On May 21, the market experienced a surge and subsequent retreat throughout the day, with all three major indices declining over 2%. The Shanghai Composite Index fell below the 4100-point mark, while the STAR 50 Index dropped more than 3%. In response to today's decline, several domestic and international institutions promptly provided their interpretations. Overall, the main reasons for the adjustment are identified as concentrated profit-taking, external sentiment transmission, and sector divergence. However, most institutions believe the medium-term upward logic of the market remains unchanged, and the short-term correction instead provides a window to position in quality assets.
Zhang Xiaoning, J.P. Morgan: Market Still Has Considerable Upside Potential; Bullish on Three High-Growth Themes Regarding the Chinese stock market, Zhang Xiaoning, China Equity Strategist at J.P. Morgan, maintains a positive and optimistic outlook. J.P. Morgan forecasts a base case year-end target of 100 points for the MSCI China Index, an optimistic case of 120 points, and a pessimistic case of 80 points. For the CSI 300 Index, the base case year-end target is 5200 points, the optimistic case is 6000 points, and the pessimistic case is 4200 points. "The market still possesses considerable upside potential, with core support stemming from the 'dual resonance' of ample liquidity and improving earnings expectations," Zhang Xiaoning stated. Regarding sector and thematic allocation, she recommends "focusing on high-quality growth and selecting individual stocks." Against the backdrop of generally ample liquidity and steadily improving earnings, she is optimistic about three major high-growth themes: First, the artificial intelligence ecosystem. IDC data indicates the global AI industry's compound annual growth rate from 2024 to 2029 will exceed 30%, with the Chinese market also approaching 30%. Based on this, the entire AI ecosystem chain is expected to benefit comprehensively. While there may be rotation among specific segments, the overall theme is worth being bullish on as a core growth driver. Second, energy security. Specific sectors include new energy vehicles, power equipment (grid equipment, energy storage), new energy, and upstream materials. On the domestic demand front, new energy's share in China has already exceeded 10%, with mid-term policy targets pointing to 30% and long-term targets to 50%, indicating ample medium-to-long-term growth space. On the external demand front, the high oil price environment will further accelerate the overseas penetration of products like new energy vehicles, creating a resonance between domestic and external demand. Third, the robotics sector. This can be divided into two main lines: humanoid robots and industrial automation. Humanoid robots benefit from phased catalysts brought by the listing plans of some emerging companies; industrial robots are expected to benefit from the anticipated restart of the upward cycle in China's overall capital expenditure by year-end.
Yang Delong: Shanghai and Shenzhen Markets Experience Significant Correction as Expected; Profit-Taking in Previously Strong Stocks is the Main Cause I have recently been suggesting that after breaking through the 4200-point integer mark, the market might face profit-taking pressure, especially in sectors that have seen substantial gains earlier. It is recommended that investors appropriately adjust their positions, possibly maintaining a portion to stay flexible for both offense and defense. It is anticipated that this market cycle belongs to a slow and long bull market, likely presenting a pattern of "two steps forward, one step back" rather than a one-sided rally. From the market's drop to around 3800 points in March to the present, this cycle has risen approximately 10%, accumulating certain profit-taking pressure, with stronger stocks seeing even larger gains. Today's adjustment also suggests this round of upward movement may be pausing, with subsequent volatile consolidation likely. However, entering a short-term consolidation phase may not alter the medium-to-long-term trajectory of a slow and long bull market for A-shares. It is advisable to observe more and act less, waiting for the market to fully adjust. The six major sectors, which I proposed early last year, are: chips & semiconductors, computing power & algorithm infrastructure, humanoid robots, commercial aerospace, energy storage sectors like solid-state batteries, and biomedicine. Once the market stabilizes and resumes an upward trend, these sectors are highly likely to remain leading performers.
Chang Sheng Fund on the Market: Volatility Digests Floating Supply; Tech Resilience Remains Chang Sheng Fund stated that the main reasons for today's decline are: Concentrated profit-taking: Technology sectors (e.g., AI computing power, semiconductors) saw significant gains previously, leading to selling pressure due to short-term capital divergence; External sentiment transmission: Overnight weakness in Chinese concept stocks coupled with volatility in South Korea's semiconductor supply chain exacerbated market caution; Sector divergence intensifies: Continued capital outflows from heavyweight sectors like non-bank financials and lithium batteries dragged down index performance. Future Outlook: Short-term volatile consolidation, medium-term slow bull logic unchanged. Pressure digestion: Profit-taking pressure around the 4200-point level still requires time to digest, but high trading volume suggests limited room for further decline; Seeking core support: Domestic accommodative monetary policy continues, with industries like commercial aerospace and AI computing power receiving strong policy support (e.g., SpaceX's impending IPO accelerating domestic substitution); Short-term market fluctuations represent healthy consolidation, not a trend reversal. Maintain patience, focus on industrial certainty, position in quality targets on dips, and avoid chasing purely speculative themes.
Kaiyuan Securities Strategy: Bull Market Enters Third Phase; Bullish on Four Directions Looking ahead to the second half of 2026 for the A-share market, Wei Jixing, Chief Strategy Analyst at Kaiyuan Securities, stated that the current bull market has entered its third phase. Wei Jixing noted that reviewing this bull cycle, the most important rhythm is not the linear rise of the index itself, but the "restart" after each exogenous shock, accompanied by a re-switching of the market's dominant pricing variables. The three phases of a bull market are not mechanical segments, but rather three switches in the dominant pricing variables: from risk appetite repair, to asset revaluation, and then to profit realization and structural differentiation. Wei Jixing indicated that the core difference between the three phases of this bull cycle lies in the further elevation of investment aesthetics. In the first phase, the market traded on the overall risk appetite repair of Chinese assets; in the second phase, it traded on the revaluation of quality assets within Chinese assets; entering the third phase, the market begins to seek structural winners that are truly gaining profit share and whose profit distribution speed is still accelerating. Regarding industry allocation recommendations, Wei Jixing stated he is optimistic about investment opportunities in the following directions: First, AI technology, including computing power, advanced packaging, semiconductor equipment, memory, secondary computing power plays, power equipment, large models, and internet platforms; Second, cyclical elasticity, including non-ferrous metals, chemicals & petrochemicals, building materials, etc.; Third, consumption expectation gaps, including textiles & apparel, high-end commercial properties, catering, tourism, etc.; Fourth, high-dividend plays post-Q1 reports, including city commercial banks, pharmaceuticals, textiles & apparel, utilities, media, etc.
Hua An Fund: "Barbell Strategy" May Be the Optimal Solution for Current Equity Positioning Recently, the market has experienced volatile adjustments, with the A-share market surging and retreating. The Shanghai Composite Index fluctuated repeatedly between 4100 and 4200 points, eventually breaking below the key integer level. Under these market conditions, investors are gradually shifting from "pure offense" to "balanced offense and defense," making the balance between attack and defense timely. Against the backdrop of unstable market sentiment and increased volatility, central SOE dividend assets characterized by "low valuation and high dividend yield" continue to demonstrate strong defensive value. In an uncertain market environment, the high-dividend strategy can provide stable cash flow returns. Despite short-term market pressure, the long-term growth logic for technology growth sectors represented by AI computing power, semiconductors, and robotics remains unchanged. As the global AI industry moves from "technology validation" into the crucial year of "commercial promotion," once market sentiment recovers, the high-growth tech sector is expected to become the vanguard of the rebound. Hua An Fund believes that under the current structurally volatile market, the "barbell strategy," which offers both offensive and defensive capabilities, is the optimal solution—using tech/AI as the "spear" and central SOE dividends as the "shield," balancing risk while capturing industry opportunities. Synthesizing views from multiple institutions, today's market decline primarily stemmed from concentrated profit-taking on previous gains and external sentiment transmission, constituting healthy technical consolidation. Currently, domestic liquidity remains accommodative, industrial policies continue to intensify, profit expectations are improving, and the medium-term slow bull market logic remains intact. Looking ahead to the second half of the year, institutions are generally optimistic about growth themes like AI technology, energy security, and robotics, while also emphasizing the defensive allocation value of high-dividend yield assets. Investors can reference the "barbell strategy" to control drawdowns while maintaining exposure to high-growth directions, avoid chasing purely speculative themes, and patiently await structural opportunities after the market stabilizes.
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