On May 21, the three major A-share indices opened collectively higher. The Shanghai Composite Index rose by 0.29%, while the ChiNext Index gained 1.03%. In terms of sector performance, semiconductors, memory chips, and photovoltaics led the gains, while oil and gas extraction, electric power, and coal sectors were among the decliners.
**Institutional Views on Market Outlook**
China Galaxy Securities believes that the ChiNext Index still has room for further upside in the medium term, although the short-term trend is likely to shift to a pattern of "volatile consolidation, slow bull market advance, and structural bull market." From a medium- to long-term perspective, as long as the performance of core sectors continues to be realized and industry prosperity persists, the current level is merely an intermediate stage in a structural bull market, not its endpoint. With sustained profit releases, steady valuation increases, and continuous inflows of incremental funds, it is highly probable that the index will refresh its highs and open up further upside potential. However, after reaching new highs, excess returns at the index level are expected to converge, with structural excess returns becoming the core focus. The main investment themes should continue to focus on five high-growth sectors: AI computing power, semiconductor equipment and materials, high-end equipment, energy storage, and innovative pharmaceuticals, while capturing rotations within sub-sectors.
Founder Securities notes that as overseas inflation expectations rise, global indices closely linked to AI, such as the Nasdaq, South Korea, and Japan, have faced some profit-taking pressure. However, the domestic semiconductor sector in China has shown strength against the trend during the A-share market pullback, further attracting capital from other sectors. From an industry cycle perspective, the semiconductor sector has transitioned from earlier "point breakthroughs" in AI domestic chips to a "systematic closed-loop" rally across the entire sector, with rotations in memory, advanced packaging, equipment, and materials. The short-term momentum of the Sci-Tech Innovation Board Index is expected to continue. However, for conservative investors, high-priced stocks have entered a high-volatility trading range, and industry-driven gains, after accumulating certain valuation risks, are susceptible to external sentiment fluctuations and pullback risks. It is advisable to moderately control positions at this stage and await the release of risks related to inflation and policy tightening driven by rising oil prices. The A-share market may continue its volatile upward trend, but due to substantial profit-taking pressure and a lack of new major catalysts in the short term, the likelihood of an immediate start to a major upward wave is low. Instead, the market is more likely to exhibit range-bound fluctuations and structural differentiation. Against the backdrop of persistent structural contradictions in the market, the following investment directions are worth attention: 1. Overseas and domestic computing power driven by AI: Within the sector, focus on shifting from high- to low-priced stocks, with attention to areas such as AI power shortages, new technologies, and new materials. 2. Relatively undervalued HALO assets: In the context of strengthened key resource supply chains and rising energy price levels, moderately increase allocations to core resources (non-ferrous metals and chemicals) and energy-related sectors (coal, electric power, and petrochemicals). 3. Thematic stocks: Against the backdrop of easing China-U.S. relations and expectations of tariff reductions, focus on sectors where policy and news align, such as computing-power synergy, commercial aerospace, robotics, and export chains to the United States.
Oriental Securities highlights that the domestic demand for Chinese-made lithography machines exceeds supply, although high-end lithography machines are still in the research and development stage. Against the backdrop of escalating geopolitical risks, the substitution potential for the domestic lithography machine industry chain is vast, and high-quality listed companies across the upstream and downstream of the industry chain warrant long-term tracking. Additionally, the advanced packaging concept has performed strongly, as the AI industry boom has driven explosive demand for CPUs, GPUs, optical chips, and memory chips, further fueling demand in the packaging industry and presenting rare development opportunities for related companies. Overall, stock indices remain in a rebound trend, with the Shanghai Composite Index maintaining its trajectory toward challenging the 4,200-point level. The technology sector continues to attract strong investor interest.
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