Finding Certainty in Structural Bright Spots When the Macro Picture Is Unclear

The Event

China International Capital Corporation released an investment outlook ahead of the mid-year earnings season in July, emphasizing that against a backdrop of significant external uncertainty, investors should "seek structural bright spots through earnings reports" rather than betting on overall market direction. The report outlined three primary investment themes.

Background Context

In the first half of 2026, the A-share market faces multiple uncertainties—geopolitical risks, fluctuations in foreign capital flows, unclear macroeconomic policy expectations, and more. In this "direction-unclear" environment, investors easily fall into two extremes: either bearish across the board or bullish across the board, both of which risk stepping on mines. CICC's recommendation is essentially a shift in perspective "from the big picture to the microscope."

Logic Behind the Three Themes

First Theme: Upstream and Tech Hardware Benefiting from Emerging Demand

• Upstream oil, gas, and chemicals; certain metals: driven by global energy transition and rising EV penetration
• Tech hardware and power equipment: data center construction driven by the AI wave, chip manufacturing, cooling and power supply needs
• Non-bank financials: wealth management and asset allocation upgrades in the AI era

The common thread across this theme: demand has new growth drivers, not passive waiting for economic recovery.

Second Theme: Specialized Segments in the AI Industrial Chain

• Optical communications: the bottleneck in data center interconnection and cloud computing infrastructure
• Batteries and energy storage: simultaneously meeting dual demands of energy security (power system stability) and industrial chain security (domestic substitution)

The implication here: AI is not just about training large models; the entire industrial chain's infrastructure has a 5-10 year high-growth cycle.

Third Theme: Cyclical Industries in the Rising Phase of Supply-Demand Cycles

• Specialized chemicals, optical and optoelectronics, certain innovative pharmaceuticals: production capacity position is clear, demand shows recovery signals

The sophistication of this theme lies in: not betting on the big question of "when will the economy recover," but only focusing on "has the supply-demand picture for this specific subsector actually improved?"

Why This Thinking Approach Matters

Traditional macro investing tells us: predict overall market direction (bullish or bearish) → select matching industries → pick individual stocks. But this logic breaks down when uncertainty is elevated, because the premise itself—"your judgment on the overall market"—is full of noise.

Structural opportunity identification flips this: suppose I'm uncertain about market direction, or even assume the market has no direction; can I find opportunities where "even if the market drops 20%, this subsector still has fundamental support"? The answer often is: yes. Because in a market with 5,000+ stocks, there are always some industries whose business cycles are "decoupled from macro cycles."

Three Criteria for Judging Structural Opportunities

Based on the implicit logic in this CICC report, structural bright spots typically satisfy:

1. New variables on the demand side: not old demand dependent on economic cycle recovery, but "new stories" like AI, energy transition, and domestic substitution. 2. Constraints on the supply side: production capacity cannot expand rapidly in the short term (optics, optical communications, batteries are all engineering and capital-intensive), so when demand rises, supply falls short and margins are protected. 3. Industry cycle in a clearly rising phase: not "possibly," but already climbing based on objective indicators like inventory, capacity utilization rates, and order data.

Insights for Investors

This thinking approach tells investors: when macro is full of noise, micro fundamentals become clearer. Don't try to guess the market's overall direction; instead find those subsector tracks where "regardless of how the market moves, this industry's fundamentals are improving." Earnings season is precisely the moment to test this hypothesis—look at earnings, guidance, industry inventory and order data. These are harder facts than "what experts say about being bullish or bearish."