CITIC SEC research indicates that the current concentration of capital and the attraction effect in the A-share market, along with the divergence in individual stock returns, have both reached historical extremes. The correlation coefficient of returns between leading assets and long-tail assets is approaching a critical divergence threshold of 0.5. A review of history shows that while reaching a peak in concentration does not determine the market's overall direction, a divergence in correlation often signals that previously favored market themes are entering a consolidation phase, with capital flows and market sentiment poised for a structural shift. Looking ahead, whether the market can transition from extreme divergence to systemic convergence depends on whether robust macroeconomic fundamentals and global liquidity can smoothly take over as drivers. During the current ambiguous period before key macro external events are resolved, relying solely on industry-specific narratives is unlikely to break the deadlock of capital concentration. A new "AI + Energy/Chemicals" barbell strategy is recommended as a tactical solution to balance volatility reduction and returns.
Current State of A-Share Market Shows Concentration and Capital Attraction Nearing Historical Extremes
According to Wind data, the combined trading volume of the top 10% of stocks by turnover in May 2026 surged to 59.2% of the total market turnover. This figure is at a historical percentile above 97.5%, nearing its peak level. Under the current environment of存量博弈 (stock game), capital is concentrating into leading stocks at an unprecedented density. This creates a situation where局部过热 (local overheating) in microstructure coexists with整体失血 (overall capital outflow) for the broader market, with pressure for market convergence building towards a critical point.
Divergence in Individual Stock Returns Has Also Reached a Historical Extreme
In May 2026, the top 10% of stocks by turnover, representing the core leading circle, achieved a rolling 12-month turnover-weighted cumulative return of 161.5%, placing it at a high historical percentile of 97.9%. In contrast, the bottom 50% of stocks by turnover, the long-tail circle experiencing capital outflow, had a rolling 12-month cumulative return of just -0.73%, at a historical percentile of only 51%. The difference in their rolling returns reached 162.2%. Furthermore, the correlation coefficient of the rolling 12-month cumulative returns between the top 10% leading assets and the bottom 50% long-tail assets has declined to 0.57. This value is approaching the traditional divergence critical threshold of 0.5, indicating a sustained downward trend in their correlation.
Market Trading Activity Remains Broadly Stable in the 20 Weeks Following Peak Concentration
A review of five historical instances of typical cross-sectional data reveals that in the 20 weeks following the peak of concentration (when the top 10% stocks' turnover share exceeded 55%), the median weekly turnover rate remained consistently within a moderate range of 4.5% to 7.5%. This suggests that after extreme divergence peaks, the withdrawal of capital from the overall market at the aggregate level is extremely slow. Under a relatively stable total turnover rate, liquidity within the market's microstructure undergoes a deep存量再平衡 (stock rebalancing) and阵地转移 (positional shift) between the core leading circle and the long-tail clearance circle.
Performance of the Wind All-A Index Shows Significant Divergence in the 20 Weeks Post-Peak Concentration
Historical data from five typical instances shows that by the 20th week after triggering the extreme, the average market-wide return was 25%, with a median of 16%, but the range was wide with an upper limit of 116% and a lower limit of -19%. This significant divergence strongly confirms that liquidity concentration itself does not determine the market's direction. Capital concentration reaching an extreme merely signals that the deterioration in micro-trading structure has reached a critical point. Whether the index evolves into a broad surge like in 2014, a震荡上行 (volatile uptrend) like in 2025, or a失血型收敛 (outflow-driven convergence) like in 2018 and 2023 over the subsequent 20 weeks depends on whether the certainty of macroeconomic fundamental growth and macro liquidity can achieve a smooth handover during the critical window period.
Historical Divergence in Returns Between High/Low Turnover Stocks Often Precedes a Shift in Market Themes
Using historical points where the rolling 12-month correlation coefficient between the top 10% and bottom 50% of stocks by turnover fell below 0.5 as T=0, analysis shows that the leading sectors in the 60 trading days before T=0 are almost entirely different from those leading in the 60 trading days after T=0. This implies that following a correlation divergence, capital behavior and market sentiment undergo a structural change. Previously favored strong sectors typically enter a consolidation phase, while new market themes tend to form in areas with lower attention or where capital is being reallocated.
Major Style Shifts Since 2025 Have Been Triggered by Intense Global Macro Resonance
Since 2025, the market has experienced several external events with significant global macro impact, including trade tariff conflicts, China-U.S. détente, heightened U.S. inflation, the Hormuz Strait conflict, and the U.S. presidential visit to China. Under the extreme divergence induced by存量博弈 (stock game), changes in micro-narratives within industries are unlikely to break the current deadlock of capital concentration. Forming a market-wide consensus and driving capital shifts across assets and industries relies on the resolution of macro-level external events. Potential events that could扭转全球风险偏好 (reverse global risk appetite) looking ahead include the resumption of navigation through the Hormuz Strait, breakthrough progress in China-U.S. economic and trade agreements, and the first Federal Reserve interest rate meeting following a new chairperson's appointment.
"AI + Energy/Chemicals" Forms a New Barbell Structure for the Year, with Style Shift Opportunities Possibly Tied to Macro Changes
Faced with this year's external uncertainties, the new "AI + Energy/Chemicals" barbell strategy offers a tactical solution for reducing portfolio volatility. AI serves as the offensive end, satisfying aggressive capital's pursuit of high growth and new paradigms. The energy and chemicals sector serves as the stable end, responsible for hedging against macroeconomic uncertainty and meeting配置型资金 (allocation-oriented capital)'s demand for high-certainty returns.
Risk Factors:
Slower-than-expected domestic economic recovery or policy implementation; sharper-than-expected decline in domestic consumer demand; worse-than-expected recessions in European and U.S. economies; escalation of China-U.S. friction in technology, trade, or financial sectors.
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