As market risk appetite gradually recovers and the earnings season approaches, attention is shifting toward earnings certainty, with profit delivery capability likely becoming a core variable. Investors are advised to focus on sectors and companies with strong earnings visibility. Two major themes are highlighted: 1) Growth-oriented sectors still require careful selection within the technology sector, where congestion has notably eased after recent adjustments. Industries with sufficiently high growth momentum can achieve positive effects from strong numerator-side growth to offset denominator-side drag. AI infrastructure-related segments, such as optical communications and PCB, are expected to maintain a strong high-growth state this year. For many companies in areas like semiconductors and computing power, the alignment between fundamentals and valuations still needs close monitoring, and the technology growth sector may experience divergent trends. Meanwhile, numerous companies in the innovative drug sector are entering the clinical data validation phase, warranting a bottom-up focus. 2) Cyclical improvements are emerging across more sectors, with fundamentals rebounding from cyclical lows. It is recommended to comprehensively consider geopolitical situations and capacity cycle positions, focusing on areas with improving earnings and supply-demand dynamics, such as power grid equipment, petrochemicals, engineering machinery, and non-bank financial sectors benefiting from a healthier capital market. The precious metals sector, after significant adjustments, also deserves attention. The recovery progress in pure domestic demand industries remains relatively slow and requires further observation.

Key views from the analysis include that the mid-2026 earnings report disclosure peak is approaching in late August. As of August 14, 2026, approximately 4.8% of listed companies on the A-share market had disclosed their 2026 mid-year reports, similar to the pace in the same period of 2025. Including earnings previews, about 9.3% of listed companies have released basic earnings information. After fluctuations since July, investor risk appetite is gradually recovering, and attention to mid-year earnings reports has notably increased. A-share non-financial sectors are expected to achieve double-digit growth in the first half of 2026. Among listed companies that have disclosed 2026 mid-year reports or earnings previews as of August 14, net profit growth in the first half of 2026 was approximately 23.5%, with financial/non-financial sectors seeing growth of about 8.1%/28.4%, and main board/growth enterprise board/STAR market growth of about 15.6%/69.8%/207.0%. In the first quarter of 2026, net profit growth for all A-shares, financials, and non-financials was 7.2%, 2.2%, and 11.7%, respectively. Macro data shows that from January to June 2026, industrial enterprise profits increased by 18.7% year-on-year, up from 15.5% in March. In terms of prices, the CPI in the second quarter of 2026 remained above 1%, while PPI notably rose. For consumption, under the influence of weakening effects from trade-in policies and a high base, retail sales grew 1.3% year-on-year from January to June 2026, slowing from 2.4% in the first quarter. In real estate, the decline in commercial housing sales area widened slightly in Q2, while the drop in sales value narrowed. For external demand, export growth was 17.6% year-on-year from January to June 2026, up from 14.7% in the first quarter, indicating strong resilience. Based on current disclosure progress and macro data, it is expected that mid-2026 earnings growth rates will be roughly flat or slightly higher than Q1, with non-financial A-shares achieving double-digit growth in the first half.

According to an incomplete survey of A-share companies covered by the analysis (approximately 748 companies), the expected year-on-year growth in net profit attributable to shareholders for Q2 2026 is about +19.0% for all A-shares, +21.0% for financials, and +15.4% for non-financials. By industry, in the financial sector, non-bank financials are expected to continue benefiting from high market activity. In the non-financial sector, upstream industries benefit from price increases, tech hardware continues to benefit from AI industry trends, while domestic demand consumption and real estate remain weak. Based on data from listed companies that have already disclosed 2026 mid-year reports or earnings previews, among 31 primary industries, 23 saw improved mid-2026 earnings growth compared to 2025. Industries such as steel, oil and petrochemicals, defense and military, electronics, and non-ferrous metals showed high year-on-year profit growth, while real estate experienced a significant decline. Specifically:

1) Upstream: Price increases are expected to boost earnings for mid-to-upstream resource sectors, with strong certainty in areas like non-ferrous metals and oil and gas chemicals. PPI year-on-year growth accelerated in Q2, driven by factors including overseas geopolitical changes leading to higher oil and some chemical product prices, AI demand pushing up prices of certain tech hardware like storage, steady copper price increases, and high aluminum prices. However, price rises led to heightened expectations of Federal Reserve rate hikes, and gold prices generally declined in Q2. Meanwhile, building materials may continue to face pressure due to the weak real estate sector.

2) Midstream: Divergence between domestic and external demand persists, with export sectors continuing to receive support from external demand. China's export growth rate in Q2 further improved from Q1, and export-related sectors such as electrical equipment and new energy, and AI infrastructure (batteries, energy storage, etc.) are expected to maintain high growth. However, profits in traditional general and specialized equipment, automobiles, and some machinery industries may face pressure.

3) Downstream: Domestic consumption still needs improvement. Retail sales growth further slowed in Q2, and sectors like commercial retail, agriculture, textiles, and apparel may remain relatively subdued. However, certain sub-sectors with a high proportion of exports, such as innovative drugs, aquaculture, and home appliances, may outperform the overall consumption sector.

4) TMT: The AI industry trend continues, likely supporting high growth in the sector. AI technology rapidly iterated in the first half, with AI demand continuing to drive up prices of tech hardware like storage. Orders for high-end computing chips, storage chips, optical communications, PCBs, and servers are sufficient, and profits in electronics and related sectors are expected to sustain high growth. The disclosure situation will continue to be monitored closely.