中国投资指南针季度报告：2026年第三季度，应对K型市场

3Q26: navigating a K-shaped market Equity Strategy 07 July 2026 A stockpickers’ market with diverging performanceChina equitiesposted divergent performance in 2Q: MSCI China/HSCEI fell 7.6%/9.8%, while ChiNext/STAR 50 surged 38.6%/78.6%, highlighting the gap between internet-heavy HK benchmarks and A-share growth indices. Globally, macro events (eg Iranconflict, the Trump-Xi meeting) had limited market impact, while AI capex droveearnings upgrades across tech supply chains. Positioning became more concentrated andcrowded, volatility is elevated, and retail leverage (incl leveraged ETFs) amplified marketswings. Sentiment became more fragile amid inflation and liquidity concerns. Wecontinue to view China as a stock pickers’market, with A-shares likely to outperform H-shares until the global AI rally unwinds. We maintain our barbell strategy, favoring bothvalue/yield and sectors with strong earnings support and R.E.A.L. moats. Equity StrategyChina Market:inexpensive, but not yet compellingMSCIChina fell 7.6% in 2Q26 in USD terms, underperforming global markets (vs MSCI World: +14.5%, MSCI EM: +23.3%). Within MSCI China, IT was the only sector withpositive return in 2Q (+36.7%), while Consumer Discretionary (-20.7%), ConsumerStaples (-18.6%) and Materials (-18.3%) were the worst performers. The index currentlytrades at 10.3x forward P/E, a 12% discount to its long-term average, but still above thehistorical trough of 8-9x. Earnings remain challenged, with consensus 2026E EPS growthrevised down from 11-12% in Jan to 2-3% now. Flow-wise, liquidity pressures arebuilding in 3Q, with nearly HKD540bn of lock-up expiries and a strong IPO pipeline. Macro:uneven growth with continued domestic softnessChinaInvestment Compass (CIM) should mostly be in the C4/stimulating phase in 2026. Credit growth slowed from 8.2% in 2025 to 7.7% in 1Q26 and 7.4% in May, alongsideweak domestic demand. FAI declined 4.1% YoY, while retail sales rose just 1.4% in5M26. Exports remained a bright spot (+15.5% YoY in 5M26), but the uneven growthcaps investor conviction on China equities. PPI turned positive in Mar-26, after 41consecutive months of deflation, and rose to 3.9% by May, driving a strong industrialprofit growth of 18.8% YoY in 5M26. However, sustainability is questionable given thelower energy prices. Expectations for near-term policy stimulus remain muted. Winnie Wu>>Research AnalystMerrill Lynch (Hong Kong)+852 3508 3058winnie.wu@bofa.com Patrick Pan, CFA>>Research AnalystMerrill Lynch (Hong Kong)+852 3508 4601patrick.pan2@bofa.com Gina Wu>>StrategistMerrill Lynch (Hong Kong)+852 3508 8008gina.wu@bofa.com Model portfolio:industrials/tech over utilities/consumersFor3Q26, our quant-driven portfolio upgrades industrials (incl. heavy machinery and electrical equipment) and tech hardware to the Top-10 OW list. We stay positive oncommunications equipment, which was up 92% in 2Q. We also upgrade diversifiedfinancials for strong 2Q earnings, and remain constructive on metals & mining (ex-gold),chemicals, and life sciences sectors. On the other hand, our model downgrades IPPs &renewables and liquors to the Bottom-10 UW list, while remains cautious on the autos,gas & water utilities, real estate, biotech, and household durables sectors. Glossary OW: overweightUW: underweightR.E.A.L.: Regulatory Critical–Enduring Cycles–Asset Heavy–Local Services Executive summary: the 3Ms Market:MSCI China and H-share significantly underperformed A-share and globalmarkets in 2Q. MSCI China’s forward P/E at 10.3x currently is 12% below the long-termaverage. EPS growth expectations have been reduced to 2-3% YoY for 2026E. Macro:Credit and nominal GDP growth softened in 5M26, along with weak FAI andconsumption, although higher energy prices drove up PPI and industrial profits. Model portfolio:For 3Q26, we prefer industrials (heavy machinery, electricalequipment), tech (communications equipment, hardware), and materials. Underweightutilities (IPPs, gas & water), consumers (liquors, auto, durables) and biotech sectors. China Investment Compass based model portfolio recommendation: 3Q26 Market: inexpensive, but not compelling Market performance review 2Q26 was marked by AI-led market leadership, resulting in sharper divergence betweentech and non-tech sectors and between A- and H-shares. While investors increasinglylooked through geopolitical headlines, concerns over weak domestic demand and anexport-reliant economy continued to cap conviction on China equities. In USD terms,KOSPI (+64.2%), ChiNext (+38.6%), and Nikkei 225 (+34.1%) outperformed in 2Q26,while HSCEI (-9.8%), HSI (-7.7%), and MSCI China (-7.6%) lagged. Within MSCI China, ITwas the only sector with positive return in 2Q (+36.7%), while Consumer Discretionary(-20.7%), Consumer Staples (-18.6%) and Materials (-18.3%) were the worst performers.A/H-share divergence widened notably: CSI 300 +13.7% in 2Q, while HSCEI -9.8%. P/Evaluation of MSCI China fell back to 10.3x, which is a 1