Is the pullback of "Xiaodeng stocks" not over yet? Securities firms are highly bullish on CATL and WuXi AppTec as their top gold stock picks for August, while the number of brokerages that recommend Innolight has decreased by 8.
On the first trading day of August, all major A-share indices closed lower.
On August 3, the Shanghai Composite Index closed at 3809.66 points, down 0.59%, nearly breaking the 3800-point threshold; the Shenzhen Component Index closed at 13448.29 points, down 0.96%; the ChiNext Index closed at 3302.55 points, down 1.24%; the Sci-Tech Innovation Board Composite Index closed at 1758.21 points, down 3.39%. On the same day, the wind power equipment and power grid equipment indices led the gains, while the semiconductor index topped the decline list.
In the previous month of July, the technology sector that was previously favored by clustered capital generally suffered a sharp pullback. The ChiNext Index and the Sci-Tech Innovation Board Composite Index plummeted 23.00% and 27.79% respectively that month, and the Shanghai Composite Index also trended down from 4100 points at the beginning of the month, hitting an intraday low of 3741.11 points on July 20. At the end of July, as regulators and multiple central SOEs as well as insurance enterprises released positive signals, the market stabilized to some extent.
How will the A-share market perform in August? Can the technology sector, playfully nicknamed "small bull stocks" by the market, recover from the pullback? Will the "traditional blue-chip stocks" represented by baijiu and banking sectors, and the "mid-growth blue-chip stocks" represented by new energy and pharmaceutical sectors see a rally?
Multiple securities firms believe that the recent market adjustment is mainly affected by the impact of the overseas technology sector and excessively high capital congestion in the early stage. The market may maintain a volatile pattern in August, and the market is expected to shift from the extreme technology-driven rally to a balanced pattern across all sectors, with sectors that saw capital outflows in the early stage expected to witness valuation repair. Some institutions also hold that the technology growth sector has seen eased congestion after this round of pullback, and will still return to the main line of this bull market.
Yang Zhenjian, Assistant to the Director of the Index & Quantitative Investment Department and Fund Manager at Bosera Asset Management, told Time Weekly that in the past, the rise of US tech stocks had an obvious driving effect on A-shares, but this year this transmission effect has weakened. The reason is that the AI investment in the US stock market has entered the "performance delivery" stage, while the A-share technology sector follows a more independent logic based on domestic industrial policies. This means that the A-share market is gaining greater autonomy in pricing, and investors should pay more attention to the domestic economic fundamentals and industrial development trends, rather than simply relying on the sentiment transmission of external markets.
Recommendations for Innolight and Hygon Information Have Both Dropped Sharply
As of August 3, according to statistics from Wind, 23 securities firms have released their August top stock recommendations, covering a total of 183 stocks. Among them, CATL and WuXi AppTec are the most frequently recommended, with 8 securities firms recommending both at the same time. In addition, Innolight and Midea Group are both recommended by 5 securities firms, while Zijin Mining, Naura Technology and SMIC are all recommended by 4 securities firms.
Regarding the recommendation logic for CATL, Zheshang Securities pointed out in a research report that the company's global and overseas power battery share continues to rise, the capacity utilization rate of its battery system remains at a high level, and its order and liquidity performance are robust. As the second half of the year enters the peak production scheduling season, CATL, as a leading battery manufacturer, is expected to fully benefit from the demand expansion, with high certainty in performance growth.
For the reasons for recommending WuXi AppTec, Ping An Securities believes that with the advancement of global drug innovation, the importance of domestic enterprises in the industrial chain continues to rise, and WuXi AppTec, as a leading CXO enterprise, continues to benefit from the transfer of the industrial chain. At present, new molecules have become a new hotspot in drug R&D. The company has taken the lead in laying out the new molecule field, with peptides, small nucleic acids and other products entering large-scale supply one after another.
It is worth noting that the number of recommendations for top stocks in the technology sector has decreased significantly compared with July.
The number of recommendations for Innolight, Hygon Information and China Jushi, which were recommended by 10 or more securities firms at the same time in July, dropped sharply in August, decreasing by 8, 9 and 8 respectively. Among them, Hygon Information was recommended by only 1 securities firm in August, and China Jushi, a PCB concept stock, was recommended by only 2 securities firms in August.
Looking back at the top stocks recommended by securities firms in July, the tech stocks with top recommendation rankings including Innolight, Hygon Information, China Jushi, Juhua Co., Ltd., GigaDevice and Cambricon all fell by more than 20% that month, among which GigaDevice saw the largest decline, reaching 53.55%.
It is worth mentioning that Changxin Technology, founded by Zhu Yiming, Chairman of GigaDevice, officially landed on the Sci-Tech Innovation Board at the end of July and set a number of records. Its market value exceeded that of Industrial and Commercial Bank of China on the first day of listing, topping the list of "the largest market value stock in A-shares", and its trading volume of 141.2 billion yuan on the first day also refreshed the A-share historical record at the same time.
Yang Delong, Chief Economist of Qianhai Open Source Fund, told Time Weekly reporter that under the current tech bull market environment, tech enterprises have a good timing for listing, which will further consolidate their industry status, and at the same time provide investors with leading investment targets in relevant tracks. Before the listing of leading enterprises, many investors worried that the listing would produce a siphon effect on capital, diverting funds from the chip semiconductor industry and even the entire technology sector, causing further decline of tech stocks. However, in the previous more than one month, tech stocks have already seen a large pullback, and sectors with high gains in the early stage such as chips semiconductors, computing power and algorithms have witnessed large-scale profit taking, which has digested the expectation of capital diversion brought by the listing in advance.
Bosera Asset Management told Time Weekly that at present, the valuation of A-shares has been adjusted to a reasonably low level. The recent adjustment is mainly impacted by the sharp deleveraging in South Korea and repeated overseas industrial expectations, and short-term external shocks have not changed the fundamental trend. Under the trend of RMB exchange rate appreciation, the resilience and value of Chinese assets are being further demonstrated, foreign investors' attitude towards Chinese assets is gradually becoming optimistic, and the return of overseas funds is expected to support A-shares in the medium and long term. Considering that the A-share sentiment indicator has approached the bottom area, and ETF funds have seen another large inflow at key points, the largest scale since April 2025, the market is expected to bottom out in stages.
A public fund in Shanghai told Time Weekly that from the perspective of market structure, the market shows an obvious divergent state, lacking a main line that can continuously lead the indices, and the rotation rhythm of various sectors has accelerated significantly. In the process of digesting micro selling pressure and external disturbances, the market will inevitably maintain repeated volatility, and sufficient tactical patience is needed. The key tracking point in the future market is to pay attention to core tech varieties supported by prosperity, and wait for the further clarification of the main line resonance signal.
Will the Market Shift from Clustered Tech Rally to Rebalancing?
Multiple securities firms stated in their research reports that excessively high congestion in the technology growth sector in the previous period was the main reason for this round of adjustment.
From the perspective of trading data, previously, the transaction volume of the top 5% A-share stocks has approached the historical threshold of 50%, and the allocation proportion of the electronics and communication sectors has reached historically high levels. The excessively rapid rise in the early stage led to a large number of profit-taking positions accumulated in tech stocks. When the trading concentration of the track is too high, it is often accompanied by large adjustments.
Looking ahead to the August market, Kaiyuan Securities believes that although the pressure on the tech sector has been partially eased, the market still faces the pressure of high congestion. One of the main reasons for the sharp tech adjustment this round is the fragile chip structure under congestion, which leads the market back to rebalancing, and part of the capital flows to non-congested sectors with the least resistance. Looking forward to the market, congestion is the core indicator, and historically, the decline of congestion often leads to style switch.
Donghai Securities stated in a research report that geopolitical factors may still cause disturbances in August, but the marginal impact of further escalation is relatively limited. The Political Bureau meeting has set the tone to increase counter-cyclical adjustment efforts in the second half of the year, and the overall market environment may be better than that in July. As the mid-year financial reports enter the intensive disclosure period, in addition to focusing on sectors related to hardware equipment with performance verification capabilities, in the pro-cyclical aspect, we can focus on relevant sectors that benefit from both the price rise caused by geopolitical factors and the long-term insufficient capital expenditure, so as to achieve more sustainable profitability.
In Yang Delong's view, the market is currently in a bubble-squeezing stage. When the pressure of profit taking is fully released, some high-quality leading tech stocks that have been mispriced downward will see a repair rally. However, the current downward momentum of the market may not have been completely stopped, and many tech stocks are still in a downward channel. Investors need to wait patiently for the market to stabilize before making layout.
"The overall market in August is most likely to maintain a repeated volatile trend, with continuous sector rotation, and the probability of a unilateral rise or a sharp slump is low." Yang Delong said.
This article is from the WeChat Official Account "Time Weekly" (ID: timeweekly), author: Xie Yiwen, editor: Xi Ang, published with authorization from 36Kr.