Shenwan Hongyuan Group Co., Ltd. released a strategy report indicating that amid short-term China-US trade friction disruptions, risk appetite-driven assets and pro-cyclical assets may experience adjustments. Stabilizing capital market expectations is essential, and hedging assets may gain pulsed advantages. The firm recommends focusing on banking, rare earth, military, and agriculture sectors. Shenwan Hongyuan predicts that Q4 2025 technology markets still have potential for new highs, with overseas computing power, semiconductors, and robotics sectors presenting opportunities. Additionally, anti-involution represents a key structural shift from structural bull to comprehensive bull market, serving as an important medium-term structure (solar and chemical sectors). The firm continues to maintain a medium-term positive outlook on Hong Kong stocks, as they may continue benefiting from global easing and emerging new economy industry trends, with Hong Kong blue chips showing strong representativeness.
**I. China-US Trade Friction Disruption Re-emerges, But Don't Underestimate Market Adaptability**
Compared to the April 7 adjustment, current index levels are higher, but market learning effects are also accumulating. Stock price evolution patterns resemble April's, but the magnitude may be lower. After next week's pulsed adjustment, there's no need for pessimism.
China-US trade friction disruption has re-emerged, with global risk assets falling broadly on Friday and risk appetite declining significantly. Comparing with the market impact of equal tariff friction between China and the US in early April, current A-share index levels are higher, but market adaptability and learning effects regarding China-US friction shouldn't be underestimated. The adjustment magnitude of stock index futures and VIX index increases were lower.
The timing of China-US trade friction disruption was unexpected, but the direction was reasonable. US tolerance for negative trade friction impacts has boundaries. As long as the US cannot establish trade barriers between China and its trading partners, trade friction's impact on A-shares will hardly exceed early April levels. Meanwhile, recognition of demand improvement potential is relatively sufficient. Expectations for supply-demand upward inflection points around mid-2026 are not easily disrupted.
We believe A-share market evolution patterns resemble early April, but the magnitude may be lower. After next week's pulsed adjustment, there's no need for pessimism.
**II. Reasons for Technology Leaders' Adjustment: Short-term Scattered Disruptions Plus Continued Mid-term Upward Space Issues**
We believe technology lacks foundation for sustained adjustment. Overall market effective breakthrough still requires technology leadership: (1) Overseas AI beta remains upward, and domestic AI continues progressing. Before spring 2026, technology industry catalysts outnumbering pro-cyclical catalysts remains unchanged. (2) Technology cost-performance ratio hasn't reached absolute peak characteristics: long-term cost-performance is indeed lower than before, but short-term cost-performance has improved. (3) Markets maintain basic momentum, with technology leaders adjusting but rising company ratios not low.
This week, institutional heavy-weighted technology stocks adjusted significantly. We understand three adjustment reasons: First, some investors attribute adjustments to semiconductor leaders' high valuations, with margin trading collateral conversion rates returning to zero, triggering deleveraging concerns amid China-US friction escalation. Second, the National Day holiday didn't accumulate one-sided positives, with stock market performance typically rising first then consolidating. Short-term scattered negatives include overseas computing power chain industry capital reductions, Oracle's AI cloud business profitability questioned, and Alibaba's performance still dragged by food delivery competition. Third, medium-term upward space hasn't opened (bull market expectations exist widely, but medium-term upward logic isn't complete, not yet at key verification period), creating short-term effective breakthrough resistance.
**III. Medium-term Market Judgment Unchanged: Technology Industry Catalysts Significantly Outnumber Pro-cyclical Catalysts Before Spring 2026**
Technology growth may continue trend markets, eventually evolving to long-term low cost-performance areas. Spring 2026 may be a phased peak (structural market peak), when A-share markets may face three challenges: (1) Demand-side key verification period arrival; (2) New structural highlights may need waiting; (3) Technology industry trend markets' long-term cost-performance may reach low positions.
After short-term pulsed adjustments, we remain optimistic about Q4 2025. Spring 2026 may be a phased peak, but likely not 2026's annual peak, much less this comprehensive bull market's peak. Bull markets have depth, and comprehensive bull market conditions will become increasingly sufficient over time.
**IV. Investment Strategy Recommendations**
Under short-term China-US trade friction disruptions, risk appetite-driven assets and pro-cyclical assets may adjust. Stabilizing capital market expectations is essential, with hedging assets potentially gaining pulsed advantages. Focus on banking, rare earth, military, and agriculture sectors.
Q4 2025 technology markets still have new high potential, with overseas computing power, semiconductors, and robotics offering opportunities. Anti-involution represents the key structure for structural bull to comprehensive bull transformation, serving as important medium-term structure (solar and chemical sectors).
Continue medium-term optimism toward Hong Kong stocks, which may continue benefiting from global easing and new economy industry trend fermentation, with Hong Kong blue chips showing strong representativeness.
Short-term China-US trade friction becomes core trading theme, with risk appetite-sensitive assets (high-elasticity technology) and pro-cyclical assets potentially needing adjustment to short-term high cost-performance areas. Indices may bottom first overall, with high risk-preference assets and pro-cyclical assets bottoming slightly later.
Medium-term structural outlook remains unchanged, with anti-involution as key structure for medium-term structural bull to comprehensive bull transformation. Continue highlighting anti-involution endgame focus on globally high market-share solar and chemical sectors, through merger and debt restructuring → industry concentration improvement → promoting price alliances and coordinated price support.
Medium-term continued optimism toward Hong Kong stocks, potentially continuing to benefit from global easing and new economy industry trend fermentation, with Hong Kong blue chips showing strong representativeness.