Currently, the market is characterized by a juncture of valuation bottoms alongside cyclical lows in fundamental indicatorsThis transitional phase showcases a sideways movement primarily influenced by a box-shaped oscillation, signifying the presence of structural opportunities within the financial ecosystem.

An analysis conducted until June 28, the last trading day of the first half of the year, reveals that sectors such as banking, coal, and utilities led the market gainers, with respective increases of 17%, 12%, and 11.8%. Additionally, other sectors exhibiting positive absolute returns included home appliances, oil and petrochemicals, transportation, communications, and non-ferrous metals, indicating a strong correlation between high dividend assets and the prevailing low-risk preferences of investors.

A closer inspection of the data points to a preference for defensive industries

As previously noted, sectors like coal and banking have lower valuations in terms of price-to-earnings (P/E) and price-to-book (P/B) ratios, coupled with higher dividend yields, thus showcasing robust growthConcepts related to overseas expansion have also shown promising outcomes, particularly within the commercial vehicle sectorBy June 28, the commercial vehicle division of the Shenwan industry had surged by 47.43%, propelled by strong overseas demandSimilarly, the shipping sector has also experienced notable growth, attributed to geopolitical tensions leading to a spike in global shipping pricesThe resultant bottlenecks have created opportunities for domestic shipping enterprises, which have benefited significantly in terms of profitability during the first half of the year.

Looking ahead to the second half of the year, the question persists: can these structural opportunities continue? Are there emergent sectors that warrant attention?

It is essential to acknowledge that market corrections are a natural part of financial cycles.

Analysts from Cinda Securities assert that the recent market correction mirrors historical patterns observed after bear markets, typically leading to a subsequent quarter of adjustment

• Key Support Levels in the Silver Market
• Gaining Advantage from Uncertainty
• Foreign Investors Dump South Korean Shares
• The Dilemma of Natural Gas Futures
• Unexpected Prosperity in the U.S. Stock Market

Notably, since 2005, second-quarter corrections have consistently followed the first year of bullish trendsAccording to historical data, the strength of recovery post-bear market declines typically leads to three observable outcomes, based largely on the momentum of profit realization.

The most robust recoveries were seen after the 2008 and 2005 bear markets, with maximum gains reaching 140% and 89% respectively, underpinned by significant profit growth and incremental capital influxConversely, during more neutral scenarios, such as in 2013, 2016, and 2019, the market registered an approximate maximum gain of around 30%, featured by a strong surge in the early quarters followed by a marked retraction leading into the second half of the year, wherein optimism regarding profits and capital allocations gradually resurfaced.

Cinda Securities elucidates that the current market adjustment can be likened to the periods of corrections from February to June 2013, April to May 2016, and April to July 2019, indicating that the current adjustment phase may not have fully run its course, while the potential for substantial retraction is limited.

Furthermore, Guosheng Securities reinforces the sentiment that post-bear market conditions are characterized more by neutral patterns that do not distinctly align with either bull or bear markets

The current landscape mirrors those valuation and cyclical bottoms previously noted, where indexes are primarily buoyed by box-based oscillations, still offering structural opportunities for informed investors.

Export resilience has emerged as a focal point.

On July 12, the General Administration of Customs announced that in the first half of the year, China's total trade in goods reached a value of 21.17 trillion yuan, marking a year-on-year growth of 6.1%, thus registering a historical high that exceeded 21 trillion yuan for the first time during this periodAs the growth rate accelerated through the quarters, the second quarter demonstrated a 7.4% growth, outpacing the increases observed in both the first quarter and the last quarter of 2023.

The resilience of exports prompts inquiries regarding its potential to further bolster the "going out" narrative during the latter half of the year.

According to analysis by Guangfa Securities, when evaluating the total demand in terms of import content, investment exhibits a ratio of 35.5% significantly outweighing that of private consumption, recorded at 27.4%. This suggests that improvements in investment play a crucial role in enhancing global trade dynamics

Despite announcements from the USA and Europe regarding new tariffs on certain Chinese exports since May, China's share in global goods trade remains incrementally positiveEven though there has been a 4.0 percentage point drop in China's market share of U.Simports from an average of 21.4% from 2014 to 2018 to 17.4% from 2019 to 2023, its share in the global goods trade proportion has increased by 1.3 percentage points.

As such, there exists significant potential for export recovery in sectors such as ships, integrated circuits, wind turbine generators, general machinery, durable and non-durable consumer goods, as well as select intermediate goods.

Guosheng Securities also echoes the positive outlook for exports and overseas initiativesThe ongoing economic transformation requires further investments beyond domestic demand

In the context of increasing global anti-globalization sentiments, moving production capacities overseas also emerges as a pragmatic strategy to mitigate trade frictionsHence, the private sector, increasingly leaning on product competitiveness, is expected to sustain its emphasis on international expansion.

Regarding stocks perceived as undervalued and yielding high dividends, analysts from Chuan Financial Securities recommend a focus on large-cap and low-valuation stocks in the latter half of the yearIn light of escalating global complexities and tightening regulations on publicly listed companies, investing in these conglomerates could yield considerable margins of safety, likely to continue through the second half of the year.

Moreover, a significant potential lies within the electronics sector, which presently lingers in a historical low valuation range, thus positioning itself as a viable outlet for investors

The "low-altitude economy," categorized within new productive forces, harbors substantial economic potential.

The utilities sector, comprising stable profit generation from thermal and hydroelectric sectors, alongside stable growth in nuclear power, also signals strength in these areas.

Recommendations for the upcoming months lean towards cautious strategies hinging on capturing structural opportunities, with an emphasis on high dividend large-cap blue-chip stocksAmid the ongoing recovery of the domestic economy, coupled with low fluctuations in risk-free interest rates, sectors such as coal, petrochemicals, banking, thermal power, and expressways retain notable value for investors.

From a long-term perspective, Guosheng Securities postulates that as the domestic economy transitions and growth decelerates, the need for rectifying expected returns on A-share investments becomes urgent

Longitudinally, returns on stock investments primarily hinge upon factors such as Return on Equity (ROE), dividends, repurchases, and valuationsAs growth slows, the trend in overall A-share ROE experiences a decline, which, coupled with current fluctuations in valuation, necessitates a recalibration through an uptick in dividends or repurchase strategies.

The agency anticipates a corresponding rise in the dividend yield across the entire A-share market alongside a surge in repurchase activities to align with this correction trajectoryAs indications mount towards reallocating fiscal strategy away from dependence on land finances, the profit-sharing dynamic and dividend policies among state-owned enterprises may witness an uptick in significance, as emphasized by communications from the State-owned Assets Supervision and Administration Commission.

Lastly, cyclical sectors are still seen as promising

Cinda Securities advocates that the current upper-tier cycles could be poised for a valuation resurgenceThe annualized Return on Equity is undergoing a promising upward shift, with indications that present valuations, while appearing elevated when juxtaposed with the 2013-2020 period, appear undervalued under the current ROE metrics.

In the context of improving external demand, anticipated reductions in U.Sinterest rates, and tightened supply chains, the outlook on prices for commodities such as non-ferrous metals like copper and aluminum, as well as precious metals like gold and silver, indicates a notable potential for upward movement.

In summary, the global manufacturing landscape enters an upward cycle, enhancing demand for copper amidst strict supply constraintsConsequently, these dynamics are expected to amplify potential price movements, further supporting the premise of a bullish market in selected sectors.