On May 11th, Meng Lei, China Equity Strategist at UBS Securities, shared his views on recent A-share market performance and future outlook during a media briefing.
Regarding the Shanghai Composite Index's intraday high of 4,229.58 points today, setting a new record since July 2, 2015, Meng stated that this is merely a step within the broader market uptrend, where successive breakthroughs of key integer levels provide strong positive momentum, yet it is far from the ultimate target.
He pointed out that the driving forces behind the A-share market stem from two aspects: First, the recovery in earnings growth will be the primary driver of the market's upward movement this year, with double-digit profit expansion anticipated. Second, various liquidity support measures, coupled with the heightened strategic importance of the A-share market within the national strategy framework, are attracting increased capital inflows, thereby bolstering stock valuations.
Addressing the highly sought-after technology sector, Meng noted that UBS is continuously monitoring relevant technical indicators. In terms of trading volume share, sectors such as electronics, communications, computers, and defense technology have collectively accounted for a range of 40% to 45% in recent years, often indicating elevated trading activity at certain stages. Since the beginning of May, this proportion has risen again, approaching 40%.
He believes that, in the short term, this may signal some degree of crowding in certain stocks. However, over the longer term, as long as fundamental earnings growth and advancements in artificial intelligence persist, there remains room for further upward movement. The 40% level is by no means the ceiling for the technology sector's share in stock market trading; this average is expected to rise further.
Meng further elaborated that over the past fifteen years, the technology sector's share in the A-share market has shown a consistent upward trend: from an average of only 10% between 2010 and 2013, to around 15% from 2014 to 2017, approximately 25% from 2018 to 2021, and the current level since 2023. This progression indicates that, with each five-year interval, the technology sector's contribution to the economy and the stock market—whether measured by trading volume, value, or market capitalization—has been increasingly significant.
Comments