Nomura Orient International Securities believes that the A-share market is once again close to the “batting zone.” Compared to US stocks, A-shares may have shown relative gains in the second quarter, mainly because undervaluation is so valuable in an uncertain future. However, the market is affected by risk appetite and a weak recovery in fundamentals, and A-shares may still be volatile in the short term. Market expectations for the improvement of China's economy are expected to increase, and policy expectations that the benefits of industries such as cyclical and real estate will continue to increase will drive the index upward. Furthermore, the weighted consumer medicine industry, which benefits from the return of foreign capital in terms of capital, is expected to drive the gradual rebalance of the A-share style from dividends. However, because the overall capital side is still insufficient, the strengthening of the above industries may also disrupt the liquidity of capital-sensitive industries such as TMT, and the rebound in the index may increase the differentiation in the performance of the A-share industry. The agency believes that the problem of lack of capital for A-shares has yet to be solved, and after experiencing long-term fundamental pressure, the market needs more signals to be expected to establish consistent expectations for recovery. Until then, the fluctuation between market sectors is expected to remain high due to insufficient liquidity. It should be noted that the direction of economic improvement is gradually becoming clear, so the decline in the market means that A-shares are once again approaching the “hitting zone”, and many medium- to long-term directions have re-revealed allocation opportunities.