China: An Equity Strategist’s Diary (H/A): Weekly wrap (27-31 Jul): AI de-crowding, H-share gains on rotation

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China: An Equity Strategist’s Diary (H/A)

Weekly wrap (27-31 Jul): AI de-crowding,

H-share gains on rotation

Equity Strategy

Weekly index performance, Wax & Wane (W&W) indicator

03 August 2026

HSCEI +4.1%/CSI 300 -1.3%: The week-long unwind in domestic AI trades amounted

to a stress release from overcrowding, in spite of Friday’s temporary reprieve. Broader

caution persisted amid soft A-share turnover, with funds rotating into value and laggard

plays incl. consumer, auto and select AI application platforms, contributing to H-share

outperformance (+14% in Jul). Communication services, consumer discretionary and

staples ourperformed the most while IT, healthcare and energy underperformed the

most. Looking ahead, earnings delivery from major platforms in mid-Aug may put the

sector strength to test after recent re-rating. Our W&W indicator swung in the volatile

week before reverting to neutral zone at 46 on Thu. Weekly average was 35, bullish while

monthly average rose to 43, neutral (see page 18).

Equity Strategy

China

Macro: top weekly headlines & upcoming highlights

Earnings revisions

7

Recovery trends

8

Week of Aug 3: Mon, Jul RatingDog mfg PMI; Wed, RatingDog mfg services PMI; Fri,

trade data, FX reserves; Sun, inflation; Geopolitical: China accused US of AI

hegemonism, threatened countermeasures over potential probe; Macro: Jul mfg PMI fell

to 49.2% (50.3% in Jun); non-mfg PMI at 49.0% (50.2%); no immediate easing signals

from Jul Politburo meeting, as expected; MOC rejected overcapacity claims, said no

universal capacity utilization benchmark exists; tech and green lending continued to

outpace overall loan growth in 2Q, property loans contracted further; Fiscal: China

issued detailed 20% tax guideline on offshore trusts; STA stepped up crackdown on

invoice economy; personal income tax surged to the third-largest tax category; China to

phase out urban land-use tax exemptions for energy and resource firms.

Sector: key trends and weekly updates

New productive force: PBOC unveiled national data catalogue to boost tech finance,

data sharing; Shenzhen eyed RMB2.3tn value-add from strategic emerging industries by

…