Citi is cautiously optimistic about the China equity market for the second half of 2026, favoring the tech and export sectors while upgrading the insurance sector to Overweight due to expected higher investment income. They forecast a slight decrease in targets for major indices but prefer A-shares over H-shares due to better liquidity. Sector allocations remain Overweight for tech, basic materials, healthcare, and internet, with adjustments made for slowing earnings growth in the internet sector.
