Shenwan Hongyuan: 2026-27 will be the core interval of the A-share bull market, and there is still a certain gap before the bull market starts

1. Clue Analysis of Short-term Market Breakthrough: The key window in April-May stabilizes capital market expectations and clears pessimistic positions; the effects of long-term funds entering the market become evident, with insurance increasing equity allocation, and banks rising against the trend. The previous market center was already relatively high. The market normally reflects short-term improvements: geopolitical conflicts quickly ease, trading expectations of Federal Reserve interest rate cuts rise, and thematic enthusiasm heats up (stablecoin theme leads the way). Additionally, the index breakthrough itself directly boosts risk appetite.

This week, the SSE Composite Index broke through the March high, and we analyze the market clues: 1. Stabilizing capital market expectations + long-term funds from insurance entering the market raised the market center. In April-May, overseas disturbances + domestic policy hedging windows, with the Central Huijin playing the role of a stabilizing fund, stabilized capital market expectations and cleared pessimistic positions. In June, the effects of long-term funds entering the market accelerated, with insurance increasing equity allocation and bank stocks rising against the trend. Historically, in the oscillating market after a bear market ends, it often revolves around the tug-of-war at the bull-bear boundary. This time, the market center has been significantly raised, widening the distance from the bull-bear boundary.

Based on the high center, the market normally reflects short-term improvements, achieving breakthroughs: 1. Geopolitical conflicts quickly ease, and global risk appetite recovers. 2. Expectations of Federal Reserve interest rate cuts ferment. With the Federal Reserve chair transition approaching, the market anticipates more coordinated policies between the Federal Reserve and Trump. The dollar weakens, U.S. Treasury yields decline, industrial metals rebound, and global stock markets generally see an increase in risk appetite. 3. There are indeed new investment opportunities. The stablecoin theme shows high elasticity; the September 3 military parade arrangements advance, providing a repair window for defense and military industries; overseas computing power chains and intelligent driving also have catalysts. 4. The index breakthrough itself directly boosts risk appetite, with trading fund activity significantly increasing, reflected in the rebound of small-cap stocks and the recovery of technology growth.

2. We believe that multiple positive factors will accumulate in 2026-27, forming the core interval of a bull market. Recently, the downward pressure on A-shares has been weak, while the upward momentum has been strong, indicating that the market should pay more attention to long-term positive factors. It must also be acknowledged that the current market is still some distance from the start of a bull market. This is mainly reflected in: weak expectations for the overall fundamental outlook, and structural improvements are not yet at the bull market level. Various funds' expectations remain fragmented, and investors focusing on fundamental trends are relatively cautious. In the short term, there may still be speculative index rallies, and we maintain the judgment of a high-center oscillating market in Q2-Q3 2025.

We reiterate the mid-term judgment of "the preparation period before the bull market starting gun fires," with 2026-27 being the core interval of the bull market. In Q4 2025, the index center may effectively rise (anticipating the improvement of the overall fundamental outlook in 2026; the peak period of deposit repricing, with residents' asset allocation possibly beginning to shift towards equities; A-share profit growth readings in Q3-Q4 2025 will reverse the difficulties, providing a favorable backdrop for the fourth-quarter market), while Q3 2025 remains a high-center oscillating market Recently, the A-share market has shown weak downward momentum and strong upward momentum, indicating that the market is paying more attention to long-term positive factors.

However, it must also be acknowledged that the current market situation is still some distance from the start of a bull market. This is mainly reflected in two aspects: 1. The overall fundamental expectations are relatively weak. The rush to export in June has weakened ahead of schedule, and stabilizing domestic growth has become the main contradiction, raising concerns about a gap in macroeconomic support. In terms of structural improvement, the mid-level rise in technology still lacks significant catalysts. The profit effect from new consumption has already spread sufficiently, and there are limited new changes in fundamentals. Both technology and consumption are currently in a rebound phase. 2. Various funding expectations remain fragmented, with increased activity from trading funds, while investors focused on fundamental trends remain relatively cautious. This fragmentation is similar to that seen in October 2024. In the medium term, the profit effect accumulation for institutional investors is still insufficient, and the timing for comprehensive entry of resident funds into the market has not yet arrived.

Under such a microstructure, the short-term market may still experience speculative index gains. A larger-scale upward trend may have to wait until Q4 2025.

3. In the short term, finance sets the stage, and growth takes the lead. The overseas AI computing power industry chain continues to demonstrate a prosperous trend, with stablecoin themes and national defense and military industry being relatively resilient directions. New consumption and innovative pharmaceuticals may see a rebound after June 30. The mid-term valuation reassessment of high-dividend assets is a trend, and after the short-term market attention recedes, it will still present allocation opportunities. The medium-term structural view remains unchanged: A-shares are returning to a structural bull market, still relying on breakthroughs in technology industry trends. We are optimistic about three macro narrative-related assets: gold, rare earths, and national defense and military industry. Strategically, we view Hong Kong stocks as a leading market in a potential bull market.

In terms of structural selection, the short-term market is set by finance, with growth taking the lead. We believe that stablecoins and the national defense and military industry are clear new catalysts in the short term, with higher price elasticity. At the same time, we are paying attention to the prosperous trend of the overseas AI computing power industry chain. The public fund quarterly report settlement window is approaching, and new consumption and innovative pharmaceuticals may rebound after June 30.

Long-term funds entering the market will ultimately anchor the pricing of high-dividend assets (dividend yield) to long-term funding costs + reasonable interest spreads. Short-term high-dividend investments have overly focused on bank stocks, accumulating certain adjustment pressures. Once market attention recedes, high-dividend assets will still present allocation opportunities.

The medium-term structural recommendation remains unchanged, with A-shares returning to a structural bull market, still relying on breakthroughs in technology industry trends. At the same time, three types of assets are directly related to China's strategic opportunity narrative, including gold, rare earths, and national defense and military industry. We continue to strategically favor Hong Kong stocks as a leading market in a potential bull market.

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