On August 2, CITIC Securities released a research report indicating that the ongoing adjustments in the A-share market are mainly a correction for overheated trading activities, rather than a severe deleveraging crisis akin to the Korean market experience. The key reasons are outlined below:

Firstly, the overall leverage level remains secure. Nearly half of all A-shares experienced price increases in July, a notable surge compared to June.

Secondly, when juxtaposed with historical global deleveraging patterns, the current downturn in margin financing is relatively modest.

Thirdly, sustained capital inflows into the ETF market, particularly technology-focused ETFs, have ensured ample market liquidity. Despite localized liquidity pressures, notably the adjustment of certain non-core AI stocks that impacted internal holdings within the technology sector and led to a temporary pricing failure of core stocks, CITIC Securities believes this influence has largely dissipated.

The likelihood of a broad market recovery in August has risen, though it is not merely a rebound. The negative sentiment surrounding non-AI sectors is gradually improving, and the funding environment also favors a moderate recovery. Regarding asset allocation, it is advisable to increase positions in energy, non-ferrous metals, non-banking financial sectors, and innovative pharmaceuticals, while maintaining a focus on holding positions in the technology sector during the rebound phase.