On June 29th, the three major A-share indices opened with mixed performance. The Shanghai Composite Index fell by 0.01%, while the ChiNext Index rose by 0.15%.
In terms of sector performance, storage chips and controlled nuclear fusion were among the active gainers. Conversely, sectors such as wind power equipment, energy metals, and film & cinema chains were among the leading decliners.
Brokerage Perspectives on Market Outlook
CITIC Securities suggests that A-share market movements have shown greater resilience. The firm continues to recommend maintaining a portfolio structure focused on AI and energy/chemicals.
CITIC Securities' analysis indicates that the strengthening of the US dollar and rising interest rate expectations in early May coincided with an acceleration in the K-shaped divergence of global markets. The core issue is the damage that tightening expectations inflict on demand in non-AI sectors. At the current stage, this K-shaped divergence has reached an extreme point, with consolidation even occurring within overseas technology sectors. Pricing across equities, bonds, commodities, and currencies is beginning to show early signs of recessionary trading. If further tightening materializes, it could further harm demand in the carbon-based economy. Conversely, the K-shaped divergence may see a temporary convergence.
Compared to the more volatile overseas markets, A-shares have demonstrated greater resilience. There are signs of early-stage capital entering some non-AI sectors, with a few undervalued sectors showing a foundation for recovery, awaiting only a catalyst.
Regarding specific allocations, the firm reiterates its advice to stick with the AI plus energy/chemicals structure. On the AI side, it remains optimistic about storage, gas turbines, diesel generator sets, and semiconductor equipment and materials. On the energy/chemicals side, within the power and new energy sector, it favors performance realization in areas like electrolytes, additives, and separators. In the chemical sector, a decline in both the average oil price and its volatility is expected to drive inventory replenishment and operational demand. A potential turning point could be the peaking of macro liquidity expectations. Currently, the firm favors products with significant cost reduction potential, relatively inelastic demand, and low valuations, such as refrigerants, phosphate chemicals, spandex, dyes, and large-scale refining. In the non-ferrous metals sector, it recommends computing metals that have some AI exposure but whose valuations are temporarily suppressed by the interest rate hike narrative, such as tin, copper, and some AI-related minor metals (e.g., tungsten). Additionally, the firm continues to suggest increasing allocations to undervalued securities brokers, as current liquidity constraints and other imperfections may gradually ease starting in the second half of the year, with half-year earnings previews also serving as a catalyst.
CSC Financial states that while the fundamental logic for AI computing power remains robust, volatility has increased, advising caution against chasing rallies.
CSC Financial points out several key factors. Fundamentally, AI computing power maintains high activity levels, with its half-year results and overseas financial reports warranting attention. Concurrently, given the macroeconomic pressures since April, the economic stimulus measures expected from the July Politburo meeting are crucial. Regarding liquidity, external disturbances are intensifying while domestic conditions remain neutral. In terms of risk appetite, geopolitical events and major industry IPOs could cause short-term market fluctuations. Considering the interconnectedness of global tech stocks, it is also essential to continuously monitor the primary overseas computing power markets, such as those in Japan, South Korea, and the US.
For sector allocation, while the growth narrative for AI computing power remains intact, increased volatility suggests caution against chasing highs; instead, consider buying on dips. The lithium battery sector may see a peak season, and energy storage demand continues to recover, presenting opportunities for a valuation rebound in new energy. Dividend-yielding stocks are poised for an oversold rebound, offering relatively attractive allocation value. Key areas to focus on include banking, coal, utilities, AI, optical modules, storage, chips, industrial metals, and lithium battery materials (like VC).
Industrial Securities believes that the relative strength of sector momentum and changes in relative earnings performance remain the core guiding principles.
Industrial Securities' view is that recent volatility in global technology stocks stems partly from structural crowding and the amplifying effect of high leverage. However, the underlying cause is the lack of clear fundamental guidance during the earnings off-season. Early-stage capital has been engaged in a tug-of-war around global capital expenditure expectations and marginal industry changes. Yet, the fundamental picture of the tech industry has not undergone substantial shifts. The upcoming earnings season will be the true test for the sector's health. Recent disagreements and volatility caused by some market "noise" may, in fact, create opportunities for strategic positioning.
For the A-share market, beyond changes in the global AI industry, the recent structural divergence is essentially driven by domestic disparities in economic momentum. The upcoming disclosure period for preliminary half-year earnings reports in early July will serve as another verification of this divergence. This implies that the consensus favoring growth and strong momentum sectors is unlikely to be altered by recent market fluctuations.
In terms of allocation, there's no need to switch sectors arbitrarily. The relative strength of momentum and changes in relative earnings performance remain the key considerations. Currently, AI computing hardware (optical communication, semiconductors, PCBs) still holds the strongest consensus for momentum. Expectations for some advanced manufacturing sectors (upstream AI equipment, battery storage, shipbuilding) have also been revised upwards. Additionally, upstream resource products (many of which are also driven by AI demand, such as minor metals, energy metals, and chemicals) are in focus.
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