Are relatively undervalued tech stocks poised for a catch-up rally? Today (June 10th), the Xinchuan ETF Huabao (562030), which is heavily weighted in software development, saw its intraday gain reach as high as 2.27%. It is currently up 2.08%, having reclaimed its 5-day moving average during the session and is on track for its third consecutive positive daily close.
Among its constituent stocks, Hygon Information Technology Co.,Ltd. led the gains, soaring over 12%. Others like Sugon and Biwin Storage rose more than 6%, with stocks such as CloudWalk Technology, Inspur Information, and East China Information following suit.
Key Industry Dynamics
Examining past technological revolutions reveals that computing power and AI applications are two inseparable phases of a complete industry cycle. Looking back at the two major bull markets in the TMT sector (2013-2015 and 2019-2021), the performance gaps between the electronics, communications, computer, and media sectors were typically not very wide by the end of the cycle. Currently, hardware-related sectors like electronics and communications have seen significant gains, while AI application-related sectors like computers and media have lagged. Historical patterns suggest these performance disparities are likely to converge. Sectors like Xinchuan (information technology innovation), which are relatively undervalued and supported by the industrial logic of AI commercialization and attractive valuations, coupled with their previous underperformance, may attract increased capital inflows.
Policy Catalysts in Play
The 2027 deadline for comprehensive domestic substitution is creating urgency, making 2026 a pivotal year for order releases. A directive from the State-owned Assets Supervision and Administration Commission mandates that all central and local state-owned enterprises must achieve 100% Xinchuan substitution in their information systems by the end of 2027. As this deadline approaches, Xinchuan substitution is expanding from government and party office systems to eight key industries, including finance, telecommunications, and energy, and progressing from peripheral systems to core business systems. The refinement of government procurement standards further solidifies the replacement timeline.
Analysts at Guotai Junan Securities note that the Xinchuan sector is characterized by recovering industry sentiment, improving product performance, and leadership in domestic computing power. Current domestic substitution rates for hardware and software remain low. Driven by relevant policies, related orders are expected to accelerate, with sub-sectors like domestic computing power potentially driving the development of the entire Xinchuan industry chain.
Valuation Perspective
As of June 9th, the price-to-earnings ratio (PE TTM) of the underlying index (CSI Xinchuan Index) for the Xinchuan ETF Huabao (562030) was 95.24 times. This is below its historical median of 107.11 times, placing it at approximately the 36.86th percentile over the past five years, indicating relatively high valuation appeal and a margin of safety.
Focus on Self-Reliance and Security
Against the backdrop of global geopolitical tensions and a trend towards deglobalization, the need for technological self-reliance and control is increasingly urgent. From the perspectives of national security, information security, and industrial security, the Xinchuan field necessitates strong state support and accelerated enterprise development.
The Xinchuan ETF Huabao (562030) and its feeder funds (Class A: 024050; Class C: 024051) focus on the information technology innovation and self-reliance sector. They passively track the CSI Xinchuan Index, which covers core segments of the Xinchuan industry chain including basic hardware, basic software, application software, information security, and peripheral equipment. The index aggregates leading Xinchuan companies, is heavily weighted towards software development, and exhibits characteristics of high growth and significant potential. Investors optimistic about the prospects of the Xinchuan sector may wish to pay close attention.
According to Shenwan industry classification, as of the end of May, the constituent stocks of the Xinchuan ETF Huabao's (562030) underlying index (CSI Xinchuan Index) were weighted as follows: Software Development (46.2%), Semiconductors (28.5%), IT Services II (13.3%), and Computer Equipment (12.0%). These sectors collectively form the key pillars of the Xinchuan industry.
Risk Disclaimer: The Xinchuan ETF Huabao passively tracks the CSI Xinchuan Index. The base date for this index is December 29, 2017, and it was launched on December 21, 2012. The composition of the index's constituent stocks is adjusted according to its compilation rules, and its past performance does not indicate future results. The index constituents and individual stocks mentioned in this article are for illustrative purposes only. Descriptions of individual stocks are not investment advice of any form and do not represent the holdings or trading动向 of any fund managed by the fund manager. The fund manager assesses this fund's risk level as R3-Medium Risk, suitable for Balanced (C3) and above investors. Suitability matching opinions are subject to the sales institution. Any information appearing in this article (including but not limited to individual stocks, commentary, forecasts, charts, indicators, theories, or any form of expression) is for reference only. Investors are responsible for any independent investment decisions. Furthermore, any views, analysis, or predictions in this article do not constitute investment advice of any kind to the reader, and no liability is accepted for any direct or indirect losses arising from the use of this content. Fund investment carries risks. The past performance of a fund does not guarantee its future results. The performance of other funds managed by the fund manager does not constitute a guarantee of this fund's performance. Invest in funds with caution.
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