In recent time, Chinese stocks have softened. Goldman Sachs' Chief Stock Strategy Analyst for Asia Pacific, Mu Tianhui, believes that this is a healthy adjustment. In the future, the focus needs to be on the Third Plenum of July and the political bureau meeting. With the continuous introduction of strong policies, coupled with the improvement in corporate profits and valuation recovery, Chinese stocks will rise again. Goldman Sachs has already raised its 12-month target price for the MSCI Asia Pacific (excluding Japan) index to 615 points earlier this month, corresponding to a valuation of 13 times. Mu Tianhui pointed out that the recent issuance of convertible bonds by Chinese tech stocks is due to two reasons. Firstly, the market's positive response to companies strengthening measures to reward shareholders improves corporate governance, focuses on shareholder returns to help enhance market valuation and release shareholder value. This trend, led by Japan and followed by South Korea, has now permeated into China, prompting Chinese companies to raise funds for share repurchases or increased shareholder returns. Secondly, it provides liquidity for offshore shareholders to redeem, as even if a company has cash in China, it may be difficult to extract funds from within or outside the country. Mu Tianhui pointed out that it is difficult to predict whether the issuance of convertible bonds by Chinese stocks will continue, but typically, if several companies successfully issue convertible bonds, other companies may follow suit until it is unsuccessful. Regarding the trend of Chinese stocks, Mu Tianhui pointed out that Chinese stocks experienced a strong rebound from the end of April to mid-May, even overheating at one point. Various indicators have since cooled down and the adjustment was within expectations, but the stock market is expected to rise again. Goldman Sachs noted that the future market needs to pay attention to the Third Plenum. Although the rhetoric may not be too targeted, if a broad and correct plan can be seen, similar to the nine measures of the state, it could give confidence to the market. Meanwhile, Chinese stocks are trading below 10 times, and Goldman Sachs believes a fair valuation is between 10.5 and 11 times, indicating room for valuation recovery. Even though the bank's profit expectations for companies are below market consensus, profit growth is still a positive driver for the market. Mu Tianhui pointed out that global stock markets are facing three headwinds in the second half of this year: 1) The Federal Reserve delaying interest rate cuts, with Goldman Sachs predicting only two cuts, leading to a relatively strong dollar, which may be unfavorable for Asia-Pacific markets; 2) The US presidential election will bring volatility to the market; 3) Geopolitical risks. Goldman Sachs currently has a buy rating on Chinese A-shares, India, Indonesia, Japan, and South Korea, while giving a sell rating to Thailand, Malaysia, and Australia. In terms of investment themes, artificial intelligence is one of Goldman Sachs' favored themes, including hardware and semiconductors for generative artificial intelligence (AIGC), power and electric vehicles. Mu Tianhui reminds investors to pay attention to how much direct income companies generate through AI. While the AI theme may sound good, some companies may only derive about 5% of their income from AI. At the moment, the semiconductor sector has shown better performance in this area.