GEMS FIRST TO MARKET

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GEMS FIRST TO MARKET

Global Equity Research

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GEMS First To Market 06 July 2026

Top Stories

China Equity Strategy (Erin Zhang, CFA)

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 semiconductor/hardware already having

corrected by c8-9% over the past two days vs CSI300’s -3%. Policy speculation ahead of the month-end Politburo meeting is

driving positioning and short covering in consumption, property and infrastructure stocks, while brokers, insurers and

healthcare appear set for a catch-up rally as strong 2Q operational results and pre-announcements land over the next 2-3

weeks. Meanwhile, anecdotally, some onshore clients are wondering whether there will be a regulator-directed market cool-

down given more than 20 A-share AI listcos issued cautionary notices on potential share price downside risks on 30 June.

China AI ecosystem proxies staged a strong return in June (MXCN/A-share IT up c6%/20%), and A-share velocity surged to

6%-plus in late June. That said, we think such broadening will be short-lived – we believe China’s AI ecosystem can reassert

leadership in the August earnings season, outperforming on both 2Q results and 2H guidance. JPM China AI ecosystem top

picks include Zhongji Innolight, Victory Giant-H, JCET-A and Weichai-H in the global supply chain, and NAURA, AMEC-A,

Baidu, Zhipu and Iluvatar CoreX as localization plays.