Indicators are pointing towards the formation of a potential bottom for a new market sentiment cycle.
Key Market Positioning Signals
The short-term sentiment indicator for the entire A-share market has dropped to near the 0th percentile this week. Historically, when this indicator has neared 0%, the market has often experienced short-term rebounds, whereas levels near 100% have typically preceded adjustments. Having fallen from 80% on May 13th to near 0% this week, short-term concerns appear to be largely priced in, increasing the likelihood of a near-term stabilization and rebound.
The moving average deviation for popular technology sectors has also corrected significantly. A month ago, indices for sectors like CCL, memory, semiconductor equipment, and optical modules showed deviations above 15%, while typical tech and lithium battery segments have now generally retreated to below 10%.
Major indices like the Shanghai Composite and the Wind All-A Index are currently trading near their 100-day moving averages. Barring any external 'black swan' events, this position suggests opportunity outweighs risk.
Approaching the Mid-Year Reporting Season
The market is once again entering a phase dominated by fundamental pricing, with the mid-year financial reporting window on the horizon. A seasonal pattern shows that April trades on Q1 results, May-June is relatively less focused on fundamentals, and July-August again trades on mid-year reports.
Domestic demand remains soft, with indicators like petroleum asphalt operating rates and apparent demand for rebar below seasonal levels, pointing to a slow recovery. In contrast, the global AI industry continues to show robust momentum, with data indicating high景气 expectations for Q2.
Consequently, the盈利 gap between traditional and emerging industries may widen further during the mid-year reporting season. Starting late June, markets will enter the windows for A-share mid-year pre-announcements, followed by formal U.S. and then A-share mid-year reports. Any short-term pullbacks in overseas computing power sectors (like optical modules, chips, PCBs, fiber optic cables) could present fresh布局 opportunities.
Other Sectors to Monitor
Beyond AI, other potential areas gaining attention include metals, energy storage, and biotech.
The metals sector has seen significant price declines despite strong underlying commodity prices, reflecting overly pessimistic expectations regarding海外 variables. With recent海外 stability and clear mid-year earnings expectations, the sector may be poised for an oversold rebound.
For energy storage and lithium batteries, concerns over IRR and demand have eased following a retreat in lithium carbonate prices from highs, with industry fundamentals improving quarter-over-quarter. Long-term demand is supported by expectations for AI data center配储.
The biotech sector shows a strong negative correlation with U.S. interest rates. With valuations at low levels and利率 stabilization, a配置 window may be opening.
Market Overview and Outlook
With external disturbances like U.S.-Iran tensions easing and U.S. inflation data meeting expectations, market focus is shifting back to fundamentals. The core driver of A-share style rotation remains相对业绩优势. The profit growth differential between emerging and traditional industries is expected to widen further in the mid-year reports, driven by sustained global AI progress against a backdrop of疲软 domestic demand.
In summary, signals for a new sentiment cycle bottom are evident. The market is positioned near key technical support levels, with short-term fear largely exhausted. As the mid-year reporting season approaches, focus will return to fundamentals, likely accentuating the performance divergence between sectors. Opportunities may arise not only in the high-growth AI theme but also in oversold segments like metals and energy storage, alongside interest-rate-sensitive areas like biotech.
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