Public offerings analyze Q2: A-shares enter the "performance verification" stage, with resource and AI price increase chains becoming the main focus

Topic: Perhaps the A-share mid-term low point is upon us; declines create opportunities for allocation

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The second quarter of 2026 has arrived. How will public fund institutions assess the outlook for the A-share and Hong Kong stock markets? Which investment main lines are drawing focus?

In the first two trading days of April, after broad gains, the market saw another pullback. Regarding the market outlook for the second quarter, a reporter from The Paper interviewed seven public funds. Some public funds pointed out that the core concern in current market pricing is that, under the assumption of global liquidity tightening risks significantly elevated due to Iran’s situation spiraling out of control; as the subsequent situation becomes clearer, A-shares are expected to gradually return to their original underlying logic.

On market outlook, Yongying Fund stated that the market may enter a “transition period of digesting valuations and validating earnings,” and that earnings certainty will be the key. Guotai Fund believes that April is still a high-volatility period of cautious observation, but the medium-term trend remains favorable; relative to global equities, China’s advantage in resilience is evident.

Jiang Heze, Deputy General Manager of Quansuo Fund, judged that A-shares will show “slow bull” and “structural bull” characteristics, with industry differentiation becoming even more pronounced, thereby creating opportunities for active investment. Jiang Heze also said that the process of re-pricing Chinese assets has already begun over the past year. Despite facing challenges both domestically and internationally, China already has global competitiveness in areas such as new energy, AI, and high-end manufacturing, and the process of re-pricing Chinese assets will inevitably continue.

On investment main lines, multiple public funds have highlighted the resource and energy sector, the AI price-increase chain and the power-constraint (shortage) chain, as well as directions in technological innovation and localization.

More signals are needed for fundamental recovery in A-shares

Regarding the reasons for the market’s continued sideways-to-volatile movement in recent times, Yongying Fund believes it mainly stems from geopolitical conflicts and inflation concerns. Such concerns shift the market’s underlying pricing logic from a “growth story” to “inflation reality.” Although signs of de-escalation currently exist in the conflict between the US and Iran, the conflict has triggered global concerns about “stagflation with persistent inflation,” and amid a backdrop where geopolitical conflict is pushing up inflation, market expectations for the Federal Reserve to cut rates have been delayed. This has created significant valuation pressure on high-valuation technology growth stocks.

Yongying Fund’s analysis pointed out that capital is flowing out from technology growth stocks that are sensitive to interest rates and costs, moving instead into “inflation-immune” or defensive sectors such as energy and resource products that directly benefit from higher prices, as well as utilities and other sectors with stable cash flows and high dividend yields.

Chen Xianshun, Chief Equity Strategy Analyst at Boshi Fund, also expressed a similar view. He noted that in terms of the overall A-share market, the core concern in current market pricing lies in that, under the scenario of Iran’s situation running out of control, the risk of global liquidity tightening is significantly elevated. “We believe: first, the external situation is gradually shifting from ‘one-sided runaway escalation’ to ‘bounded games and expectation management.’ Second, as of now, the difficulty and threshold for the Federal Reserve to raise rates within the year are also not low.”

In terms of valuation, Guotai Fund believes A-shares’ stock assets’ price-to-value ratio is at a mid-level, requiring more signals of fundamental repair. Currently, the stock-to-bond ratio is at the 94th percentile, and the Wind All A-share equity risk premium is at the 47th percentile.

“With the subsequent direction of events becoming clearer, A-shares are expected to gradually return to their original internal logic, including the stable base of capital market policies, an unchanging tone of the economy bottoming out and rebounding, and high-quality development; coupled with the overall favorable shift in the market’s micro-level liquidity environment, after experiencing volatility and consolidation, the rally is still worth looking forward to.” Chen Xianshun further elaborated.

Earnings certainty will be the key

After a period of volatility, Shangyin Fund said that the market has already priced in risks to energy, shipping, and so on brought about by war. After risk is released, market sentiment has improved. Looking ahead over the 1–3 month horizon, key observations for the Middle East war mainly involve actions by U.S. ground forces and the extent of damage to oil-related infrastructure. In addition, it is also important to focus on the magnitude of declines in U.S. stocks and the stance of the U.S. domestic public toward the war. If liquidity risk continues to spread, it may force the Fed to expand its balance sheet to provide liquidity.

“Due to the Middle East conflict and high oil prices, expectations for Fed rate cuts have been pushed back. The upward momentum from previously loose liquidity has weakened; the market may enter a ‘transition period of digesting valuations and validating earnings,’ and earnings certainty will be the key.” Yongying Fund said that although short-term global economic uncertainty is rising, over the long term China may be entering a strategic opportunity window. With an energy base of a “coal + new energy” dual-pillars structure, China’s energy industry, manufacturing sector, and RMB-denominated assets are all expected to benefit.

Guotai Fund, meanwhile, believes that April still sits in a high-volatility watch-and-wait phase, but the medium-term trend continues to look favorable. By revisiting two past oil crises, the capacity of a country’s stock market to withstand stagflation pressure lies in, at the bottom, an upward economic cycle, the technological wave brought by technological revolutions, a strong manufacturing supply chain and export advantages, and advantages of energy independence and controllability. Compared with global stock markets, the above advantages are evident for China.

On style assessment, Chen Xianshun believes it should return to fundamentals and place emphasis on large-cap growth. First, at the beginning of the second quarter, it should first return to earnings; based on historical experience, the correlation between stock prices and earnings has gradually risen since late March, reaching a full-year peak in the second half of April. Second, from the perspective of both large/small style and how calendar effects, changes in current market sentiment, and capital behavior interact, they also point to large caps or relatively better positioning.

Two major sticking points in Hang Seng Tech are seeing positive changes

“For Hong Kong stocks, we actually feel that Hang Seng Tech has started to become more interesting,” said Hu Chao, Assistant General Manager of the International Business Department and Fund Manager at Tianhong Fund.

Hu Chao analyzed that first, Hang Seng Tech suffered a major drop in February. Therefore, when the Middle East conflict broke out in the first half of March, this sector did not pull back again—this is an unexpected piece of good news. More importantly, there have been two positive changes at the industry level: one is that the State Administration for Market Regulation stepped in to halt the “food delivery wars”; the other is that export data for leading new-energy vehicle companies in February showed outstanding performance. These two points precisely correspond to the two sub-sectors that drove the sustained decline in the Hang Seng Tech Index last year—internet platforms and new-energy vehicles.

Hu Chao believes that halting the food delivery wars helps curb disorderly competition among companies. The released funds will either be used to increase R&D spending or to improve shareholder returns, both of which are beneficial for enhancing the long-term value of listed companies. Meanwhile, with exports of leading new-energy vehicle companies continuing to improve, it can effectively hedge against fierce competition and weak demand in the domestic market. Both major sticking points in Hang Seng Tech have seen positive changes.

When招商基金 looked ahead at Hong Kong stocks, it pointed out that one possibility is that the U.S. could get stuck in a long-term consumption war over the Iran issue, thereby losing dominance over the situation. Another possibility is that the issue becomes prolonged and gradually undermines the factual foundation of the U.S. technology industry. Therefore, a “catch-up decline” in strong assets during the previous drawdown (U.S. technology) may be a sign that emerging markets, represented by Hong Kong stocks, are bottoming out.

At the same time,招商基金 also warned that in the short term investors should be alert to possible reversals in U.S.-China tariff negotiations, the pace of Fed rate cuts falling short of expectations, and pressure from the release of restricted shares. Investors may consider adopting an “offense-and-defense balanced” strategy and focusing on policy catalysts and fundamental validation points.

Start with improving fundamentals and valuation quality; prefer undervaluation with quality later

Looking ahead, from a quarterly perspective, Shangyin Fund recommends continuously focusing on the Middle East situation and global market liquidity risks, while finding opportunities to buy during the declines as risks are gradually released. For example, directions for domestic demand improvement that are immunized against war volatility; related sectors that benefit from long-term energy security strategies boosted by a resonance between innovative drugs and geopolitical/AI demand; financial sectors that may stabilize the market and dividend-yield assets, and so on. Specifically, the following three major themes could be pursued: first, resource and energy sectors. Second, directions in technological innovation and localization—for instance, semiconductor equipment and materials, consumer electronics, solid-state batteries, etc. Third, consumption, pharmaceuticals, gaming, and other sectors with relatively strong earnings certainty.

Under the current backdrop of sharply higher global energy prices, Yongying Fund said that the following three directions are worth paying attention to: first, coal-to-chemicals and chemical production, energy substitution with clear cost advantages; second, new energy, which is seeing new opportunities in exports, and upstream and supporting industry chains are expected to benefit in tandem; third, the AI price-increase chain and the power-constraint chain. In 2026, the scale of AI computing power infrastructure is enormous; massive consumption of upstream materials will lead to supply shortfalls and price increases across the entire industry chain. Subsequently, investors can continue to focus on sectors such as storage chips, optical modules, PCB materials, and power supply for data centers.

招商基金 stated that the intensity of structural transition in 2026 will be even more significant. The key for style rotation lies in whether the earnings gap between the old and new economy continues to widen; focus on improving fundamentals first and undervaluation with quality later, gradually bringing about a balanced outcome.

招商基金’s view is that the beneficiary chain from the expansion of AI capital expenditure is shifting from front-end computing power to back-end infrastructure. Heavy-asset areas such as power equipment and power grids have high capital-intensity barriers. High-end manufacturing going overseas (chemicals, machinery, defense industry) relies on global capacity restructuring and industrial upgrading, and the resilience of earnings continues to be validated.

Zhao Yi, Assistant General Manager of Quansuo Fund’s general manager office and General Manager of Public Offering Investment Department, said that in 2026, the fund will mainly focus on two areas: energy and AI. In the energy segment, the rapid development of AI increases the total demand for energy. Meanwhile, under the backdrop of intensifying geopolitical conflicts, the energy price center of gravity shifts upward, and the importance of energy security increases. This further highlights the comparative advantages of new energy relative to traditional energy, and accordingly the ceiling of demand for new energy can be lifted. Specifically, he is more focused on the lithium battery segment within new energy. On the AI side, as AI technology penetration rates keep rising, China’s domestic computing power infrastructure enters a rapid growth cycle. The focus will be on AI applications and infrastructure construction.

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