China International Capital Corporation: The A-share market in August may enter a recovery phase after a significant correction.

According to research reports from China International Capital Corporation, since late July, the index has been oscillating and consolidating. The A-share market in August may enter a recovery phase after a significant correction. In light of the rapid adjustment in the market in July, it is recommended to pay attention to two main lines recently: 1) Selective focus on growth sectors: After the significant adjustment in technology style, the crowding has noticeably eased. Industries with sufficiently high prosperity can achieve a high growth rate on the numerator side to offset the drag on the denominator side. Relevant segments in AI infrastructure, such as optical communication and PCB, remain in a strong state of prosperity this year. However, many companies in the semiconductor and computing power sectors still need to consider the alignment of fundamentals and valuations, with potential divergence trends in the technology growth sector. Many innovative drug companies are entering the clinical data validation stage, which is worth bottom-up attention. 2) Improvement in cyclicals: More and more areas are seeing a rebound in fundamentals from the cyclical bottom. It is advisable to consider the geopolitical situation and the position in the capacity cycle comprehensively, focusing on sectors with improving performance and supply-demand patterns, such as power grid equipment, petrochemicals, engineering machinery, and non-bank financial industries that benefit from a favorable capital market. The precious metals sector also deserves attention after several adjustments. The basic recovery progress in purely domestic demand industries is still relatively slow and requires further observation. Overweight sectors in August: basic chemicals, communication equipment, electrical equipment, machinery, and securities. Underweight sectors in August: construction and engineering, textiles and apparel, education, light industry and home furnishings, and retail.