Historical data suggests that A-share market performance in September is largely shaped by policy shifts, external events, liquidity conditions, and fundamental drivers. Since 2010, the Shanghai Composite Index has shown a resilient yet slightly firm pattern in September, with gains in 9 of the past 16 years against 7 declines.

Policy and external events are the primary catalysts for September's market direction. Positive policy initiatives or favorable external circumstances tend to support a stronger A-share market, whereas policy tightening or adverse global events can lead to a weaker performance. Economic fundamentals also play a pivotal role; among the nine years with September gains, manufacturing PMI, property sales, retail sales, or export growth all showed varying degrees of improvement. Liquidity remains another critical factor influencing the index's trajectory during this month.

The A-share market is likely to experience a steady but upward bias in September. Policy and external factors may lean constructive, with a potential US-Iran agreement possibly emerging and a likely meeting between Chinese and US leaders potentially improving bilateral relations. Economic and earnings momentum should continue its recovery path, supported by robust export growth, stabilizing infrastructure investment, solid high-tech manufacturing spending, and a rebound in retail sales. Corporate profitability is expected to remain on an upward trend, while liquidity is set to stay accommodative at the macro level, with equity market inflows potentially seeing marginal improvement.

Growth and cyclical styles are anticipated to outperform in September, while large-cap and small-cap styles may remain balanced. Historically, growth sectors have thrived on rising industrial trends, policy backing, and ample liquidity, whereas cyclicals have benefited from price increases and supportive measures. This year, AI industry momentum should persist, backed by ongoing tech-support policies and easy liquidity, while prices for metals like minor metals, rare metals, gold, and copper may climb, keeping sector policies constructive. For market cap styles, high tech-growth sentiment favors small and mid caps, a probable Fed rate pause also aids these segments, yet a focus on tech innovation and consumption stimulus could support mid-to-large caps. Easing overseas AI concerns, a calmer US-Iran situation, and a potential summit meeting may further benefit smaller caps.

For September's sector allocation, technology growth and select cyclical industries look like the core investment themes. Historical patterns show high-prosperity and policy-driven sectors perform well in September. This year, AI hardware should maintain its high momentum, and some cyclical industries are due for a pick-up. Policy support for tech innovation and accelerated infrastructure projects will likely favor these areas. Sectors such as non-ferrous metals, electronics, non-bank financials, computers, power equipment, and petrochemicals are reporting strong mid-year earnings growth.

The strategy is to accumulate positions on dips in September. Recommended areas include electronics (semiconductors, AI hardware), communications (AI hardware), non-ferrous metals, computers (AI applications), media (AI applications, gaming), new energy (AI power, lithium batteries), innovative drugs, and defense (commercial space). Additionally, low-valuation sectors with improving fundamentals, such as brokerages and consumer goods, warrant attention.

Risk warnings: Historical patterns may not apply to the future, policy changes could exceed expectations, and economic recovery may fall short of projections.