Huajin Securities: When will the technology adjustment end?

Huajin Securities released a research report stating that the current TMT price-to-earnings ratio has fallen from 93% to 84% from its peak in the past three months. The TMT trading volume still accounts for over 50% of the total. The TMT financing balance has also dropped by around 10% compared to before the adjustment. Strong industry trends and policy catalysts indicate that the adjustment in TMT may be nearing its end. In terms of fundamentals, short-term real estate investment growth may continue to be weak, infrastructure investment growth may stabilize, and high-tech industry manufacturing investment growth may continue to rise. Finally, short-term consumption growth may continue to stabilize and rise. In terms of allocation, it is recommended to balance investments in outstanding technology, some cyclical industries, and undervalued dividend sectors. Key points of Huajin Securities: Looking back on history, the short-term adjustment of the TMT market is mainly driven by industry events, further policy support, sufficient adjustment of sentiment indicators, and loose liquidity. Since 2016, the TMT index has experienced 23 short to medium-term adjustments and 4 medium to long-term peak adjustments. The end of the medium to long-term TMT market adjustment is mainly driven by the improvement in fundamentals, policy implementation, and loose liquidity. The end of the short-term TMT market adjustment is mainly driven by industry events, positive policy implementation, sufficient adjustment of sentiment indicators, and loose liquidity. Industry event catalysis is the core factor pushing the end of the short-term TMT adjustment. Positive policy implementation is also an important factor leading to the end of the short-term TMT adjustment. Sufficient adjustment of sentiment indicators is a key condition for the end of the short-term TMT adjustment: firstly, the proportion of TMT trading volume percentile has mostly dropped to below 40%; secondly, the majority of TMT financing balances have dropped by 5% or even more than 10%. Loose liquidity also has a significant impact on the end of the short-term TMT adjustment. Currently, with strong industry trends and policy catalysts, the adjustment in TMT may be nearing its end. The short-term catalyst for the upward trend in industry trends continues. Firstly, there is a continued expansion in global AI computing demand. Secondly, new AI-related products are constantly emerging. Thirdly, companies globally related to AI may announce high growth rates and exceed expectations in the short term. Fourthly, technology company financing continues. Positive policies may continue to be implemented in the short term. Firstly, the World Artificial Intelligence Conference 2026 will be held. Secondly, the "2026-2028 National Computing Infrastructure Construction Action Plan" will be released. Thirdly, Shanghai has announced the "AI + Manufacturing" 13 measures. Sentiment indicators have declined, but the extent of the decline is not sufficient. Firstly, the TMT price-to-earnings ratio has fallen from 93% to 84% from its peak in the past three months. The TMT trading volume still accounts for over 50%. Secondly, the TMT financing balance has dropped by around 10% from the peak before the adjustment. Fundamental support remains strong, and A-shares may experience bottoming out in the short term with limited further downside. Short-term economic and profit trends may continue to be in a recovery trend. Firstly, short-term exports may continue to maintain high growth rates. Secondly, short-term real estate investment growth may continue to be weak, infrastructure investment growth may stabilize, high-tech industry manufacturing investment growth may continue to rise, and short-term consumption growth may continue to stabilize and rise. Secondly, short-term profit growth may continue to rise, with short-term producer price index year-on-year growth and industrial enterprise profit growth possibly continuing to rise, and A-share profit growth also likely to continue its upward trend. Short-term liquidity may further loosen. Firstly, short-term macro liquidity may marginally expand, with short-term inflation expectations in the United States cooling down and short-term international liquidity expectations possibly marginally loosening. Secondly, the net injection by the central bank in China this week exceeding 1.9 trillion may maintain loose domestic liquidity. Secondly, inflows into the stock market in the short term may improve. Short-term policies may continue to be positive, and external risks may remain relatively low. Firstly, short-term policies may continue to be positive, with the July Political Bureau meeting likely to continue setting a positive tone, and the active policies in the consumption and technology industries may accelerate in the short term. Secondly, short-term external risks may remain relatively low, with the negative impact of the short-term US-Iran conflict on the market likely to be limited, and the short-term stability of Sino-US relations likely to continue. Industry Allocation: Balanced allocation in outstanding technology, some cyclical industries, and undervalued dividend sectors in the short term. Currently, growth industries such as electronics, media, and defense in the PEG and low sentiment categories; in the disclosed mid-year report forecasts, sectors with high year-on-year profit growth include petrochemicals, retail, environmental protection, defense, and computers. It is recommended to balance investments in: 1. Electronics (semiconductors, AI hardware), communication (AI hardware), computers (AI applications), media (AI applications, games), electronics (AI power, lithium batteries), innovative medicine, defense (commercial aerospace), non-ferrous metals, etc.; 2. Low-valuation dividend sectors such as major finance and power. Risk Warning Historical experience may not necessarily apply to the future, unexpected changes in policies, and economic recovery not meeting expectations.