China Equity Strategy Tactical rotation may continue in July, but AI could reassert leadership in August

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China Equity Strategy Tactical rotation may continue in July, but AI could reassert leadership in August

Global Markets Strategy

03 July 2026

China Equity Strategy

Tactical rotation may continue in July, but AI could

reassert leadership in August

We see growing odds that the tactical rotation will continue in July, with A-share Equity Macro Research

semiconductor/hardware already having corrected by c8-9% over the past two AC Erin Zhang, CFA

days vs CSI300’s -3%. Policy speculation ahead of the month-end Politburo

(86-21) 6106 6328

meeting is driving positioning and short covering in consumption, property and erin.zhang@jpmorgan.com

infrastructure stocks, while brokers, insurers and healthcare appear set for a catch- SAC Registration Number: S1730521090002

up rally as strong 2Q operational results and pre-announcements land over the J.P. Morgan Securities (China) Company

next 2-3 weeks. Meanwhile, anecdotally, some onshore clients are wondering Limited

whether there will be a regulator-directed market cool-down given more than 20 Tim Huang

A-share AI listcos issued cautionary notices on potential share price downside (852) 2800-4323

risks on 30 June. China AI ecosystem proxies staged a strong return in June tim.huang@jpmorgan.com

(MXCN/A-share IT up c6%/20%), and A-share velocity surged to 6%-plus in late J.P. Morgan Securities (Asia Pacific) Limited/

June. That said, we think such broadening will be short-lived – we believe J.P. Morgan Broking (Hong Kong) Limited

China’s AI ecosystem can reassert leadership in the August earnings season, Rajiv Batra

outperforming on both 2Q results and 2H guidance. JPM China AI ecosystem top (65) 6882-8151

picks include Zhongji Innolight, Victory Giant-H, JCET-A and Weichai-H in the rajiv.j.batra@jpmorgan.com