China's three major stock indices opened higher on June 12th. The market climbed strongly in the morning session, posting significant one-sided gains. However, the upward momentum weakened in the afternoon, with the gains narrowing considerably.
From a sector perspective, large capital reduced allocations to highly crowded trades, with popular stocks on the AI hardware side generally underperforming. Some funds rotated into undervalued sectors such as metals and non-bank financials. The aerospace sector took off on news of SpaceX's impending IPO.
At the close, the Shanghai Composite Index rose 1.12% to 4,031.51 points. The Shenzhen Component Index gained 0.75% to 14,963.41 points, and the ChiNext Index increased by 0.5% to 3,830.35 points.
Wind data shows that 3,923 stocks across the Shanghai, Shenzhen, and Beijing exchanges rose, while 1,511 fell, and 89 were unchanged.
The combined turnover for the Shanghai and Shenzhen markets reached 3,214.9 billion yuan, an increase of 662.8 billion yuan from the previous session's 2,552.1 billion yuan. Specifically, Shanghai's turnover was 1,537.4 billion yuan, up 351.8 billion from the prior day, while Shenzhen's turnover hit 1,677.5 billion yuan.
A total of 140 stocks across the two main boards and the Beijing Exchange rose by more than 9%, while 53 stocks fell by more than 9%.
Metals Lead Gains, Semiconductors Reverse Early Strength
In terms of sectors, the non-ferrous metals sector led the gains. Nearly 20 stocks, including New Life (301323), Jintian Titanium (688750), Tongling Nonferrous Metals (000630), China Molybdenum (603993), Zhaojin Mining (000506), and Yuguang Gold & Lead (600531), hit their daily limit-up or surged over 10%.
Analysts at Shenwan Hongyuan Securities believe that benefiting from the rapid development of the AI industry, computing metals are facing a structural supply gap, with sustained high growth expected. Driven by long-term trends of deglobalization and AI advancement, the fundamental logic for precious and base metals remains intact, with interest rate hike expectations providing a long-term allocation window. Strategic and computing metals continue to see improving conditions.
Brokerage stocks surged sharply in early trading, pushing the non-bank financial sector higher. Caida Securities (600906), SDIC Power (000958), and Bank of China Securities (601696) hit their limit-up, while Sinolink Securities (600109), Ruida Futures (002961), and Northeast Securities (000686) rose over 5%.
Shipping stocks strengthened, leading the transportation sector higher. CITIC Offshore (000099) hit the limit-up, China Merchants Energy Shipping (601872) gained over 8%, and stocks like Hongchuan Wisdom (002930), Juneyao Airlines (603885), and China Express Airlines (002928) rose more than 6%.
The semiconductor sector opened high but closed lower. Zhongju Semiconductor (688549), Youyan Silicon (688432), QP Tech (688216), Nata Opto-electronic (300346), National Silicon Industry (688126), and Jianghua Microelectronics (603078) fell by their limit-down or dropped over 10%.
Home appliance stocks underperformed. Chunguang Technology (603657) hit the limit-down, while Unionman (688609), Zhaochi (002429), Xingshuai (002860), and Hejing Technology (300279) fell more than 2%.
Coal stocks retreated after an initial surge. Dayou Energy (600403) hit the limit-down, and China Shenhua Energy (601088) and Sundiro (000571) declined over 2%.
Market Currently in a Consolidation Phase
According to a Nomura Orient International research report, the A-share market is currently in a phase of volatile adjustment. It suggests investors increase allocations to high-dividend assets during this period to enhance portfolio defensiveness, while maintaining a firm long-term focus on the technology industry theme to capture investment opportunities brought by the AI trend.
Huatai Fixed Income stated that regarding the stock market, the industrial trend remains unchanged, but recent slight disturbances from external factors, crowding, and liquidity suggest continuing to reduce exposure to high-crowding areas and switching to sectors with independent positive momentum, while maintaining some trading flexibility. If sharp declines occur due to a shift in market positioning, investors could re-enter quality stocks that have been oversold.
Tianfeng Securities believes that trading volume for A-share technology-focused broad indices is fluctuating at high levels while market capitalization is steadily increasing, possibly indicating a transition from sentiment-driven trading to industry fundamentals taking the lead. Although the trading volume share of the STAR and ChiNext boards is near a high of 40%, it hasn't reached historical peaks. Their share of free-float market capitalization has risen consistently from 8% in 2020 to around 25% currently, showing an ongoing optimization of the market structure. Based on economic recovery and market liquidity, the investment focus can be distilled into three directions: 1) Opportunities in the technology theme driven by the AI industrial revolution, encompassing computing power, storage, power, and applications; 2) The "strong get stronger" style typical of bull markets, with cyclical sectors potentially performing in the latter stages, supported by domestic and international economic recovery; 3) A risk-reward perspective, considering the possibility of style rotation and bottom reversals. Progress in the AI industrial trend depends on breakthroughs in AI applications and consumer adoption, warranting close attention to the moves of AI giants.
Caixin Securities views the overall situation as one where neither domestic nor international events have effectively boosted market confidence, with capital remaining largely on the sidelines, leading to continued low-level consolidation for A-shares. It was previously noted that a short-term market stabilization and recovery might require the convergence of three scenarios: a high-volume surge in the indices, the absence of consecutive negative feedback from the technology innovation sector, and a recovery in overseas stock markets. As none of these scenarios have materialized yet, the recommendation is to maintain a cautious stance focused on observation and position control, waiting for clearer signals of market strength before active participation. From a medium-term perspective, the high-growth trend in the AI industry continues. As overseas tech giants release their mid-year reports from mid-July through late August, the pricing logic for the AI and technology direction is expected to shift back to fundamentals and earnings drivers.
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