CICC has released a research report stating that in the first half of 2026, the A-share technology growth style benefited from high prosperity in the AI industry chain and advanced manufacturing sectors, continuing its structural market performance. Since July, negative narratives surrounding the global AI industry chain have increased, compounded by tightening overseas liquidity expectations and rising uncertainty in Middle East geopolitical situations, leading to overall poor performance in the A-share market. Industry rotation has accelerated, and growth sectors that previously performed strongly have seen significant corrections. Looking ahead, the barbell allocation structure of "technology plus dividend" is expected to receive greater attention. The medium-term industrial logic for technology growth remains intact, but short-term uncertainties and valuation fluctuations may intensify, and quality dividend assets are expected to provide an alternative allocation consideration beyond the growth mainline. CICC's main views are as follows:

Dividend style has been relatively dominant in A-shares since the third quarter

In the first half of 2026, the A-share technology growth style benefited from high prosperity in the AI industry chain and advanced manufacturing sectors, continuing its structural market performance. Since July, negative narratives surrounding the global AI industry chain have increased, compounded by tightening overseas liquidity expectations and rising uncertainty in Middle East geopolitical situations, leading to overall poor performance in the A-share market. Industry rotation has accelerated, and growth sectors that previously performed strongly have seen significant corrections. As of October 9, the ChiNext Index and STAR 50 had fallen 29.9% and 34.0% respectively from end-June, while the CSI Dividend Index rose 11.5% over the same period, with defensive sectors such as coal, petroleum and petrochemicals, and banking performing relatively strongly (Chart 1). Year to date, the CSI Dividend Index has risen 1.8% cumulatively, second only to STAR 50 (+8.4%) among major indices, outperforming the Shanghai Composite Index (-3.9%) and CSI 300 (-6.8%). Technology growth and dividend styles have shown a certain "seesaw" effect. Against the backdrop of increased volatility in growth styles and declining market risk appetite, the relative allocation value of dividend assets deserves renewed审视.

Unlike the broad, trend-driven market performance from 2022 to the first half of 2024, the dividend style in recent years has been more characterized by phased, structural market performance. From 2022 to the first half of 2024, the dividend style was one of the most persistent mainlines in both A-share and Hong Kong stock markets. The bank previously proposed that the resonance of three factors — scarcity of high-prosperity investment opportunities, tight balance in stock market liquidity, and the "asset shortage" environment — was the primary reason for the dividend strategy's dominance at that time. After the "924" market rally, the first two factors reversed. On one hand, the AI industry chain's prosperity accelerated, making high-growth opportunities no longer scarce; on the other hand, trading activity was vibrant, with incremental capital continuously entering the market and forming a positive feedback loop with wealth effects. Combined with rising risk appetite, the "asset shortage" logic weakened, and the relative attractiveness of the dividend style declined. However, the allocation logic for the dividend style is not over. When external uncertainties rise, market risk appetite falls, or the growth mainline experiences phased corrections, dividend assets can often demonstrate relative return advantages through relatively stable earnings and dividend returns as well as defensive attributes. For example, during the tariff policy disruptions in April 2025, the US-Iran conflict in March 2026, and the repeated AI industry chain expectations and growth style pullback since July 2026, the dividend style all showed relative performance.

Medium-to-long-term allocation value and phased rebalancing opportunities for the dividend style

From an asset allocation perspective, the medium-to-long-term allocation logic for the dividend style remains valid. The domestic low interest rate environment, medium-to-long-term capital allocation demand, and continuous improvement of listed companies' shareholder return mechanisms jointly constitute the medium-to-long-term support for quality dividend assets. Medium-to-long-term capital continues to increase equity asset allocation, and new regulations on insurance asset-liability management strengthen stable return allocation demand. At the policy level, continuous guidance encourages insurance, pension, and other medium-to-long-term capital to enter the market. Combined with return demands under the low interest rate environment, insurance capital's equity allocation intensity continues to increase. As of the end of the second quarter of 2026, the total scale of insurance funds allocated to stocks and securities investment funds reached 6.4 trillion yuan, up 12.1% from the beginning of the year, accounting for 16.2% of the funds utilization balance, with both scale and proportion reaching historical highs; among them, the stock allocation ratio has increased quarter-on-quarter for eight consecutive quarters. Under the new accounting standards, fair value changes of FVOCI stocks are included in other comprehensive income and do not directly affect current net profit, while eligible dividend income can be included in current profit and loss, which helps balance long-term dividend returns with income statement stability and enhances insurance capital's motivation to allocate high-dividend assets. The 2026 interim reports show that listed insurance companies generally increased FVOCI stock allocations, with the FVOCI proportion in stock portfolios increasing by an average of 5.5ppt to 46.3% from the beginning of the year. Meanwhile, the August 2026 "Insurance Company Asset-Liability Management Measures" further strengthened asset-liability cost-return matching requirements, explicitly requiring life insurance companies' net investment return coverage ratio to be no less than 100%, which is expected to further enhance insurance capital's long-term allocation demand for stable dividend equity assets.

The improvement of dividend systems and corporate cash flow has driven a steady increase in listed companies' dividend levels. Since 2023, policies have continuously strengthened the dividend orientation of listed companies, and the "15th Five-Year Plan" outline further proposed improving the dividend incentive and constraint mechanism for listed companies, promoting the normalization and institutionalization of dividend mechanisms. According to disclosures at the State Council Information Office's September 2026 press conference, since the new "Nine National Articles," listed companies' cumulative dividends and buybacks have exceeded 7 trillion yuan, with over 2,000 companies paying dividends for five consecutive years and over 1,000 companies conducting interim dividends, with dividend frequency and amounts continuously increasing. In 2025, A-share listed companies' total cash dividends reached 2.4 trillion yuan, with the overall dividend payout ratio rising to 44.9%, both reaching historical highs; in the 2026 interim period, implemented and proposed cash dividends totaled approximately 720.9 billion yuan, with the number of dividend-paying companies and scale continuing at high levels since 2024. The bank believes that as listed companies' earnings quality and cash flow improve, and the dividend incentive and constraint system continues to be refined, the overall dividend level of A-shares is expected to maintain a steady upward trend.

Under the low interest rate environment, the relative return advantage of stocks over bonds remains prominent. As of October 9, the CSI Dividend Index's TTM dividend yield was 4.24%, and the CSI 300's TTM dividend yield was 2.75%, both significantly higher than the 10-year government bond yield of 1.69%. Against the backdrop of the domestic interest rate center remaining low, stable cash dividend assets still offer good investment appeal relative to traditional low-risk assets such as bonds and deposits.

The relative allocation attractiveness of the dividend style has increased in the short-to-medium term. The three conditions that supported comprehensive dividend dominance from 2022 to the first half of 2024 — scarcity of high-prosperity investment opportunities, tight liquidity balance, and the "asset shortage" environment — have not fully reappeared, but increased volatility in high-growth opportunities and the recent marginal tightening of market risk appetite and liquidity may bring dividend allocation demand with higher sustainability than in the past two years. Macro aggregate recovery elasticity is limited, and profit growth remains primarily driven by structural opportunities. The domestic economic fundamentals are recovering moderately, with exports and the AI industry chain maintaining high prosperity, but domestic demand and real estate remain weak, and the breadth and elasticity of policy transmission and recovery still need observation. Third-quarter A-share overall profit growth may decline quarter-on-quarter, with upstream energy and raw materials and TMT sectors expected to maintain relatively high growth. Market risk appetite has retreated in phases, and incremental capital has slowed. Although the long-term AI industry trend has not changed, recent market concerns have risen regarding the return cycle of overseas capital expenditures, ARR growth of major large model manufacturers falling short of expectations, and external restrictions in the optical module sector. Combined with elevated valuations and concentrated positions in some popular tracks, this has exacerbated short-term volatility in growth sectors. Meanwhile, expectations of overseas liquidity tightening and repeated Middle East geopolitical situations continue to disturb global risk appetite, and A-share trading activity has marginally cooled. On the capital supply side, since July, A-share new account openings and newly established equity fund shares have significantly declined from the first half of the year, and the enthusiasm of incremental capital entering the market has decreased.

Rising US Treasury yields increase valuation sensitivity, and dividend assets have historically shown some correlation with US Treasury yields. The bank's previous historical review shows that the relative returns of the A-share dividend style have a certain correlation with the trend of 10-year US Treasury yields. After US Treasury yields enter an upward cycle, high-dividend strategies have a relatively high probability of achieving excess returns in the A-share market. Since July 2026, long-end US Treasury yields have continued to climb, and in early October, both 10-year and 30-year US Treasury yields hit new highs since 2002.

Outlook: The barbell allocation structure of "technology plus dividend" is expected to receive greater attention

High-dividend strategies not only have defensive attributes when fundamentals weaken and the stock market corrects, but may also achieve phased relative returns through stable returns and value attributes when fundamentals are slowly recovering and the market is range-bound or slowly rising. Looking ahead, the medium-term industrial logic for technology growth remains intact, but short-term uncertainties and valuation fluctuations may intensify, and quality dividend assets are expected to provide an alternative allocation consideration beyond the growth mainline. On one hand, domestic economic aggregate recovery is moderate, but sectors such as AI hardware, computing infrastructure, semiconductors, and innovative drugs still possess relatively independent industrial prosperity logic and profit growth potential. Currently, the A-share AI industry chain as a whole remains in a demand-driven benign expansion stage, and technology growth companies with core competitive advantages and the ability to deliver profit growth still have bottom-up allocation opportunities. However, the sustainability of overseas AI capital expenditures and commercialization returns remain uncertain, and combined with rising overseas inflation pressure and liquidity tightening risks, growth sectors may face greater earnings expectation and valuation volatility. On the other hand, against the backdrop of rising uncertainty in high-growth opportunities and increased market risk appetite volatility, investors' emphasis on earnings certainty and stable cash flow is expected to increase. The domestic low interest rate environment, medium-to-long-term capital allocation demand, and continuous improvement of dividend systems provide medium-to-long-term support for quality dividend assets, which are expected to play a role in providing stable cash returns and buffering volatility risks in growth sectors. Overall, in an environment of limited aggregate growth elasticity, structural high prosperity, and increased market risk appetite volatility, the barbell structure of "technology plus dividend" is expected to become an allocation choice that balances profit growth elasticity, shareholder cash returns, and portfolio stability. On the technology side, attention is recommended for companies with clear industrial trends, long-term competitive advantages, and profit delivery capability; on the dividend side, attention is recommended for quality companies with stable earnings and cash flow, sustainable dividends, and reasonable valuations.

A-share high-dividend stock selection portfolio update

In 2025, A-share corporate dividend totals continued to grow, but sector dividend situations diverged. High-dividend investment should focus more on the earnings quality, cash flow generation capability, and dividend sustainability behind dividends. The bank previously proposed an optimized stock selection approach of "quality free cash flow, stable high dividends, and moderate dividend yield." Combining the latest valuations, dividend yields, and earnings and asset quality data disclosed in the 2026 interim reports, the high-dividend stock selection portfolio has been updated. From this period's stock selection results, beyond traditional high-dividend sectors such as finance, energy, and utilities: 1) Pan-consumer dividends remain an important source of quality high-dividend assets. Selected companies in food and beverage, home appliances, textiles and apparel, light industry manufacturing, and media have strong continuity. These companies are mostly mature-stage leaders with certain channel and brand advantages, stable industry competitive landscapes, and steady growth and cash flow. Selected companies in the pharmaceutical and biologics sector are mainly concentrated in sub-directions with consumer attributes such as branded traditional Chinese medicine, OTC, and pharmaceutical retail. These companies typically have relatively stable terminal demand, good profitability, and sustained dividend records. 2) Industrial manufacturing leaders are gradually entering the high-dividend investment horizon. More companies in industrial manufacturing sectors such as automobiles, power equipment, and machinery equipment are meeting high-dividend screening criteria. As capacity cycles improve in some manufacturing segments and industry competitive landscapes optimize, leading companies with technological, scale, and market competitive advantages are expected to improve cash flow and capital expenditure structures while enhancing profitability, gradually unleashing cash dividend potential and developing toward a shareholder return model of "profit growth plus stable dividends," enhancing the long-term allocation value of mature manufacturing leaders. 3) High-dividend characteristics are beginning to extend to the technology industry. In 2025, the cash dividend yield of the computer industry rose compared to 2024, and the dividend payout ratio also improved significantly. In 2026, listed companies in the computer industry began entering the high-dividend portfolio. Some technology companies with strong cash generation capability, relatively controllable capital expenditure needs, and sustained dividend willingness have begun to exhibit certain high-dividend investment characteristics, deserving continued attention.