade period, with some investors taking substantial profits on recently overperformed sectors (such as domestic computing power); (2) While U.S. stocks maintained high-level consolidation, many technology leaders showed significant breakdown patterns, indirectly affecting market risk appetite; (3) Notable volume contraction and multiple thematic rotations made it difficult for investors to focus.
**Industry Outlook**
August manufacturing PMI improved month-over-month, and North American PCB shipments turned positive year-over-year. Sectors showing improvement this week included: 1) Rising precious metals prices as Federal Reserve rate cut expectations intensified; 2) Solar price index upturn and cobalt product price increases in the new energy supply chain; 3) Continued strength in TMT sectors, with July North American PCB shipments and orders turning positive year-over-year, and software industry profit growth expanding; 4) Four-week rolling retail sales growth acceleration for air conditioners, refrigerators, washing machines, and televisions. Future focus should be on precious metals, solar equipment, cobalt materials, white goods, PCBs, software development, and non-banking financial sectors showing high or improving momentum.
**Capital Flows**
Net margin financing inflows and ETF net subscriptions increased, with new fund issuance scale recovering. Margin financing recorded net inflows of 18.77 billion yuan over the first four trading days; newly established equity-oriented public funds totaled 23.08 billion shares, up 2.41 billion shares from the previous period; ETFs saw net subscriptions, corresponding to net inflows of 2.22 billion yuan. Margin financing showed net purchases in power equipment, non-banking financial, and non-ferrous metals sectors; brokerage ETFs saw significant subscriptions while technology ETFs experienced more redemptions. Major shareholder net reduction scale decreased, with planned reduction scale declining.
**Thematic Focus**
OpenAI announced plans for self-developed AI chips, potentially changing the supply-demand landscape for computing power. According to The Information, OpenAI significantly raised its cash consumption forecast through 2029 to $115 billion total, $80 billion higher than previous expectations. The company expects to spend over $8 billion in 2025 and over $17 billion in 2026, more than double previous forecasts and $10 billion higher than earlier predictions. By 2027, spending will reach $35 billion, and $45 billion by 2028. The increased capital expenditure will primarily fund development of proprietary data center server chips and facilities.
The Financial Times reported that OpenAI's first self-developed AI chip, co-designed with Broadcom, is expected to ship next year for internal computing expansion rather than external sales. This project represents a $10 billion order, making OpenAI Broadcom's fourth-largest custom AI chip client. Following the announcement, Broadcom's stock surged 9.4%, pushing its market value to $1.6 trillion.
**Valuation Data**
Overall A-share valuation levels declined this week, with the Wind All A Index PE (TTM) falling 0.3 from the previous week, positioning at the 66.5th percentile of historical valuation levels. Index valuations showed mixed performance, with power equipment, pharmaceuticals & biotechnology, and coal leading gains, while electronics, defense & military, and computers posted the largest declines.
**Risk Warning**: Incomplete policy understanding and unexpectedly tight overseas policies.