On May 22, the three major A-share indices opened collectively higher. The Shanghai Composite Index rose by 0.46%, while the ChiNext Index gained 1.2%. In terms of sector performance, quantum technology, computing power, and optical communication led the gains, whereas photovoltaic, baijiu (liquor), and real estate sectors were among the decliners.
Looking ahead, Huatai Securities noted that following the market's recent surge, the crowding level in the technology sector has risen to a relatively high position. Margin financing funds have reached floating profit levels in the historical high range. Last week, various types of trading funds were observed to have entered a "plateau period" in terms of activity. Additionally, the willingness of allocation-oriented funds to take profits at high levels may be stronger. Active equity-focused funds showed signs of reducing positions in TMT (Technology, Media, Telecom) sectors in early May, while actively managed foreign capital, after briefly turning to small net inflows, resumed net outflows.
China Securities Co., Ltd. (CSC) believes that the current market divergence is a superficial phenomenon, with the underlying essence being a style rotation. The medium-term rebound trend remains unchanged, and the current consolidation phase is seen as a period of accumulation. Subsequently, funds are expected to continue focusing on high-growth sectors such as semiconductors and the AI track. High-level thematic stocks may still face adjustment pressure. In terms of trading strategy, short-term transactions should pay attention to increasing the frequency of band trading. It is advisable to avoid stocks that are prone to profit-taking at high levels. During pullbacks, investors can position themselves in certain main themes like semiconductors, advanced packaging, and AI equipment to capture structural opportunities. However, attention should be paid to position control, avoiding excessive concentration.
Industrial Securities holds the view that the current rotation intensity is still not extreme compared to previous market peaks. Since April, market consensus on the prosperity of computing power hardware has continued to solidify, leading to a convergence in internal rotation intensity. The consensus on the main theme has driven the market upward. However, compared to the rotation intensity observed at previous peaks in the AI sector (such as the DeepSeek rally in February 2025, the computing power rally in October 2025, and the mid-to-downstream rally in early 2026), the current situation has not reached an extreme level. This indicates that the current AI rally overall remains in a relatively healthy state of orderly internal rotation within the sector, without converging into a narrow range of few local directions. Therefore, the subsequent market trend still has a foundation for internal diffusion and development.
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