Core Viewpoint: Micro Trading Structure Pressures May Need to Be Digested Following the Shanghai Composite Index hitting a new high last Thursday, A-shares entered a consolidation phase. The market experienced a significant volume adjustment today. The analysis suggests: 1) Exogenous factors may include liquidity and geopolitical disturbances. With April U.S. inflation data exceeding expectations, coupled with market concerns over the potential hawkish stance of the incoming Federal Reserve Chair Walsh, the 30-year U.S. Treasury yield reached a new high. Pressure on risk appetite emerged amid clouds such as the Bank of Japan's interest rate hike and the situation in Cuba. 2) However, a more fundamental cause may be pressure from a crowded micro trading structure. Tracked A-share sentiment indices and valuation dispersion coefficients indicate that the structural market rally has become quite extreme. Metrics such as trading volume proportion and turnover rate show that the AI thematic sector is experiencing high trading congestion. The adjustment in previously strong sectors like semiconductors today may represent normal divergence following overly uniform expectations. Looking ahead, it is advisable to control position sizes and maintain a balanced allocation in the short term, while continuing to position around industrial and growth trends for the medium term.
The A-share market surged then retreated today, with previously strong sectors facing concentrated profit-taking. The three major indices all closed lower, with nearly 4,800 stocks declining, significantly cooling the赚钱 effect. Following overnight declines in oil prices and the U.S. dollar, and a strong rally in U.S. tech stocks, Asian markets including Japan and South Korea opened higher. The A-share market opened high and initially rose but then reversed gains, with technology sectors like semiconductors that had seen substantial gains earlier experiencing concentrated profit-taking. In the afternoon, indices continued to fall, with the STAR 50 Index turning negative after briefly rising over 3%, closing down 3.7%. Combined trading volume on the Shanghai and Shenzhen exchanges reached 3.48 trillion yuan, a significant increase from the previous session. In terms of style, large-cap and value stocks showed relative resilience. Sector-wise, technology sectors represented by communications, computers, and electronics led the declines. Banking and automotive sectors rose against the trend, while transportation, non-bank finance, and pharmaceuticals showed relative resilience, indicating signs of capital rotation from the technology thematic towards defensive and low-position sectors.
Exogenous factors for the adjustment may be liquidity and geopolitical disturbances. Following the intraday decline, numerous market rumors circulated, though their authenticity and credibility remain unverified. A previous report highlighted that uncertainties in overseas liquidity and geopolitics constitute two main lines of external risk, which may also be the exogenous factors for today's adjustment: 1) Uncertainty has increased regarding the global liquidity easing environment since the start of the current Federal Reserve rate-cutting cycle. The incoming Fed Chair Walsh has previously held a relatively hawkish stance. According to CME FedWatch, the current market consensus expects a probability exceeding 60% for a Fed rate hike within the year. On May 19th, the 30-year U.S. Treasury yield briefly hit its highest level since 2007. 2) According to Xinhua News Agency, U.S. media reported during the session that the Trump administration has begun formulating plans for military action against Cuba, potentially reigniting market concerns over geopolitical tail risks.
However, the root cause may be an overly crowded micro trading structure. The analysis posits that a deeper reason is the need to digest pressure from a crowded micro trading structure: 1) The tracked A-share sentiment index entered the "greed zone" above 90% on May 8th, with market volatility concurrently amplifying. Historical patterns suggest that overheated conditions typically last about two weeks, often followed by a digestion period. 2) As of yesterday, the A-share valuation dispersion coefficient broke above 1 standard deviation above the mean since 2010, reaching a new high in recent years. 3) Trading congestion in the AI thematic sector is also relatively high. On May 14th, the electronics sector turnover rate exceeded 5%, and as of yesterday, its trading volume proportion surpassed 27%. Premiums for products like China-South Korea Semiconductor ETFs and Global Chip LOFs remain elevated. Although Nvidia reported earnings last night that exceeded Bloomberg consensus estimates, its guidance was relatively muted. Capital may be taking profits on the news, which could represent normal divergence after excessively strong "consensus."
Short-term control of position size and balanced allocation advised; medium-term thematic shift may be premature. The core market contradiction currently lies in the coexistence of overheated sentiment and valuation dispersion, compounded by rising overseas uncertainty, leading the strong structural rally into a consolidation phase. In the short term, it is recommended to control position sizes, reserve room for maneuver, and appropriately increase allocations to low-position and dividend-yielding品种. For the medium term, the AI industry trend shows no clear signs of slowing. The year-over-year growth rate of forward 12-month capital expenditures for overseas CSP (Cloud Service Provider) manufacturers continues to climb. Leading indicators for segments like PCBs and semiconductors are still rising. The current adjustment may provide buying-on-dips opportunities. It is suggested to consider increasing allocations opportunistically after the pressure from trading congestion eases. Additionally,关注品种 showing dual improvement in supply and demand in Q1 reports, such as lithium batteries, power grid equipment, photovoltaic equipment, commercial vehicles, consumer electronics, minor metals, coal, and building decoration materials.
Risk warnings: AI industry progress falling short of expectations; liquidity falling short of expectations; external risks exceeding expectations.
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