China Equity Strategy: AI entry point improving, balanced by shareholder return plays

研报英文原文证据摘录

China Equity Strategy: AI entry point improving, balanced by shareholder return plays

buyback

Alex Yaoyield >5%, positive net cash and OCF, and beta<1.2). On macro policies, JPM

(86 21) 6106 6505

believes the July Politburo is likely to prioritize faster deployment of the existing alex.yao@jpmorgan.com

budget with focus on AI infrastructure, high-tech manufacturing, energy security SAC Registration Number: S1730523020001

and broader self-reliance initiatives. We think this, together with the 2Q earnings J.P. Morgan Securities (China) Company

season which will likely set the stage of AI-theme’s lead on EPS growth, should Limited

help China’s AI ecosystem to reassert leadership in the second-half of 3Q and 4Q.

JPM China AI ecosystem top picks are Zhongji Innolight, Victory Giant-H,

JCET-A and Weichai-H in the global supply chain, and NAURA, AMEC-A,

Baidu, Z AI and Iluvatar CoreX as localization plays.

• Deleveraging well in progress: Margin financing deleveraging has likely

passed its most acute phase. Outstanding margin balance peaked at Rmb3.0trn

on June 23, marking the first time in A-share history that margin loans exceeded

the Rmb3trn threshold. The subsequent correction saw 13 consecutive trading

days of decline from July 2 to July 20, with total margin balance contracting by

approximately Rmb300bn to around Rmb2.70trn by July 20. The streak ended

on July 21, with margin balance recovering slightly to Rmb2.72trn. As a

percentage of total A-share turnover, margin buy volume has fallen below 9%,

down significantly from earlier highs, indicating that the most aggressive forced

deleveraging pressure has largely been released. Short selling remains

negligible, with outstanding short balance at only Rmb20-21bn, suggesting

limited downward pressure from the short side.