CITIC SEC's research report indicates that the capital driving force behind this round of structural market performance primarily stems from existing fund repositioning and margin trading inflows. After the TMT sector's trading volume proportion reached a periodic peak, the overall A-share turnover rate is estimated to gradually decline below 1.8%. The recent high-level U.S.-China meeting has established a framework of "competition without conflict" for bilateral relations. However, market sentiment may be at a cyclical high. Once sentiment cools, the impact of expectations for global liquidity tightening on investor decision-making is expected to increase. Following this cooldown, a return to diversified market characteristics is anticipated, with the necessity of readopting a barbell investment structure growing. AI combined with the energy-chemicals sector is projected to be a more suitable structural focus for the year. CITIC SEC's main viewpoints are as follows:
The capital driving this structural rally mainly comes from existing portfolio adjustments and margin trading inflows. Following a severe market adjustment involving broad-based position reductions, the market typically undergoes three phases: "comprehensive position replenishment," "differentiated replenishment structures," and "rotation of existing funds." The current phase of market position recovery is nearing its end, gradually transitioning into a stage dominated by the rotation of existing capital. The rapid surge in margin trading has constituted the primary incremental driver of this structural market trend. Leveraged funds demonstrated resilience during the March correction and have continued to rise steadily since. As of May 14th, the five-day moving average of margin purchase volume as a percentage of total turnover on the Shanghai and Shenzhen exchanges stood at 10.3%, reaching the 92.2 percentile level since 2021. Furthermore, leveraged capital has been primarily concentrated in the broad AI sector, represented by communications and electronics. Over the past four weeks, the net margin buying proportion for the communications and electronics sectors combined was 51%, 55%, 42%, and 61%, respectively.
Apart from leveraged funds, other capital flow indicators suggest limited market inflows, highlighting the characteristics of a structural rally driven by repositioning of existing funds. Since April 9th, existing A-share ETFs have seen cumulative net redemptions of 459.1 billion yuan. During this period, broad-based ETFs experienced cumulative net redemptions of 398.6 billion yuan, with the major broad-based ETFs held by Central Huijin at the end of 2025 seeing cumulative net redemptions of 286.1 billion yuan. Sector/theme ETFs recorded cumulative net redemptions of 60.5 billion yuan, including net redemptions of 45.7 billion, 17.5 billion, and 16.0 billion yuan in technology, cyclical, and manufacturing categories respectively, while dividend-themed ETFs saw net subscriptions of 14.6 billion yuan. The increase in positions by small and medium-sized active private funds has been limited, with their surveyed positions still below January highs. Retail investors have not entered the market on a large scale either; the number of new accounts opened in April failed to maintain the March level, decreasing by 46% month-on-month. According to CITIC SEC's channel research, the size of settlement funds in May also did not surpass the January level despite the market rise. Search index data for A-share related terms on WeChat also remains significantly lower than in January this year. Overall, the concentration of leveraged funds in the technology sector, coupled with other existing funds switching into tech, forms the main capital characteristic of this structural rally. Based on CITIC SEC's calculations, over the past ten weeks, the profit-making effect in the technology sector relative to the other six major sectors has reached its highest level since 2025.
Following the periodic peak in TMT trading proportion, the overall A-share turnover rate is estimated to gradually decline below 1.8%. Since September 2024, the proportion of A-share TMT sector trading volume to total turnover has shown a high degree of synchronization with the daily turnover rate of all A-shares. From a micro-structure perspective, reviewing the seven phases since 2019 where the TMT sector's trading proportion exceeded 40%, the daily turnover rate of all A-shares exhibited characteristics of initial volatile decline, mid-phase volatility compression, and later-stage restructuring and breakthrough within 120 trading days after the main theme peaked and retreated. In the first phase (T to T+25), overall A-share trading sentiment reached a boiling point on the peak day (median daily turnover rate of 1.47%, with an upper limit reaching 2.22%). Subsequently, as core TMT assets cooled, the market entered a painful period of "main theme dimming," with the median daily turnover rate for all A-shares declining to a range of 0.6%~1.8% (median 1.11%). The second phase (T+25 to T+60) saw the market enter a "main-theme silent period" lasting about a month, during which the turnover rate upper limit was approximately 2%. The third phase (after T+60) involved the spontaneous repair of the market's trading structure. Overall, based on historical experience, during the market sentiment cooling phase, the overall A-share turnover rate needs to fall below 1.8% to be considered essentially concluded. Based on the current total market capitalization, this corresponds to a daily trading volume of approximately 2.5 trillion yuan.
The recent high-level U.S.-China meeting has established a framework for a return to "competition without conflict," but market sentiment may be at a cyclical high. Overall, the core purpose of this high-level Sino-U.S. meeting was to establish guardrails and maintain stability, with its constructive role being relatively limited. Following strategic setbacks in Iran, the U.S. is expected to enter a state of "strategic calm." In this context, Sino-U.S. relations will focus more on building guardrails, maintaining stability, engaging in limited transactions in controllable areas, and managing competition in key areas to avoid loss of control, essentially returning to the Biden administration's framework of "competition without conflict." Looking ahead, the relatively stable pattern in Sino-U.S. relations may not be limited to this year. Given the ongoing fluctuations and restructuring of Trump's strategic thinking, it could potentially persist throughout his term. From a market perspective, significant contacts between the U.S. and China, whether trade agreements or leader meetings, are often seen by the market as signals for a cyclical peak in optimistic sentiment. The reason is that such meetings typically occur when disagreements are relatively minimal and consensus is easiest to reach. In the six months or even longer following past meetings, opportunities for further improvement in Sino-U.S. relations have been rare, with marginal negative disturbances being more common. Therefore, viewing such events as periodic points of minimal bilateral disagreement and peak market optimism is also a principle used by some investors to gauge medium-term market sentiment. Historical data supports this judgment. CITIC SEC analyzed A-share performance around eight major Sino-U.S. contact events since 2018, including leader summits and important agreement signings. In the 20 trading days preceding the events, the A-share sentiment indicator constructed by CITIC SEC averaged an increase from 62 to 66, with the CSI 300 averaging a gain of 1.6%. In the 20 trading days following the events, the A-share sentiment indicator averaged a decline from 66 to 45, with the CSI 300 averaging a drop of 2.2% (2 instances of increase, 6 instances of decrease, maximum drawdown of -11.9%, minimum drawdown of -2.1%). The adjustment was most pronounced in the first five trading days, gradually normalizing thereafter.
Once sentiment cools, the impact of expectations for global liquidity tightening on investor decision-making is expected to rise. The inflationary impact from the disruption of the Strait of Hormuz has begun to materialize. China just released its April PPI, which recorded a month-on-month increase of +1.7%, the second-highest value since 2021, with upstream components like raw materials showing significant strength while downstream components remained weak. The recently released U.S. April inflation data (CPI, core CPI, PPI, core PPI) all exceeded expectations. High inflation continues to erode the real purchasing power of American households; in April this year, real average hourly earnings turned negative year-on-year for the first time in three years (down 0.3%). The year-end interest rate implied by CME interest rate futures has been rising continuously since April 17th, approaching the year's highest level at 3.7% (implying no rate cuts within the year). Global bond markets have already begun pricing in inflation. U.S. 10-year and 30-year bond yields have been rising steadily, with the 10-year Treasury yield nearing 4.5%, close to its highest level since June 2025. Japan's long-term bond yields have also continued to climb, recently rising unilaterally to 2.6%. European government bond markets have also seen widespread selling. Previously, the stock market was primarily focused on high-growth segments within the strong AI industry trend, temporarily overlooking the impact of inflation and interest rates. However, excessively high interest rates may ultimately affect the level and pace of spending on debt-financed AI infrastructure. This analytical logic has always existed but could be selectively ignored when market enthusiasm was high. As the market marginally cools, liquidity expectations will carry greater weight in investor decisions, and negative narratives may periodically dominate.
The necessity of returning to a barbell structure is increasing, with AI plus energy-chemicals being a more suitable structure for the year. 1) Stable funds are only temporarily absent, but the demand for stable allocation has never disappeared. The recent new highs普遍创出新高普遍 reached by large Hong Kong-listed bank stocks证明证明 that stable funds are not absent from the market. It is merely that the extreme structure and excessive concentration of attention in the A-share market have obscured the movements of these stable funds. If stable, return-oriented sectors in the A-share market decline alongside a market adjustment, entering more attractive valuation ranges, they are likely to attract these stable funds to expand their purchasing scope. Of course, even when constructing a barbell strategy, it needs to be built around identifiable supply-demand gaps or stable cash flows. The energy-chemicals chain is projected to be the most suitable choice for one end of the barbell this year. The only short-term issue is the extreme volatility in commodity prices ahead of U.S.-Iran negotiations, making it difficult for the market to judge the real supply-demand gap and its sustainability after the strait resumes navigation, thereby constraining participation by stable funds. Once a U.S.-Iran agreement is reached, commodity price volatility is expected to stabilize, significantly improving the experience. Even if short-term commodity price volatility persists, energy-chemical varieties are expected to exhibit some defensive attributes during the market sentiment cooling process. 2) AI plus energy-chemicals may be a more suitable barbell structure for this year. This year's AI plus energy-chemicals theme, similar to the AI plus dividends theme of 2023-2024 and the AI plus resources theme of 2025, has the potential to become a primary source of supply-demand gaps and excess returns on an annual basis. In terms of allocation, the underlying logic remains the revaluation of pricing power in China's advantaged manufacturing sectors, with the most representative industries being new energy, chemicals, non-ferrous metals, and power equipment. Continued close attention should be paid to the progress of domestic AI. On the hardware side, the explosive logic of "volume" remains the direction with the largest expectation gap within the AI chain, while advancements in domestic models are expected to drive simultaneous increases in both volume and price for cloud services. Domestic computing power and cloud platforms are viewed favorably. Additionally, it is recommended to continue increasing allocation to some low-valuation品种品种, with a focus on securities firms and insurance. For cyclical涨价品种涨价品种,周期成长品周期成长品 like the AIDC chain and lithium battery chain continue to experience sustained景气度景气度, but the expectation gap is now very limited. It is advised to focus on the tightest supply-demand links, reflected in recent涨价频率涨价频率, mainly including copper-clad laminates, glass fiber, high-speed silicon, electronic special gases, optical fiber, MLCCs, chromium, lithium carbonate, rare earths, and carbon fiber. For traditional周期品周期品, the focus should be on varieties that have undergone systematic capacity elimination or have绝对约束绝对约束 on supply, such as phosphorus chemicals, MDI, spandex, dyes, glyphosate, urea, rubber, and refrigerants.
Risk factors include intensified friction in Sino-U.S. technology, trade, and financial fields; domestic policy strength, implementation effectiveness, or economic recovery falling short of expectations; overseas and domestic macro liquidity tightening beyond expectations; further escalation of regional conflicts such as Russia-Ukraine and the Middle East; and slower-than-expected消化消化 of China's real estate inventory.
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