China's three major stock indexes showed mixed performance at the opening on June 3rd. During the morning session, the markets experienced a sustained upward movement, with the Shanghai Composite Index briefly reclaiming the 4,100-point mark before noon. In the afternoon, a steady decline set in, and the Shanghai Composite even turned negative at one point.
Looking at the sectoral performance, the semiconductor and computing hardware supply chains saw another significant surge, with CPO (co-packaged optics) and ultra-hard materials leading the gains. Industrial metals, lithography machines, memory chips, and commercial aerospace themes were also active. Coal, power, and oil & gas sectors strengthened. In contrast, AI application, short-video game, and e-commerce concept stocks underwent adjustments.
At the close, the Shanghai Composite Index was up 0.22% at 4,083.97 points. The Shenzhen Component Index rose 0.73% to 15,704.71 points, and the ChiNext Index gained 1.65%, closing at 4,122.99 points.
Wind statistics showed that 1,711 stocks across the Shanghai, Shenzhen, and Beijing exchanges rose, while 3,723 fell, with 84 remaining flat.
The combined trading volume for the two main boards reached 3.13 trillion yuan, an increase of 337.3 billion yuan from the previous session's 2.793 trillion yuan. Specifically, Shanghai's volume was 1.4298 trillion yuan, up 148.8 billion from 1.281 trillion, and Shenzhen's volume was 1.7005 trillion yuan.
According to DZH VIP data, 121 stocks across the two main boards and the Beijing Exchange saw gains exceeding 9%, while 23 stocks fell by more than 9%.
Semiconductor Sector Maintains Strength, Building Materials Plunge in Afternoon
In terms of sectors, semiconductors continued their strong performance. Stocks like Yuanjie Technology (688498), Guangli Micro (301095), Muxi Shares (688802), Yutai Micro (688515), Shengmei Shanghai (688082), and Tongfu Microelectronics (002156) hit their daily limit-up or rose over 10%.
Communications stocks led the gains across the markets. Meixin Technology (301577), Datang Telecom (600198), Hengtong Optic-Electric (600487), and Quectel (603236) surged to their limit-up or gained over 10%. Wutong Holdings (300292), Changfei Optical Fiber (601869), and Shijia Photon (688313) rose more than 8%.
Coal stocks rallied sharply in the afternoon. Zhengzhou Coal & Electric Power (600121) and Dayou Energy (600403) hit the limit-up, while Haohua Energy (601101) briefly touched the limit. Jinkong Coal Industry (601001) and Yankuang Energy (600188) climbed over 5%, and Liaoning Energy (600758) gained more than 2%.
Building materials stocks saw a significant downturn in the afternoon. Changhai Co., Ltd. (300196), Tuobao Group (002043), Fangda Group (000055), and International Composite Materials (301526) fell more than 5%. Qibin Group (601636), North Glass (002613), and Kaisheng New Energy (600876) declined over 2%.
Media stocks were among the biggest decliners. Zhongguang Tianze (603721) fell by the daily limit. Tianyu Shuke (002354), Century Tianhong (300654), Worthbuy (300785), Electric Guang Media (000917), and Beijing Culture (000802) dropped more than 5%. Bainacheng (300291) and Zhangyue Technology (603533) fell over 3%.
Transportation and logistics performed poorly. Yongtaiyun (001228) hit the down limit. WanTong Expressway (600012) slumped over 7%. China Merchants Energy Shipping (601975), Zhonggu Logistics (603565), China Express Airlines (002928), and STO Express (002468) all declined more than 3%.
Analyst Views on Market Direction
Caixin Securities noted that the positive trend for technology-related industries remains intact. Therefore, after recent consecutive adjustments, leading hard-tech sectors have a technical rebound demand, making their strong performance logical for the day. This does not necessarily indicate a short-term return to a technology-led market, as the trend of style rebalancing persists. Meanwhile, with the overall market trading volume continuing to shrink in a liquidity-constrained environment, style rotation may accelerate. Fundamentally sound, undervalued sectors and small-cap stocks still have rotation opportunities. Consequently, in the short term, given a stable market environment and decent trading activity, a sustained downward trend for A-shares is unlikely, and the market may remain range-bound. Regarding thematic sectors, funds are likely focused on buying dips in recent core stocks and seeking laggard plays. However, before the market sees a renewed surge on heavy volume, rotations will be rapid, increasing overall trading difficulty. Investors should manage their positions and timing carefully. In the medium to long term, the overall market uptrend remains, but investment timing is crucial. For June, it is advisable to control positions reasonably, shift appropriately towards undervalued sectors, and wait for the next favorable window.
Hualong Securities observed that market divergence is pronounced, with profitable effects currently concentrated in a few core sectors and increasing divergence among hot themes.
Dongwu Securities pointed out that the market experienced significant volatility early in the week, with the STAR 50 Index undergoing a deeper correction. While the ChiNext Index's trend remains acceptable, the three upward waves since April show signs of slowing momentum, which warrants close attention. Although there is a short-term rebound, the previous unilateral rally has likely ended, transitioning into a phase of consolidation and digestion.
CITIC Securities stated that the market has entered a critical juncture for fund rotation. The sentiment and positioning games of high-risk appetite funds have become relatively saturated. From the perspective of broad-based ETF share changes, subsequent selling pressure is expected to gradually ease. The fragility of the micro-liquidity structure suggests the index may experience technical corrections and consolidation due to insufficient buying support. However, this process of "flushing out weak holders → new fund rotation" could instead become a favorable opportunity to optimize the capital structure and solidify the foundation for gains. Subsequently, the index might replicate an "M-shaped" volatile upward path.
Li Qiusuo, Chief Domestic Strategist at CICC Research, stated in a mid-2024 outlook report that the current market favors "stability" over "speed." The resonance between the restructuring of the international order and China's industrial innovation trend is the core driver for this market upturn and the revaluation of Chinese assets. As these two conditions remain unchanged, the current market is better positioned for long-term, steady progress compared to the past. In an environment where investor risk appetite is elevated and expectations for the future are generally positive, greater attention should be paid in the second half to the external environment and global industry trends, especially in AI. While overall market valuation is reasonable, there are pockets of overvaluation. The latter half of the year requires more vigilance against fragility and volatility risks in certain sectors.
Industrial Securities indicated that in the short term, with a concentration of important tech conferences and industrial developments both domestically and abroad in June-July, and the release of listed companies' new earnings and demand guidance, the global resonance highlights and focal points remain in technology. Looking at this major cycle, whether from the perspective of penetration rates, the pace of market evolution, or valuations, this globally synchronized AI super-cycle is still in its middle stages. Short-term corrections triggered by high crowding should not be overly concerning. The continuation of the uptrend hinges on the sustained validation of industry prosperity and trends. In terms of allocation, as consensus on the fundamental strength of the AI sector solidifies, while pressures from crowding and liquidity on the funding side remain generally manageable, the current recommendation is to stick to sectors with strong and certain growth prospects, and to position around the rotation and diffusion within the main theme, rather than responding by reducing positions or systematically switching from high to low valuation sectors.
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