The A-share market experienced a choppy session today. The Shanghai Composite Index edged up 0.11% to 4,110.81 points, while the Shenzhen Component Index rose 1.24% and the ChiNext Index gained 1.41%. The STAR Market Composite Index advanced 2.80%. The total market turnover was 3,306.9 billion yuan, a decrease of 159.1 billion yuan from the previous session. At the sector level, AI hardware-related sectors led the gains again, with semiconductor equipment, chips, and integrated circuits among the top performers. Sectors such as coal, finance, and animal husbandry were among the decliners. Market risk appetite was neutral today, with over 4,000 stocks declining across the board. In terms of style, small-cap stocks were mixed, growth outperformed value, and the ChiNext and STAR markets outperformed the main board.
The three major indices turned positive in the afternoon session. Currently, there is a high correlation between domestic and international stock market movements. Asia-Pacific technology stocks staged a collective rebound after a volatile trading day. Yesterday saw several negative narratives emerge, similar to the characteristics during the rapid gold rally phase, which were essentially driven by excessively high trading crowding, pushing up asset price volatility. After signs of recovery emerged in the South Korean market in the afternoon, other markets showed some correlation.
Returning to the A-share market, looking at fund flows, using Shenwan's secondary industry classification as an example, net main fund inflows returned to the semiconductor sector today.
Looking ahead, we believe that under the current epic technological revolution and industry cycle, technology and growth sectors are expected to remain the main theme. Investors can continue to focus on core directions benefiting from the AI wave, such as the Communication ETF (515880), which benefits from the "optical" theme, and the Semiconductor Equipment ETF (159516), which benefits from industry growth dividends and the domestic self-sufficiency narrative.
Semiconductor Sector Rebound
The semiconductor sector staged a collective rebound following yesterday's correction. The Integrated Circuit ETF (159546) surged 5.92%, the Chip ETF (512760) jumped 5.62%, and the Semiconductor Equipment ETF (159516) climbed 5.42%.
Against the backdrop of AI computing power and interconnect inflation, memory capacity expansion is driving a valuation re-rating for the semiconductor equipment sector. Currently, the semiconductor equipment sector is experiencing a confluence of multiple growth engines: "price increases + overseas expansion + memory capacity expansion + domestic self-sufficiency," presenting vast growth opportunities.
Rapid Market Expansion
SEMI has significantly raised its growth forecast for the global front-end semiconductor equipment market size in 2026 from 16.5% to 23.5%, corresponding to a market size of $152.2 billion. Global semiconductor equipment billings reached $36.55 billion in the first quarter, a year-on-year increase of 14%, setting a new historical high for a single quarter.
Overseas Equipment Price Hikes
Amid rapid demand expansion and yen depreciation, the semiconductor equipment sector is experiencing a rare price hike cycle. Several major equipment manufacturers have already issued price increase plans. Reports indicate that SK Hynix has received price hike requests of 3% to 4% from equipment suppliers, suggesting that price negotiations have moved from intention to concrete action.
Strengthening Logic for Overseas Expansion
Conservative capacity expansion by overseas leading equipment manufacturers and extended lead times for precision components are prolonging equipment delivery cycles, creating opportunities for Chinese semiconductor equipment companies to expand overseas. On the materials front, chip manufacturing consumes significant amounts of silicon wafers, and capacity expansion is slow. Global silicon wafer prices are also rising. Previously, there were reports that foundries in Taiwan were procuring silicon wafers from the mainland at significantly higher prices.
Furthermore, the previously emphasized logic of memory capacity expansion and advanced process self-sufficiency remains strong. A major memory company's imminent IPO is providing a catalyst. Interested investors can continue to monitor the Semiconductor Equipment ETF (159516) and the Chip ETF (512760). However, it's also necessary to be mindful of short-term volatility. Employing strategies like phased or buying on dips may offer a better experience.
Consumer Electronics ETF Performance
The Consumer Electronics ETF (561310) also performed strongly today, closing up 5.44%.
Data centers and high-speed interconnects may be on the verge of significant volume growth. Market rumors suggest a leading company recently placed material orders exceeding ten billion yuan, interpreted by the market as strong validation of actual orders, alleviating previous concerns about the scale of optical module orders, customer demand, and material supply. Additionally, some market views cite foreign reports that have significantly raised the 12-month target price for a leading company, reflecting expectations for data center, automotive electronics, and overseas OEM customer expansion.
In the context of the AI computing power and interconnect wave, leading consumer electronics companies are undergoing a valuation re-rating from "Apple supply chain manufacturers" to "AI infrastructure + consumer electronics + automotive electronics" platform-type enterprises. Currently, the consumer electronics sector is experiencing a confluence of multiple growth engines: "AI edge-side innovation + data center high-speed interconnects + overseas OEM expansion + business structure upgrade," presenting broad growth opportunities.
Currently, the valuation re-rating logic is strengthening for the consumer electronics sector. As the proportion of high-margin communication & data center and automotive electronics businesses increases, the market's pricing for leading consumer electronics companies may shift from the valuation range of traditional manufacturing to that of AI hardware platform companies. Interested investors can monitor the Consumer Electronics ETF (561310).
Bond Market Outlook
After a period of adjustment, the active 10-year government bond futures have recently returned to a fluctuating trend. However, we believe the fundamental macroeconomic environment for the bond market has not changed significantly, so narrow-range fluctuations remain the main theme for now, and a wait-and-see approach is appropriate. The market still harbors some concern over liquidity conditions. The DR007 has repeatedly hit new highs, and the overnight SHIBOR reached a high of 1.455% yesterday. Currently, interbank market liquidity is relatively tight, and the carry return for long bond positions has declined. However, we believe the probability of the central bank conducting routine adjustments is higher than a policy shift, so excessive panic is unnecessary. In the medium to long term, interest rates are expected to fluctuate within a low, narrow range. Therefore, we recommend investors consider stable products with moderate duration, such as the Government Bond ETF (511010) and the 10-Year Government Bond ETF (511260).
Despite some liquidity disturbances, we believe excessive panic is not warranted. Historically, bond bear markets are often caused by a combination of liquidity tightening and a fundamental shift. Currently, although liquidity is relatively tight, it still fluctuates around the 1.4% policy rate anchor, lacking evidence of a policy shift. It is more likely a case of routine central bank adjustments. From a fundamental perspective, China's macroeconomy, in terms of both quantity and price, is conducive to maintaining low interest rates. Firstly, financing demand remains weak, with medium- and long-term loans and aggregate financing to the real economy (AFRE) being relatively sluggish. Secondly, as tensions between the US and Iran ease, inflation expectations driven by crude oil are gradually receding. These two factors jointly limit further upside for nominal interest rates.
Overall, we maintain the view that the short-term probability of success is relatively neutral, and the medium to long-term outlook is for narrow-range fluctuations. In the current market environment, we recommend investors consider stable products with moderate duration, such as the Government Bond ETF (511010) and the 10-Year Government Bond ETF (511260).
Risk Disclosure
Investors should fully understand the differences between regular investment plans and savings methods like lump-sum deposits. Regular investment is a simple way to guide investors towards long-term investing and averaging investment costs. However, it does not avoid the inherent risks of fund investment, cannot guarantee investors will make a profit, and is not an equivalent substitute for savings. Whether stock ETFs, LOFs, or structured funds, they are all types of securities investment funds with relatively high expected risk and expected return levels. Their expected returns and risk levels are higher than those of hybrid funds, bond funds, and money market funds. Funds investing in stocks listed on the STAR Market or ChiNext face specific risks arising from differences in investment targets, market systems, and trading rules. Investors are advised to take note. Short-term price changes of sectors/funds are presented only as supplementary material for analysis and are for reference only, not constituting a guarantee of fund performance. References to short-term performance of individual stocks are for reference only, not constituting stock recommendations or predictions or guarantees of fund performance. The above views are for reference only and do not constitute investment advice or promises. If you wish to purchase related fund products, please pay attention to relevant investor suitability management regulations, complete a risk assessment in advance, and purchase fund products with a risk level matching your own risk tolerance based on the assessment results. Funds carry risks, and investment requires caution.
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