Shenwan Hongyuan's Spring A-share Strategy: Optimistic Investment Opportunities Based on Structural Bull Strategy and Technology Industry Trends

The Zhitong Finance App learned that Shen Wan Hongyuan released a research report saying that conditions for an overall A-share bull market are becoming better, but there are still certain deficiencies. The foundation for incremental capital to continue to flow into A-shares is a condition that already exists: the “asset shortage” of residents goes without saying; when the net value of public funds rebounds, the profit effects of the asset management industry are being fully accumulated; the return of foreign capital, revaluation of Chinese assets, and short-term corrective and pessimistic expectations are being fully interpreted. If medium-term optimistic expectations are confirmed, further inflows of foreign capital are also expected to resonate.

An important “China No. 1” expectation at the economic and industrial structure levels is also a necessary condition for an overall bull market. “Chinese-style innovation (engineering innovation, 1-10, 10-N innovation)” and “China and the US enter a strategic standoff” after the Spring Festival support risk appetite, but they are not “China's first” level expectations. Subsequent Chinese-style innovation vs. China's AI application advantage, the period of strategic standoff between China and the US vs. the period of strategic opportunity in China, may become clues to the fermenting of the market at a higher level.

Shen Wan Hongyuan's main views are as follows:

1. Cyclical improvements in the economy can also be expected. The “economic bottom” in the past came from demand stimulation; the current “economic bottom” needs to be combined to clear supply. In 2026, the midstream manufacturing industry may usher in real supply clearance for the first time in history. The supply and demand pattern is easy to improve, and 25H2 optimistic expectations may ferment ahead of schedule. Within 2025, Trump's gradual tariff trend has taken hold, and expectations of overseas recession transactions have strengthened, which may repeatedly affect demand expectations. The complexity of Trump's policy outlook is that in order to restore America's internal circulation balance at any cost, the original rules of international relations have been broken, and the restructuring will not happen overnight.

In the short to medium term, the expectation that fundamentals will continue to improve is facing a lot of resistance. The implementation and effects of domestic policies remain to be seen. Overseas recessionary transactions and disruptions in the game between China and the US are all sources of resistance. However, it is believed that cyclical improvements in fundamentals in the medium term can also be expected; only the “economic bottom” confirmation model has changed. The “economic bottom” in the past came from demand stimulation: economic decline — policy easing — demand recovery — supply and demand improvement. The improvements in the supply and demand pattern in 2009, 2016-17, and 2020 all kept the supply growth rate high, and the demand growth rate rebounded sharply above the supply growth rate. At these stages, the economy has strong cyclical fluctuations and high pro-cyclical elasticity. However, the current “economic bottom” needs to be combined to clear supply: the economy is falling back — policies are underpinned — supply is cleared — supply is improved. Under such circumstances, there is only a weak cycle, and core consumption and manufacturing have become typical procyclical assets.

Continuing to suggest that in 2026, the midstream manufacturing industry may usher in real supply clearance for the first time in history. At that time, the fixed asset growth rate of the A-share midstream manufacturing industry may be less than 5%, and the demand growth rate required to improve the supply and demand pattern will drop drastically. At the time, improving corporate profitability no longer needed to be conditional on strong policy incentives; the marginal impact of tariffs weakened, and the impact of tariff shocks on the supply and demand pattern weakened; China's “anti-domestic” policies were effective, and external environmental pressure also had a basis for gradual easing. It is expected that the supply and demand pattern will improve in 2026 and that A-share profitability will rise ahead of schedule 25H2.

In 2025, Trump's tariffs will still be an important factor affecting demand expectations. The Trump administration will restore internal circulation balance (with a focus on restoring fiscal balance) as its primary short-term tactical goal. Using this as a starting point, Trump's gradual tariff trend has taken hold, his sense of luck is fading, and overseas recession transactions are heating up. As far as China is concerned, the probability of the worst pattern (the US imposes high tariffs on China, followed by major US allies) has been significantly reduced. Under the US equal tariff framework, China faces less surface pressure. Despite this, it must be acknowledged that Trump's policy outlook is complex: Trump's current policy does not hesitate to sacrifice the stability of external circulation in order to restore America's internal circulation balance. The redistribution of interests between the US and its allies has left a gap in regional influence under America's unilateralism, and the credit of the US dollar continues to be damaged. If America breaks the original rules of international relations, policies will inevitably fluctuate and be corrected, and restructuring will not happen overnight. Investing with uncertainty overseas is difficult to extrapolate. This is the background for procyclical investment in 2025.

Focus on the possibility of “natural decline in exports+increased Trump's tariff threat, and sharp fluctuations in fundamental expectations to suppress risk appetite” in 25Q2. The support for import demand from US inventory replenishment reached a high point at the end of 24. Overseas recession+ inventory replenishment weakens, and there is additional downward pressure on external demand. Investors may have a sense of luck with Trump's tariffs because Trump's progressive tariffs have not led to a clear export grab. There is natural downward pressure on China's export growth rate. If the threat of US tariffs against China is compounded, fluctuations in economic expectations may increase and curb risk appetite. At this time, some industry trend themes that lack short-term performance support will also be adjusted.

2. An update of the full A 2 non-profit forecast for 2025: Assuming that after the US imposes 10% tariffs on China twice, there will be no further tariff increases during the year, and domestic policies will strengthen to hedge the impact of 2/3 of the tariffs. Well, in 2025, net profit attributable to the mother of all A and Africa grew by 1.1% year-on-year. The four quarters were 0.2%, -0.5%, 1.6%, and 5.7%, respectively. The profit growth rate in 25 was significantly higher than in 24, mainly industries benefiting from financial incentives such as machinery and equipment, building decoration, automobiles, etc., as well as social services and media. Industries where profits are weakly improving are consumer incentives such as home appliances, beauty care, food and beverage, textiles, and clothing, as well as computers, defense, and military industries.

3. The domestic AI “iPhone 4” has already appeared. Referring to the mobile Internet market in 2010-15, the domestic AI interpretation process is deduced:

1. After a major breakthrough in the basic layer, it was time for the hardware and application theme market to spread across the board. This wave of markets may translate into macroeconomic and industry cyclical highs + medium term low cost performance positions. Short-term low cost performance often does not mean the end of the market, but rather a sign of a possible shift in leading industry segments.

The iPhone 4, which was released in mid-2010, was the first hot model in the smartphone era, and it is also the starting point for an accelerated increase in smartphone penetration. Using this as an opportunity, the mobile Internet hardware and application theme market spread across the board in the second half of 2010. On the hardware side, only individual companies in a few fields (touch screens) indirectly entered the Apple chain at the time, but among consumer electronics, high-quality leaders, other touch screen companies, and connector and passive component companies all rose markedly. The application side, operators' value-added services, various Internet monetization attempts, and the ultimate mobile Internet application (Internet of Things, intelligent driving, mobile payment), which was highly anticipated at the time, all played out the theme market.

DeepSeek's breakthrough “iPhone 4 Moment”, which looks like AI, are all major breakthroughs at the basic level. Training costs for AI models have been reduced, the market expects AI applications to be implemented at an accelerated pace, and an increase in confidence that AGI has finally achieved. At this point, the time is right to interpret the theme market that is spreading across the board.

This wave of markets may translate into macroeconomic and industry cyclical highs. The background of the first wave of the mobile internet market peaking in early 2011: the stagflation cycle was established, liquidity was completely tight; the supply and demand pattern in the electronics industry deteriorated, and the growth rate of revenue and net profit declined trendily. At the same time, consumer electronics was already in the mid-term low cost performance region (consumer electronics implied ERP was in the low cost performance region with a standard deviation of -1 times the historical average, and the consumer electronics public offering allocation coefficient was absolutely high). In industry trends, short-term low cost performance is often not a sign of the end of the market; instead, there is often a shift within the sector leading the upward sector in the industry segment.

Currently, the domestic AI market has a better macro environment, and the release of domestic AI computing power performance has just begun. The short-term cost performance ratio is not extreme, and the medium-term cost performance ratio is still close to the historical middle. Don't underestimate the resilience of the AI market in the short to medium term.

2. Mobile Internet hardware investment in 2010-15: The leading leaders in different industry stages are constantly changing.

In 2010, Chinese companies first entered the Apple chain indirectly, with Leybold Hi-Tech leading the way; in 2012, the Android camp broke through, and low-end smart phones formed a trend; after August 2013, horizontal and vertical mergers and acquisitions developed in line with the main market line, with Lixun Precision leading the way. At the same time, application-side “sellers” are beginning to outperform consumer electronics. Wangsu Technology and Inspur Information are more flexible targets in 2014-15. The switch between leaders may be an opportunity that the asset management industry must seize. By mistakenly sticking to old leaders, it is tantamount to basically missing the next stage of industry trends.

3. Investment in mobile internet apps: Every year, popular apps compete for usage time. The market interprets the general pattern: the spread of potential application targets (before popular apps) — (Hot models appear) First wave rise — (Competitors appear) Market recession — (Leading apps are clear) Market focus, leading the trend is rising. There is no need to worry about predicting popular apps; grasping the clear rise of leading apps is the focus of asset management.

Mobile Internet industry trends are at different stages, and leading hardware leaders are constantly changing. On the application side, especially on the To-C side, supply creates demand, innovates to define new methods, form new platforms, and cultivate a new ecosystem. The key direction has become the same. In 2010-15, there were popular apps every year, competing for user usage time, and investment priorities moved: Weibo in 2010, WeChat in 2011, mobile games in 2013 (investment in successful A-share Internet applications started), and Internet finance in 2014-15.

In summary, the general pattern of app-side market evolution: (before popular apps) the subject market for potential application targets — (explosions appear) key companies rise — (competitors appear) fluctuate and recuperate — (leading apps are clear) market focus, leading players are rising. There is no need to be pressured to predict popular apps: before popular models appear, you can embrace the spread of the market, focus on the verification period, wait for leading apps to clearly focus again, and grasp the main rise is the focus of asset management.

4. In-depth discussion on the AI market: Overseas AI computing power has just completed the transition from training chips to inference chips. The capital expenditure cycle of major Internet companies is rising, and domestic AI computing power is also in the early stages of performance release. Domestic AI vertical applications have yet to be exploited, but application development exploration is already in full swing, and China may have an advantage in the field of AI applications. Compared with the “amount of AI content” of A-shares (share of the market value of AI concept stocks), compared with the high “amount of Internet content” in 2015 and the “amount of new energy content” in 2022, there is still room for significant improvement.

Since 924, A-share technology stocks and domestic venture capital primary market financing amounts have simultaneously bottomed out. Semiconductors, AI chips, vertical models, physical intelligence, and intelligent driving are the most obvious directions in which the scale of venture capital financing has rebounded. It is also a key direction for subsequent level 1 and 2 linkage to launch popular apps.

The “AI content” index for A-shares was calculated (there were 6 irregular announcements in the past year referring to “AI” and “artificial intelligence”, which is considered an AI concept stock, calculating the market value share of AI concept stocks). The high points of “Internet content” in 2015 and “energy content” in 2022 were around 40%. As of February 28, the “amount of AI content” of A-shares was 15.7%. This means that there is still plenty of room for subsequent domestic AI performance releases, valuation increases, IPOs, refinancing, and mergers and acquisitions.

4. Re-examine the “three-piece puzzle of a bull market”: The conditions for an overall bull market are becoming perfect, but there are still certain deficiencies.

1. The foundation for incremental capital to continue to flow into A-shares is a condition that already exists: the “asset shortage” of residents goes without saying; when the net value of public funds rebounds, the profit effects of the asset management industry are being fully accumulated; the return of foreign capital, revaluation of Chinese assets, and short-term corrective and pessimistic expectations are being fully interpreted. If medium-term optimistic expectations are confirmed, further inflows of foreign capital are also expected to resonate.

2. Clues to cyclical and structural improvements in fundamentals are gradually becoming clear. Cyclical improvements: The supply and demand pattern for A-shares has improved, and the window for upward profitability is in 2026. 25H2 optimistic expectations may rush ahead. Structural improvements: AI and humanoid robots have the potential to become core industry trends in the bull market.

3. An important “China No. 1” expectation at the economic and industrial structure levels is also a necessary condition for an overall bull market. “Chinese-style innovation (engineering innovation, 1-10, 10-N innovation)” and “China and the US enter a strategic standoff” after the Spring Festival support risk appetite, but they are not “China's first” level expectations. Subsequent Chinese-style innovation vs. China's AI application advantage, the period of strategic standoff between China and the US vs. the period of strategic opportunity in China, may become clues to the fermenting of the market at a higher level.

5. The core conclusion of general research: prepare comprehensive cattle based on structural cows. The market, which is supported by the release of domestic AI computing power performance, is on the rise. The explosion of domestic AI applications is still in the process of preparation, and it is inevitable that it will be realized later. A resonance between industry trends and policy support has formed. The macroeconomic environment has sufficient reserves for steady growth policies, and downside risks can be addressed. Macro liquidity easing is the direction, and the interpretation of a structural bullish market is the basic market. Overall cow conditions are becoming plentiful, but there are still some deficiencies. In terms of capital supply and demand, we are waiting for the profit effect to accumulate further; in terms of cyclical fundamentals, 25H2 may beat the optimistic expectations of the 2026 A-share profitability inflection point; the “China No. 1” level of optimistic expectations, focusing on subsequent Chinese-style innovation — leading Chinese AI applications, strategic standoff between China and the US — anticipated changes in China's strategic opportunities may ferment in 2026.

6. Investment opportunities that are strategically optimistic about technology industry trends: domestic AI computing power and application, embodying intelligence, low-altitude economy. Based on the verification of improvements in the supply and demand pattern, I am optimistic that 25H2 core assets will return in excess returns (new energy vehicle power batteries, photovoltaic silicon wafers, consumer electronics, innovative drugs, and CXO may perform ahead of schedule, and core consumption of 25H2 will also be repaired). High dividends are becoming an important part of the basic return on A-shares. Allocating high dividends to the bottom positions of institutions can appropriately mitigate the problem of short-term relative earnings shortfalls.

In terms of structural selection, the strategy is optimistic about investment opportunities in technology industry trends: domestic AI computing power and application, embedded intelligence, low-altitude economy. The Hong Kong stock internet platform will maintain its advantage during the big model development and application exploration stage, and the pattern of Hang Seng Technology as the leader in this round of the AI broad-based index will not change. AI computing power companies in the domestic giant industrial chain are the direction where the release of performance is accelerating. To B-side AI applications are mainly efficiency improvements in the short to medium term, but the management framework has not changed, and management software companies still have the advantage of source data. Among them, companies that can provide agent services faster and better are expected to be re-valued. To C-side applications are waiting to be catalyzed by explosions, which will be an important source of future investment opportunities.

25H2 may advance expectations for the 2026 supply and demand pattern improvement, and is optimistic about the return of excess returns on 25H2 core assets. Focus on the direction of clearing supply first: new energy vehicle power batteries, photovoltaic silicon wafers, consumer electronics components, innovative drugs, and CXO. These directions may perform ahead of schedule in the 25H1 rotating market.

The trend of improving A-share corporate governance and shareholder returns remains unchanged. High dividends are an important part of increasing the basic return on A-shares. The allocation of institutional bottom positions with high dividends is correct for a long period of time, and can appropriately mitigate the problem of short-term relative earnings failure. At this stage, high dividends already have a very high relative cost performance ratio, and in the medium term, at least, the absolute benefits brought about by increased dividends can be obtained. If in the end, the entire market were to be interpreted as a complete revaluation of the market, high dividends would not be absent.

Supporting private enterprises will be the focus of the incremental policy of the 2025 two conferences. Private enterprises are given a heavy responsibility in scientific and technological innovation, and the private enterprise factor is expected to become a source of excess revenue in the technology industry trend market.

Risk warning: 1) Overseas economic recession exceeded expectations, and external demand fell beyond expectations; 2) overseas geopolitical conflict; 3) domestic economic recovery fell short of expectations, and subsequent stimulus policies fell short of expectations; 4) technology industry trends fell short of expectations; 5) Subsequent macroeconomic and overseas tariff policy changes are uncertain, which may lead to changes in A-share profits.