Cathay Securities and Haitong Securities: The A-share market will not stop here, and the stock index will reach new highs in the future

The strategy report released by Guotai Junan Securities shows that as the Shanghai Composite Index rises above 3,800 points, reaching a ten-year high, market divergences and doubts have also increased. Guotai Junan's strategy believes that the Chinese stock market will not stop here, and the index still has new highs to reach. Since 2025, our bullish logic on China has been consistent: First, the progress of China's transformation is accelerating, and the uncertainty of economic and social development is decreasing. Second, the risk-free interest rate is declining, leading to a historic turning point and trend of long-term capital and residents entering the market. Third, capital market reforms have systematically changed the perception of the value and risks of Chinese assets among various sectors of society, opening up space for the development of the capital market. The market does not need to worry excessively about phase adjustments: 1) The margin financing scale/circulating market value is at historical averages, the overall valuation level of the two markets is not high, and most heavyweight stocks are at low prices, showing no signs of overheating; 2) The probability of the Federal Reserve cutting interest rates in September has increased, which may provide an opportunity for the People's Bank of China to ease and restart government bond trading; incremental economic support measures are expected to be introduced. Therefore, the upward momentum of the Chinese stock market is healthy and sustainable, and we continue to be optimistic about the performance of Chinese A/H shares. In terms of allocation, we recommend increasing the allocation ratio of mid-cap stocks or low-priced blue-chip stocks in September