Institutional Perspective on the Market Outlook | Proactively Reducing Volatility Is a Better Choice; Focus on Two Main Repair Lines

Ask AI · How can two main repair lines draw lessons from historical bull markets?

During this week’s (May 6-8) three trading days, the Shanghai Composite Index rose a total of 1.65%, the Shenzhen Component Index increased by 3.02%, the ChiNext Index by 3.24%, and the STAR Market Index by 4.5%. What does the future hold for A-shares? Let’s see what institutions say:

① CITIC Securities: In the context of a continuously strengthening existing structural market trend, proactively reducing volatility is the better choice

CITIC Securities states that as the US-Iran talks approach, supply and demand analysis increasingly becomes “lame,” and macro assumptions will temporarily be absent. Macro game-playing funds will retreat temporarily, potential entrants will wait and see, and allocation funds will reduce positions at high points; the high turnover of existing funds will be more obvious, and rising at low levels is a behavioral result rather than a signal. Against the backdrop of a continuously strengthening existing structural market trend, proactively reducing volatility is the better choice. Although the short-term rhythm is becoming more complex, in the medium term, AI and energy化 remain the main sources of supply and demand gaps; this year’s AI + energy化 is equivalent to the AI + dividends of 2023-2024, and AI + resources in 2025.

② Founder Securities: Focus on two main repair lines, and thematic stocks may usher in a phased tailwind

Founder Securities states that the market’s main themes are becoming clearer, emphasizing structure. After reaching high levels in overseas computing power, domestic computing power naturally takes over. Additionally, sectors with good prosperity and relatively low prices, such as new energy and HALO assets, are also good choices. After entering a performance lull, thematic stocks are expected to improve. Specifically, referencing past bull markets’ repair lines after corrections, there are usually two: one is the misjudgment of oversold sectors early on, with improved chip structure and good fundamentals, such as cyclical stocks in 2010, Ning Index in 2021, and overseas computing power in 2025. Recently, focus can be on core resources related to HALO assets (non-ferrous metals + chemicals) and Hang Seng Tech stocks with ample adjustment time and space; the second is strong industrial cycles, where early adjustments are relatively resilient, followed by policy-driven strengthening, with winners remaining strong, such as consumer discretionary in 2009, Maotai Index in 2020, and TMT in 2019. Focus can be on computing hardware, including overseas computing industry chain upstream and downstream, and core domestic computing targets; as well as the pan-energy sector, including traditional energy, new energy, and future energy. Additionally, as May enters the performance lull period, thematic stocks may see a phased tailwind, especially in sectors resonating with policies and news, such as integrated energy and electricity, commercial aerospace, and robotics.

③ Shenwan Hongyuan: The profit-making effect of A-shares is undergoing a qualitative change, and the second phase of the rally may be just beginning

Shenwan Hongyuan states that the profit-making effect of A-shares is undergoing a qualitative change, and the conditions for the new cycle of incremental funds to start circulating are becoming better and better. After the index rises in the short term, there will still be a consolidation phase, which may just be the lower bound of the market. The upper limit is the inflow of incremental funds opening up upward potential, and the second phase of the rally may just be beginning.

In this upward cycle, we distinguish between “money that comes early” and “money that comes later” for incremental funds. The early money varies each cycle, related to capital market reforms and the development stage of the asset management industry. The current early money mainly includes ETFs, allocation funds, fixed income +, and quantitative funds. The later money mainly accumulates based on profit-making effects, with a positive cycle of incremental fund inflows. Based on the previous peak of public fund issuance, the historical pattern suggests that the net value of public funds during the last issuance peak rose to between 1.1 and 1.2. When the new round of scale expansion begins, the public fund net value exceeding 1.2 could accelerate scale growth.

(This article is from First Financial)