Multiple brokerages release 2027 investment strategies: AI narrative not yet over, diversified allocation recommended

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Entering November, sell-side institutions are releasing their 2027 investment strategies in quick succession. Following CITIC Securities and Huatai Securities, CITIC Construction Investment Securities, Zheshang Securities and several other brokerages will hold offline strategy conferences this week.

Overall, brokerages generally believe that the AI (artificial intelligence) industry narrative is not yet over, that trends within the technology sector may diverge, that non-AI sectors likewise have room for structural repair, and that the market need not be overly pessimistic. Under expectations that structural opportunities will outweigh market-wide valuation gains, several sell-side institutions advise investors to base their positioning for the 2027 market on fundamentals and to diversify their allocations.

Long-term outlook turns optimistic

"The current global economic and industrial transformation is accelerating, and the profit improvement and valuation repair opportunities in Chinese assets deserve attention," said Liang Hong, Chairman of the Institutional Business Committee at Huatai Securities. Facing market volatility and style rotation, investors should return to fundamentals, strengthen portfolio resilience, reasonably control leverage and positions, pay attention to "ballast" assets with stable cash flow as well as high-quality sectors with solid fundamentals and continuously improving earnings, and actively seize the medium- and long-term allocation value of Chinese assets.

Fu Jingtao, Chief A-share Strategist at Shenwan Hongyuan, said in the annual outlook that from a medium-term perspective, the one-sided adjustment absolutely dominated by defense is already in its late stage, likely to be followed by a volatile phase in which bottom-level themes are active. In the short term, momentum for an oversold rebound is accumulating, the balance of capital supply and demand is being rebuilt, a spring rally can be expected, and an earlier-than-expected oversold rebound is also reasonable.

He expects that before March to April 2027, there may be a window in which the oversold rebound plays out and the A-share market as a whole stops making new lows. After that, this round of market adjustment may reach the absolute bottom area, after which structural opportunities will increase and themes will become active; a new consensus may coalesce in this process, and the "second-stage rally" can be expected to take shape in the second half of the year. 2027 may see a major inflection point, clearly demarcated, from a headwind of asset allocation environment, industry trends and capital supply-demand resonance to a tailwind of resonance.

CITIC Construction Investment Securities' New Year assessment also made an early appearance ahead of its strategy conference. Its strategy team analyzed that the current actual A-share index level is already significantly below the level predicted by the model, which means market pessimism has been fully priced in and the market's overall downside is limited. Although a second bottom is still possible in the medium term, the long-term outlook for A-shares has turned optimistic. 2027 is overall a handover year of "earnings decline + discount rate decline" for A-shares, and the full year may show an "N-shaped" trajectory—pricing around downward earnings revisions in the first half and around the discount rate decline in the second half. Apart from the spring rally at the start of the year, the index may subsequently form a shallow U-shape, with the decisive factor in the third quarter.

Style switch underway

"The foundation for the A-share market's medium-term uptrend remains solid. The overall profitability of all non-financial A-share companies has passed the bottom inflection point, and improvements in industry competitive landscape, corporate overseas expansion and operating efficiency will continue to support earnings repair," said Wang Weiguang, Co-Chief Strategist at Huatai Securities Research Institute. He believes that a "style switch is underway," and that diverging development stages and prosperity rhythms across industries will bring more structural opportunities, with domestic-demand consumption and pro-cyclical sectors expected to see bottom reversals. It is expected that in the first half of 2027, large-cap value and varieties with low ROE (return on equity) repair will be relatively favored; in the second half, if the US dollar weakens and domestic credit and liquidity improve, the small-cap growth style is expected to recover.

Bao Chengchao, Chief Strategist at CITIC Securities, has a similar judgment. He believes the current market adjustment was front-loaded this year, and if AI investment slows its growth pace in the future, there is no reason to remain pessimistic on non-AI sectors. If AI enters a period of consolidation, non-AI sectors will see a turning point. Falling interest rates, falling materials prices and policy rebalancing all favor a more balanced market. He expects a return to value in 2027, with the breadth of the market expanding. Trends within the technology sector will diverge, while non-AI sectors have broad structural repair opportunities.

Liao Jingchi, Chief Strategist at Zheshang Securities, judges that after experiencing valuation repair and mainline valuation expansion, the A-share market will formally enter a "mid-point of a long bull market" phase in mid-2027. Deepening institutional dividends, higher-quality industrial transformation and the expansion of medium- and long-term funds will jointly consolidate the foundation of the "long bull market"; high overseas interest rates, a domestic fundamental bottoming-out and slow relay of incremental funds determine that the market needs to undergo "mid-point" consolidation. The driver of the market will shift from long-term narratives and denominator-side valuation expansion to endogenous earnings realization and a game over reduced chips. Overall, the market is currently in a bottoming process, and before new right-side signals appear, investors should patiently wait for bottoming and consolidation.

"The AI industry is still progressing, there is still room to open new tracks on the AI application side, and the space for residents' asset allocation to shift toward equities has not yet been effectively tapped," Fu Jingtao said. At present, the probability of rebuilding a major upward wave based on the logic of computing power inflation has significantly decreased, and time should be extended to wait for breakthroughs in AI large models and applications. It is expected that the next major upward wave will still be led by AI industry trends; the "adjustment phase between the two stages of gains" may last several quarters, but not multiple years.

In Wang Weiguang's view, the AI industry narrative is likewise not yet over. But he believes the market will move from broad-based gains into a "midfield consolidation," with the investment focus shifting from computing power investment to return verification, and attention can be focused on physical AI, on-device AI, AI applications and power, among other directions. On allocation, he advises grasping three main investment lines: improvement in supply-demand patterns, urban renewal and the construction of the "six networks," and high-quality overseas expansion leaders.

It is worth noting that "diversified allocation" is a key phrase mentioned by several brokerages in their annual outlooks. In addition to Huatai Securities, the CITIC Securities strategy team also advises that industry allocation in 2027 should be moderately diversified, positioning along four threads: steady returns, excellent overseas expansion companies, domestic-demand repair and new AI technologies.

Some brokerages have also simplified their allocation approach into a barbell strategy. Debon Securities expects that, under expectations that structural opportunities will significantly outnumber market-wide broad valuation expansion, allocation should prioritize industries where supply has been fully cleared, the competitive landscape is stable, leading players have strong earnings resilience and cash flow quality is excellent, building an offense-defense barbell portfolio: one end anchored in value blue chips to "guard the old and collect rent," and the other end positioned in high-prosperity growth to "prospect for gold in the new continent."

(Source: Securities Times) Middle of the body Embedded advertisement