The gaming rebound window opens. Why is the Sci-Tech Innovation 50 the "top choice" for "high elasticity"?

In late March, the A-share market is seeing a crucial inflection point in sentiment. The geopolitical conflict that had been disturbing the market has shown signs of easing, and global risk appetite is gradually recovering. The technology growth sector, which had been under pressure due to external factors, is now entering an important rebound opportunity—especially the STAR Market 50 Index. After being affected by geopolitical tensions, profit-taking, and other factors, it had continued to drift downward and reached a new low for the year. Now, with marginal improvement in the key factors that had been weighing on the index, its high-volatility characteristics are fully on display, making it the top choice for the current market’s rebound trade. At the same time, the performance certainty behind the STAR Market 50 has not changed with short-term fluctuations. The convergence between a short-term oversold rebound and long-term high-quality, high-conviction growth value makes it a focus for investors.

First, we need to review the reasons for the market’s prior pullback: driven by the over-the-top surge of domestic large models and industry narratives such as China’s AI domestic substitution, the STAR Market 50 Index once performed strongly. However, that rapid rally based on expectations has also planted concerns about valuation bubbles. Many stocks saw large gains in the short term, accumulating substantial profit-taking. Entering March, geopolitical conflict became a core variable disrupting global risk appetite. Tensions in the Middle East led international oil prices to trade in a high-price range; since the beginning of the year, Brent crude has at times risen by more than 70%. This has not only boosted global inflation expectations but also reinforced the Fed’s stance of “higher for longer” interest rates. Against this macro backdrop, global capital’s risk appetite fell markedly. Technology stocks—because of their high valuations and long-duration characteristics—were hit first, seeing capital outflows. Not only did A-shares’ STAR Market 50 set new stage lows, but globally, US “Magnificent Seven” technology stocks and Korea’s memory-related exposures also briefly slid into a technical correction range.

And now, the market is seeing a key change: the easing of geopolitical conflict has helped oil prices slip back down from their highs under pressure; marginal moderation in global inflation expectations has brought positive improvement to the core external factors that had been weighing on the market. Global risk appetite has begun to recover, and the capital that had previously flowed out is gradually returning to high-volatility technology sectors. The rebound window for the STAR Market 50 has officially opened.

In addition, the STAR Market 50’s earnings and growth outlook also provides the fundamental basis for its rebound. After going through an adjustment that swept everything along with it, the market landscape shows clear differentiation. On the one hand, theme stocks lacking earnings support and those that had previously relied on concept-driven trading saw large drawdowns. On the other hand, stocks with more optimistic expectations for their annual reports or first-quarter reports—along with industry conditions being validated—showed stronger downside protection. This is sending a clear signal to the market: as the first-quarter report window approaches, the market’s dominant logic is shifting from being driven by “expectations” to being supported by “reality.” With the STAR Market 50 offering earnings certainty, it will gain more solid fundamental support during the rebound.

Figure: Since March, the quality-profit index has shown outperformance in a highly volatile market

Data source: WIND

At the current point in time, the STAR Market 50, thanks to its threefold advantages—geopolitical catalysts, oversold levels already reached, and earnings support—has become a high-volatility vehicle for short-term rebound trades. Meanwhile, the high-growth value behind it over the medium to long term remains solid. Specifically:

From a short-term technical setup and market sentiment perspective, the rebound conditions for the STAR Market 50 are relatively mature. On the one hand, the STAR Market 50 Index has been in a downward channel for five consecutive weeks, with a maximum drawdown of more than 15%. Among all major core indices, its decline has been among the largest. Such a deep adjustment has already fully reflected pessimistic expectations regarding geopolitical conflict and macro uncertainty. The index’s technical indicators have moved into an oversold region, creating a strong need for a technical repair. On the other hand, with geopolitical conflict easing, oil prices falling, and global risk appetite recovering, external catalysts that had previously suppressed the STAR Market 50 are gradually showing marginal improvements. The sentiment for an oversold rebound remains high.

Judging from historical performance, after the STAR Market 50 experiences a sharp decline, its rebound elasticity has been notably higher than other core indices. It features a distinct “oversold-high-volatility” profile. And with this time’s clear external positive catalyst layered in, the magnitude and staying power of its rebound are even more worth expecting.

Figure: In the five trading days after declines in recent years, the STAR Market 50 has performed better

Data source: WIND

The STAR Market 50’s short-term rebound is not without foundation. The industry fundamentals driving growth have not reversed; solid earnings underpinnings are the core support for the rebound, and they also determine its high-growth, high-quality value over the medium to long term. In the STAR Market 50’s weightings, semiconductor companies account for nearly 70%. And the semiconductor industry’s fundamentals are continuing to improve: in January to February 2026, China’s domestic integrated circuit production increased 12.4% year over year—an improvement in growth rate compared with the full year of 2025. Meanwhile, the DXI index (DRAM production value) rose 2.8%, and the price index for memory chips has also maintained an upward trend. The global semiconductor cycle is still in an upward channel.

As the “spade-turner” for AI industry development, the semiconductor and computing power supply chain is a core link in innovation across the technology sector, and its earnings release has a high degree of certainty. As the first-quarter report window approaches, once the “hard-core” tech leaders within STAR Market 50 constituents deliver on their performance, it will effectively absorb the current valuations and become firm support for a share-price rebound. Over the medium to long term, meanwhile, industry logic such as domestic substitution and AI computing power upgrades remains clear, and the growth dividend of the STAR Market 50 is still being steadily released.

Figure: STAR Market 50 constituents are dominated by high-growth, high-visibility industries

Data source: WIND

From a valuation-for-value perspective, the risk-reward ratio of the STAR Market 50 is continuing to improve. The current level is not only a high-quality timing point for a short-term rebound trade, but also has appeal for a left-side allocation over the medium to long term. Although the STAR Market 50’s absolute valuation percentile is relatively high, considering the high growth profile of its constituent stocks, the PEG (price-to-earnings relative to earnings growth ratio) is a more reasonable valuation reference. The predicted PEG for the STAR Market 50 in 2026 is 1.11, which does not represent a valuation disadvantage compared with broad-based indices such as the CSI 300. With earnings validation from the first-quarter reports, if the leading companies within the STAR Market 50 can maintain net profit growth of 30% or more, the current valuation would be quickly digested. With external risk factors easing and the “earnings results” “blackout/drawdown shoe” gradually landing, the STAR Market 50 could potentially see a repair-style upturn driven by a double catalyst—an oversold rebound and high earnings growth. In such a scenario, short-term rebound opportunities and medium-to-long-term allocation value would align.

Figure: The predicted PEG for STAR Market 50 in 2026 is not high compared with other broad-based indices

Data source: WIND

In summary, investors need not be overly panicked about the STAR Market 50’s continued decline in the near term. With the key catalyst of geopolitical conflict easing, the STAR Market 50’s oversold rebound window has started to open. Its high-volatility attribute will make it the core holding for this round of repair-driven market action. Short-term market fluctuations are like “sifting gold from sand”: after removing the false and keeping the true, the STAR Market 50—with genuine earnings certainty—can not only lead the short-term rebound, but also benefit over the medium to long term from the growth dividend of innovation in the technology sector. The “bottom” of the STAR Market 50 is now being gradually constructed under the combined effects of geopolitical catalysts, oversold repair, and earnings validation. It is a high-quality choice for both short-term rebound trading and medium-to-long-term allocation to the STAR Market tech sector.

For investors, because technology-related instruments naturally exhibit high volatility, using index-based investing or a strategy of building positions in batches can help smooth out short-term swings and accurately capture both the STAR Market 50’s short-term rebound opportunities and the medium-to-long-term industrial growth dividend. Overall, E Fund STAR Market 50 ETF (588080) has a small tracking error and abundant liquidity. It can efficiently capture the investment value of the STAR Market 50, making it an excellent choice for participating in the rebound in the STAR Market area and for long-term allocation. Market sentiment will always fluctuate, but value growth driven by innovation will ultimately be reflected in price.