Since July, global equity markets have experienced notable volatility, with China's A-share market also undergoing a significant adjustment, drawing widespread investor attention to the future market direction. In response, interviews with several mutual fund institutions reveal that short-term fluctuations have not shaken their confidence in the medium- to long-term trajectory of the A-share market. As the window for listed companies' interim report disclosures opens, the market's pricing logic is shifting from valuation-driven to performance-driven. The current period of consolidation and adjustment is seen as providing a favorable window for medium- to long-term positioning.
Fundamental Support Remains Solid
Regarding the recent consecutive market pullbacks, an analyst from China Industrial Securities Global Fund attributed them primarily to factors such as funding pressure and the transmission of external market sentiment. The technology sector had previously accumulated substantial gains, leading to high trading concentration. In the absence of fresh capital inflows, some funds opted to reduce holdings in high-priced stocks to lock in profits. Concurrently, a collective downturn in overseas technology assets weighed on risk appetite in the A-share market. Furthermore, the market is awaiting earnings reports from major overseas tech giants to verify the authenticity and sustainability of industry demand. The analyst stated, "The short-term market is likely to continue a pattern of volatile bottoming, but as related events become clearer, A-share risk appetite is expected to gradually recover."
A representative from Bosera Asset Management views the recent market adjustment as a normal rebalancing process. As valuation pressures in certain sectors gradually ease, subsequent repair opportunities are anticipated in related areas.
GEFUND's Chief Economist and Head of Equity Research, Yang Gang, offered a more optimistic assessment. He believes downside risks for A-shares are relatively controllable, with the high volatility primarily digesting trading-related factors. Against the backdrop of the AI (Artificial Intelligence) industry trend continuing to provide upward momentum, structural opportunities can still be sought in directions where performance is verifiable and prosperity can be sustained.
From a macroeconomic fundamental perspective, the A-share market overall still possesses strong support. A representative from ICBC Credit Suisse Asset Management noted that the domestic environment of appropriately accommodative liquidity and low risk-free interest rates remains unchanged, as does the supportive policy stance towards the capital markets. Expectations for a marginal tightening of overseas liquidity have already been largely priced in. Furthermore, highlights in listed companies' profitability are still discernible. Therefore, short-term volatility has instead presented a favorable opportunity for allocation.
Liu Yuanhai, General Manager of the Equity Investment Department and Fund Manager at Soochow Asset Management (Hong Kong) Ltd., believes it is relatively likely that the net profit growth rate of A-share non-financial listed companies will bottom out and resume an upward trend this year, maintaining a certain growth trajectory, making the market's investment opportunities in the second half of the year worthy of appropriate attention.
A representative from Franklin Templeton Sealand Fund Management judges that the medium- to long-term market trend driven by industrial momentum has not yet concluded, and the market as a whole still possesses upward momentum for the second half of the year.
Performance Verification Window Opens
Currently, the market is in a critical window of intensive interim report disclosures, with attention on listed companies' fundamentals significantly heightened. Multiple mutual fund institutions believe that the continuous verification of performance will provide a more solid foundation for the market while also helping to clarify the true prosperity levels across different sectors.
Wang Li, Senior Macro Strategy Researcher at Great Wall Fund Management Co., Ltd., opines that the medium-term upward trend of the market has not changed. Historical experience shows that periodic market crowding unwinding and position resetting often help the next phase of market performance concentrate on themes with verifiable earnings. Strategically, after the digestion of crowding and earnings report verification, focus can be placed on core industry leaders based on industrial prosperity.
Analyzing from the perspective of capital flows, a representative from Xingquan Global Funds stated that as the interim report window gradually opens, the market's pricing logic will progressively shift from the previous valuation repair to performance verification. The reallocation of funds and rebalancing of positions between high-growth sectors and high-dividend defensive sectors will become the core theme of market fund flows in the second half of the year.
A representative from ChinaAMC believes that although short-term sentiment is under pressure, the medium- to long-term logic of the technology industry chain has not fundamentally shifted. After this round of adjustment, valuations of some leading companies have retreated to the middle-to-lower range of reasonable levels. The consecutive days of net inflows into related ETFs (Exchange-Traded Funds) against the market trend indicate institutions are positioning on the left side. Overall, the short-term theme is primarily volatile bottoming, and subsequent performance verification results during the intensive interim report disclosure period require close monitoring.
Regarding specific allocation directions, several mutual fund institutions recommend adopting a balanced strategy, considering both growth themes and defensive holdings.
Huang Yisong, Fund Manager at the Equity Investment Department I of Penghua Fund Management Co., Ltd., stated that medium-term favored directions mainly include three categories: first, industries achieving counter-cyclical capital expenditure expansion and delivering high-speed growth driven by market demand; second, industries capable of meeting the needs of industrial structural transformation and technological self-reliance against the backdrop of intensified geopolitical conflicts; third, opportunities in stable assets with clear competitive landscapes and non-AI stocks that have been oversold. Among these, the first two categories are primarily technology-focused, while the third is not limited to specific industries, with common characteristics being strong stability, high certainty, or valuations at very low levels.
A representative from China Merchants Fund Management Co., Ltd. believes that under divergent sector prosperity, a systematic style shift is difficult. The upward trend of the technology sector has not changed, but investment should focus on core sub-sectors with strong earnings certainty. Simultaneously, as market volatility increases, opportunities for rebalancing towards low-position growth and stable dividend sectors can be moderately considered.