亚洲量化策略：中国量化策略：坚持A股……在科技板块内轮动

China Quant Strategy: Stay with A-shares... Rotate within Tech YTD,ChinaAis up13.6%vs.MSC/China down-12.2%.We expect ChinaAleadershiptocontinue drivenbygrowth stockswhile forChina tech,we seesome roomforrotation. +6563267641rupal.agarwal@bernsteinsg.com +85221232636cheng.zhang@bernsteinsg.com Q425withincreasedpaceofearningsdowngrades.Unfortunately,wedon'tseenearterminflection oneither valuationor earnings.While70%/77%ofMSCIChina stocksaretradingbelowtheir5yr/1OyrPE;historically,markethasbottomedwhenmorethan8O%ofthestocksfall belowaveragevaluations.Investorsentimentalsoremainsweak withpassiveflowfromUS/EU slowing down and domestic flow into HK not showing pick-up (thoughsince April retail flow has moved back into stocks). China A-share leadership expected to continue: While MSCI China Atypically trades ata premium to HK listed names, A-share index is now trading at 17.7x fwd. PE ie. below itsownmean and at an averagerelative premium to H-shares; indicating a favorable returnoutlook over the next 12months vs. H-shares. China A, cap-wtd. earnings revision stillearnings support unlike the broad-based downgrades seen in MSCI China. Sector-leveldynamics:Thedispersion within Chinese equities has been drivenby Aland geopolitics with Tech, Energy, Materials, Utilities outperforming while Real Estate/Consumer sectors struggle.While Industrial/Materials are still reasonably valued; Tech,Energy, Utilities are expensive and earnings revision for Industrial/Tech are seeingmoderatingtrendsrecently while upwardrevisionsfor Energy/Materials are near extreme.Incontrast,thedowngradeforCommunications,Discretionary,Healthcarelookextremeandcouldsee abottom. Expectrotation within Chinatech:While Communication equipment and ComputerSemis into Entertainment, Interactive Media &Services and Internet.The rally this year hasbeen led more bymultiple expansion and the sector (along with Communication Equipment,Electronic Equipment, IT Services and Semis) is already in a de-rating cycle after hittingpeak valuations (49xfwd.PE,5.3x PS)in May'26.Internet/Entertainmenthavefallen torecord lowvaluations andInternetis showing a valuationbottom.WhileCommunicationEquipment/IT Services still haveearnings support; we see downgradecycle bottomingoutforEntertainment,Computers&Peripherals,Interactive Media&Services and Internet. Growthexposurebetterthanchasingmomentum:Across bothChinaAand MSClChina,momentum,growth andhigh vol stocks havedonethebest generatingmorethan20% alpha YTD.China momentum is not in a bubble (unlike KR/TW, see here), however, riskof peakupgrades ishigh.However,growth stocks still lookreasonablyvaluedwithampleroom for upwardrevisions to continue.Our preferred screens are in Exhibit 37-Exhibit38.ForourMSCIChinascreens,seeAsiaQuantStrategyDeck. Mainland China market has structurally outperformed MSCI China equities and HSCEl over the long-term,and the gap has persisted over the past 20 years. Even YTD, the trend has continued with China A, up 13.6% vs. HSCEI/MSCI China down-11.1%/-12.2% respectively. Within A-shares, Tech (50%), Energy (32%), Materials (18%) and Utilities (14%) have done wellwhile Real Estate (-20%), Staples (-20%)and Discretionary (-17%)sectors have been the worst. Even within MSCI China, Tech(55%), Energy (25%) and Materials (5%) have outperformed the broader market (Exhibit 1-Exhibit 2) the long-term.The trend has continued YTD, as MSCI ChinaA is up +13.6% while HSCEI/MSCI China are down-11.1%/-12.2% respectively Data as of Jun 22th 2026. Returns are eq-wtdin USDSource: MSCl, FactSet, Bernsteinanalysis internet names like Tencent (-28%)and Alibaba (-28%) underperformed the most YTD VALUATIONS&EARNINGS MSCI China is attractively valued, trading at 12.8x fwd.PE ie. -0.4SD below the 10-year average. However, equity risk premiumhas been on therise,presenting a challenging environment.Therehas been abroad-basedvaluation de-rating for MsCI China,sinceQ425and now70%ofMSCIChina stocksaretradingbelowtheir5yrPE (abovethelong-termaverageof62%)and77%ofthestocksaretrading belowtheir10yrmean (above75%average).Historically,marketbottomhas happened withmorethan MSCI China A has consistentlytraded at a premium to HK listed Chinese equities,and thevaluation dispersion has widened in this cycle.MSCI China A saw persistent re-rating since 2025,reaching peak valuationsof 22x fwd.PE in May2026.Since then,shares. Historically,lower valuation premium for A-shares vs.H shares has worked in favor of A-shares over the next 12months -the current premium level is on upward trend, and still has room to rise, reflecting a potential stronger performancefor A-sharesover the next 12m. (Exhibit 10 -Exhibit 8) been increasing in MSCI China as well as MSCI China A, though in A-shares earnings revision started moderating in Q2 ofthis year vs.since Q425 for MSCI China. Interestingly, cap-wtd earnings revisions shows a different picture-China Acap-wtdearnings revisions stillremain in net upgrades,highlighting large-caps in mainland m