Good morning. Let's start with the international markets.
Silver prices surged sharply on the evening of the 11th. By the close, spot silver had risen 7.15% to $86.08 per ounce, while COMEX silver futures climbed 7.54% to $86.960 per ounce.
WTI crude oil futures for June delivery settled 2.78% higher at $98.07 per barrel. Brent crude oil futures for July delivery closed up 2.88% at $104.21 per barrel.
The three major U.S. stock indices all posted modest gains. The Dow Jones Industrial Average rose 0.19%, the S&P 500 increased 0.19%, and the Nasdaq Composite advanced 0.1%. Notably, both the S&P 500 and the Nasdaq reached new all-time highs.
Former U.S. President Donald Trump stated on the 11th that the current ceasefire agreement between the U.S. and Iran remains in effect but is "extremely fragile" and in a "precarious" state.
Trump emphasized that the core of the U.S. position is that "Iran must never possess nuclear weapons," but he noted that Iran's response did not include such a commitment. He added that the U.S. would achieve "total victory."
According to Iranian media reports on the 10th, Iran formally submitted its response to the latest U.S. proposal aimed at ending hostilities to the mediator, Pakistan, focusing on ending the war and ensuring maritime security in the Persian Gulf and the Strait of Hormuz. Trump subsequently expressed dissatisfaction on social media, calling Iran's response "completely unacceptable."
Separately, an Iranian official stated on the 11th that there are serious disagreements between Iran and the U.S. in negotiations over several issues, including the disposal of enriched uranium, the duration of a suspension of uranium enrichment activities, and war reparations.
The official said the U.S. proposal demands access to Iran's uranium enriched to 60% and opposes transferring it to Russia, instead suggesting a third country. Iran opposes shipping enriched uranium out of the country but is prepared to dilute it under the supervision of the International Atomic Energy Agency.
Turning to the domestic market, A-shares staged a strong rally on May 11th. By the close, the Shanghai Composite Index had gained 1.08% to 4225.02 points, the Shenzhen Component Index rose 2.16%, the ChiNext Index surged 3.5%, and the STAR Market Composite Index advanced 3.37%. Combined turnover for the Shanghai, Shenzhen, and Beijing exchanges reached approximately 3.57 trillion yuan, an increase of nearly 490 billion yuan from the previous session. Goldman Sachs recently released its latest Asia equity strategy report, explicitly recommending an "overweight" position on China and raising its 12-month target for the CSI 300 Index to 5300 points.
Hongye Futures macro researcher Huang Siyuan noted that the surge in A-share trading volume since May is not driven by a single factor. From a capital structure perspective, margin financing has been the largest source of incremental funds. As of May 7th, the outstanding balance of A-share margin financing reached 2.7663 trillion yuan, with the total margin balance hitting 2.7864 trillion yuan, both setting new historical highs. The net inflow of margin funds has been highly concentrated in technology and resource sectors, showing typical leveraged buying characteristics. Northbound capital continued its net inflow trend, indicating foreign investors maintain a positive long-term view on A-shares.
Is this technology-driven rally a medium-term trend or a short-term peak?
Dongzheng Futures senior macro strategist Wang Peicheng believes the global chip supply shortage and high prices are unlikely to ease in the short term, and investment in the AI sector remains extremely robust. Domestically, investment in new quality productive forces has become a new engine for economic growth. Therefore, the technology-driven trend should not be viewed as a rapid, frequent rotation among sectors.
Huang Siyuan analyzed the situation from both fundamental and trading perspectives, stating that the primary driver of this rally is the better-than-expected performance of the domestic AI industry chain. The contribution of AI to earnings has entered a phase of scaling up from "1 to N." This marks a critical shift where the industry trend moves from concept to fundamentals, forming the foundation for a medium-term trend.
"However, the short-term market is showing signs of reaching a peak," Huang Siyuan added. The trading volume proportion in the technology sector has soared to historical extremes, turnover rates in some sub-sectors are excessively high, and the proportion of margin buying has risen rapidly, indicating clearly overheated sentiment. The fact that other sectors have not followed suit effectively suggests the market is not forming broad-based profit recovery expectations but is instead concentrated on betting on the AI narrative. This structure, where "a few sectors absorb liquidity from the entire market," is often a signal that short-term sentiment is nearing a peak. Overall, AI's status as a medium-term industry trend remains unshaken—technological progress, capital expenditure, and earnings realization are still in a virtuous cycle. However, from a trading perspective, this rally may be the result of peaking market sentiment coupled with accelerated entry of leveraged funds, rather than a steady medium-term uptrend.
Can sectors like consumer staples and finance, which have underperformed earlier, take over from technology in mid-to-late May, propelling the market from a "structural bull market" to a "full-fledged bull market"?
Huang Siyuan believes the consumer and finance sectors have the basis for valuation repair and rotational catch-up, but conditions for a "full-fledged bull market" are not yet mature. The market is more likely to see "structural rotation" rather than a broad-based rally. Consumer sector valuations are at low levels, with supportive policies such as the expansion of "trade-in" programs and consumer loan interest subsidies continuously being rolled out. First-quarter reports showed mild recovery in sub-sectors like condiments and soft drinks. However, improvements in household consumption confidence and income expectations are slow-moving variables, requiring further signals of recovery in retail sales growth.
"The finance sector has stronger fundamental support: first-quarter net profits for the securities and insurance industries exceeded expectations, and insurance capital along with margin financing have begun increasing allocations to the financial sector. However, factors like weak credit demand mean the valuation repair for bank stocks still requires time," Huang Siyuan said.
Wang Peicheng is more cautious. He noted that the current retail sales growth rate fluctuates around 2%, credit growth continues to decline, and real estate transaction volumes are in negative growth year-on-year, providing weak fundamental support for the consumer and finance sectors. In a market where technology stocks are crowded and capital is overly concentrated, these sectors might have some winning probability due to low valuations, low positioning, and low attention, but the risk-reward ratio is limited, the sustainability of any rally is short, and it places greater demands on investors' trading skills.
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