The A-share market in the first half of the year displayed a pattern of extreme disparity, with activity concentrated in specific sectors while others remained quiet.
There was significant divergence in performance, with the AI industrial chain, often referred to as 'next-generation' tech stocks, showing notable activity, while many other sectors, termed 'traditional' assets, were subdued.
During this period, more than 3,700 stocks declined, with the median change for individual stocks being a drop of approximately 15%.
Institutional capital has been heavily concentrated within the AI computing power supply chain, including areas like optical modules and semiconductors.
This convergence in investment preference is driven not only by industry trends and earnings realization but also by performance pressure on funds and a fear of missing out, potentially leading to prices for quality assets that already reflect long-term growth expectations.
A crucial consideration for investors is that a promising industry does not automatically equate to an attractive entry price.
Investment risk cannot be assessed solely on asset quality; purchasing high-quality assets at excessively high prices carries its own dangers, whereas ordinary assets can offer a margin of safety if acquired at a sufficiently low price.
It is vital to avoid scenarios where future expectations are fully priced in.
A company's potential for profits to multiply in the future does not mean its current valuation is inexpensive.
When a stock price already incorporates several years of high growth, subsequent investment returns may diminish due to this anticipation being exhausted.
The economic landscape is multifaceted, extending beyond 'silicon-based' technology.
The Chinese economy encompasses a diverse range of traditional and mature industries across various sectors, levels, and cycles.
Non-technology assets hold significant value.
Sectors such as banking, coal, transportation, utilities, and established manufacturing enterprises may not exhibit explosive growth, but if they can consistently generate free cash flow and provide stable dividends, they possess allocation merit independent of the tech growth narrative.
There are opportunities for realignment and recovery.
Currently, some companies in non-ferrous metals, chemicals, advanced manufacturing, and consumer services are undergoing improvements in supply-demand dynamics or corporate governance.
These firms can offer returns that are more stable and verifiable compared to many technology stocks.
The path forward involves fostering diverse valuation methods and a more inclusive investment perspective.
Genuine inclusivity does not mean indiscriminately supporting all low-valuation companies, but rather ensuring that enterprises which continuously create value receive appropriate pricing.
Reforms on the capital supply side are necessary.
This includes enriching product systems like ETFs to cater to capital with different risk appetites, while also extending the performance evaluation cycles for funds to reduce short-term ranking pressures and cultivate differentiated investment styles.
Maturing the investment culture is essential.
Advocating for a long-term, 'patient capital' mindset that respects trends while also valuing price, maintaining independent judgment between popular and overlooked assets.
Regulatory oversight must provide a safeguard.
While enhancing systemic inclusivity, it is crucial to strictly investigate illegal activities such as hype and speculation disguised under the banner of technology, supporting genuine innovation while cracking down on superficial 'tech-washing'.
In a related market movement, shares of Cambricon Technologies Corporation Limited (ASX: 688256) experienced a sharp correction, shedding approximately 120 billion yuan in market value over two days following a period that saw its valuation briefly touch the trillion-yuan mark.
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