The current market appears vibrant, yet many investors are finding themselves left out of the profits. This sentiment is echoed by numerous A-share investors who have watched the rally from the sidelines while their portfolios languish.
Many investors are caught in a dilemma. Those positioned in non-tech sectors like consumer goods or cyclical industries have witnessed the market's excitement but seen their accounts remain in the red. Conversely, investors who chased the tech rally at its peak are now facing sector pullbacks, making profits equally elusive.
This situation highlights the extreme divergence within the A-share market. While sectors like communications and electronics have surged over 50% this year, with trading volume up 80% from late last year, and over 210 stocks have doubled in value, the reality is that more than 60% of individual stocks have declined year-to-date. The median market return sits at a stark -8.32%.
This split is mirrored in the fund market. Among active equity funds, 12 have doubled their value this year, showcasing strong performance. However, nearly 30% of such funds have negative returns, with a performance gap of over 141 percentage points between the top and bottom performers. This leaves investors grappling with the conundrum of fearing a pullback if they chase tech highs, yet seeing little gain if they stick to steadier strategies.
Market sentiment is currently positive but severely fractured, with strength concentrated in tech and growth stocks while cyclical and thematic sectors lag, and trading continues to focus on these strong assets. This overall state aligns with a continued positive outlook for the tech growth direction, though the extreme level of divergence may not be entirely sustainable. The market is likely to remain upbeat overall, with the overall valuation level potentially rising further. Tech and growth are still expected to be the main theme, while quality assets in undervalued sectors may also be gradually discovered by the market.
Extreme A-Share Divergence Persists
The Shanghai Composite Index has been oscillating above 4000 points for 34 consecutive trading days, with its year-to-date return now narrowed to 2.24%. However, this surface-level stability belies intense structural divergence.
As of today's close, among the 31 primary Shenwan industries, the communications sector leads with a staggering 67.17% year-to-date gain, followed by the electronics sector with a 50.04% increase. In contrast, the third-placed coal sector has gained only 29.66%, showing a significant gap with the top two tech sectors.
On the other end, nine sectors including commercial retail and agriculture have fallen over 10% this year, with commercial retail down 21.69%. This translates to a performance spread of over 88 percentage points between the best and worst sectors, clearly illustrating the split.
Beyond price performance, the "siphoning" effect of tech sectors on market turnover is even more pronounced. Today's total market turnover was 2.76 trillion yuan, with the electronics and communications sectors alone accounting for over 1.1 trillion yuan, representing more than 40% of the total. This share has increased by over 80% from the 21.74% level at the end of last year, indicating sustained capital concentration in core tech themes.
Looking at individual stocks, of the 5,524 A-share stocks, 3,476 have declined this year, accounting for 63%. Meanwhile, 217 stocks have doubled, with over one-third belonging to the electronics sector.
Thanks to the massive gains of a few stocks, the average market return year-to-date is pulled up to 5.11%, but the median return is only -8.32%. This data contrast means the market's profit effect is highly concentrated in a very small number of stocks. If an investor randomly picks a stock, the probability of losing more than 8% is over 50%.
The current A-share investment landscape seems to be either following the AI trend or missing out entirely; even with short-term AI volatility or corrections, it outperforms other sectors. Other sectors like consumer, real estate, pharmaceuticals, and traditional manufacturing either suffer from weak growth, low景气度, or reasonable valuations but lack growth space, making them unable to attract capital or drive the market upward.
However, the long-running tech rally has recently shown signs of adjustment. The extreme tech行情 in April and May has fueled market sentiment fluctuations, leading to high-volatility震荡 in the tech sector. The market is expected to be primarily range-bound in the near future, with risk appetite declining and trading activity concentrating further.
12 Doubling Funds and 30% in the Red
The extreme structural divergence in A-shares has simultaneously transmitted to the closely related active equity fund market, resulting in a significant polarization of fund performance.
Data shows that as of June 3, the 4,859 active equity funds with available data have an average year-to-date return of 13.05%.
Approximately 70% of active equity funds have achieved positive returns this year. Among them, 205 products have cumulative returns exceeding 60%, with 12 funds, including Huashang Equilibrium Growth A, Caitong Multi-Strategy Fuxin, and Huashang Zhiyuan Return A, having more than doubled in value. Another 15 products, such as Huatai-PineBridge Quality Selection A, have returns over 90%.
Taking Huashang Equilibrium Growth A, up 113.84% year-to-date, as an example, its first-quarter report shows its major holdings are concentrated in the communications and electronics sectors, with its top ten holdings almost entirely comprising popular tech stocks. Eight of these stocks have doubled this year. Among them, Yangtze Optical Fibre And Cable Joint Stock Limited Company (SHSE: 601869) and Hengtong Optic-Electric Co.,Ltd. (SHSE: 600487) have surged over 290%, while Suzhou Everbright Photonics Co.,Ltd. (SHSE: 688048) and Yuanjie Semiconductor Technology Co.,Ltd. (SHSE: 688498) have also gained over 210%.
On the other side of the performance scale are the nearly 30% of funds with negative year-to-date returns. Data shows 34 active equity products have fallen over 20% this year. For instance, Tongtai Great Health Theme A, currently at the bottom, has declined over 27%. The performance gap between the best and worst active equity funds now exceeds 141 percentage points.
Many funds have experienced a rise-then-fall trajectory. For example, Western Lead Strategy Preferred A rose 26.9% in Q1 but has fallen nearly 22% since Q2, essentially erasing earlier gains. Some funds have seen their performance turn from positive to negative, like Avic Hengyu Hong Kong Connect Value Select A, which was up over 10% but has fallen more than 17% since April, bringing its year-to-date return to -9.48%.
It's worth noting that even top-performing funds have recently seen significant pullbacks. For instance, the "doubling funds" GF Vision Smart Selection A and Puying Ansheng Digital Economy A have both experienced maximum drawdowns exceeding 10% in Q2. This means investors who chased these strong performers in Q2 may not have achieved ideal returns.
Why Does the Buzz Exclude Me?
Indeed, the market's bipolar现状 aligns with investor feedback. An experienced fund investor mentioned buying a tech-themed product a month ago, now facing nearly a 20% loss. In their view, "if you don't buy 'chips' or 'optics', it seems hard to make money elsewhere," but the unfortunate timing of entry proved costly.
A veteran in wealth management sales explained the logic: Hot thematic funds with outstanding阶段性业绩 are更容易获得 channel marketing focus and investor追捧, continuously amplifying market热度. "The better a product sells, the more channels market it, fueling investors' 'fear of missing out' anxiety, making it easier for them to turn long-term allocation into emotional bets at highs."
Besides investors actively or passively "standing in the light," there are cautious others. A Shanghai investor stated they thought "'optics' had risen enough" and feared buying high, so invested in other niche thematic products instead, only achieving about a 2% return from a value-themed fund, finding it "agonizing to watch others 'feast'."
This纠结, cautious investment sentiment is also playing out among institutions. A Shanghai-based institutional source noted that despite ongoing concerns about the tech sector, its earnings growth certainty and profit advantages are hard to replace. Unwilling to miss out entirely, many portfolio strategies aim to capture the rally's红利 while trying to reduce volatility risk.
Against a backdrop of rapid sector rotation, some investors, seeing their holdings stagnant and eager to win, frequently switch strategies to chase trends, often resulting in "buying just before a drop, selling just before a rise."
Regarding the underperforming thematic products in investors' portfolios, they are mostly funds focused on消费, gaming, innovative drugs, or恒生科技, as well as some短期热门赛道 that were chased at highs and are now in correction.
The siphoning effect of the A-share tech主线, leading to liquidity diversion, is one reason for the疲软 performance of most non-tech sectors. Over recent weeks, market focus has重新转向 AI, semiconductors, etc., with大量 risk-seeking growth capital持续涌入. Other assets, especially those also categorized as high-volatility, high-risk growth assets, have seen明显的资金分流 and reduced拥挤度.
From the current perspective, after the extreme structural rally in tech and growth, the market needs短期消化 of issues like significant前期涨幅 and high交易拥挤度. Observations suggest the market has recently begun shifting from a单一进攻主线 toward攻守再平衡. It is expected that A-shares will likely maintain高位震荡 in the near term.
Regarding future investment思路, the approach will continue沿着 the AI logical主线,寻找有边际变化的细分方向. Beyond sectors with strong fundamental potential like optical communications and semiconductor equipment,细分领域 such as PCB上游, passive components, power chips, and liquid cooling may also offer挖掘的空间.
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