Major A-share broad market indices mostly declined this week.
From the perspective of the primary broad indices, the performance of the A-share market this week was predominantly negative, with only the SSE 50 Index and the Shanghai Composite Index recording gains. The other major indices closed lower, with the ChiNext Index, SME 100 Index, and CSI 500 Index experiencing the most significant declines.
Key Events of the Week
On the policy front, the Ministry of Industry and Information Technology and the State-owned Assets Supervision and Administration Commission recently jointly issued a notice, officially launching the 2026 Humanoid Robots and Embodied AI Real-World Training Special Action. On June 11th, the State Council executive meeting reviewed and approved the "15th Five-Year Plan for Building a Beautiful China." The meeting noted that building a beautiful China is a systematic project requiring focused efforts on key challenges, deepening the battles to defend blue skies, clear waters, and clean land, and comprehensively implementing actions to manage solid waste and new pollutants.
On the industrial front, China's automobile production and sales in May reached 2.616 million and 2.629 million units, respectively, representing month-over-month increases of 1.6% and 4.1%, but year-over-year decreases of 1.2% and 2.1%. Data from the China Index Academy shows that in May, residential land transfer revenue in 300 cities was 96.6 billion yuan, a year-over-year decrease of 7.6%. Internationally, according to a June 9th report by Securities Times citing Japanese media, the Bank of Japan plans to raise its benchmark interest rate from 0.75% to 1.0% on June 16th. On June 11th local time, the European Central Bank announced a 25-basis-point increase in its three key interest rates for the eurozone. Also on June 11th local time, former U.S. President Donald Trump announced the cancellation of planned strikes against Iran and indicated a potential agreement with Iran could be signed this week.
Monitoring the Interim Market Style Shift
This week saw significant volatility in A-shares, with a noticeable style rotation emerging on Friday. Currently, the technology and growth sectors in the A-share market have entered a phase of high volatility, with pronounced internal divergence, suggesting a possibility for a temporary shift in market style. On one hand, funds were previously highly concentrated in technology and growth directions such as semiconductors and AI computing, with trading volume proportions in some sub-sectors approaching historical extremes. These related sectors are prone to triggering concentrated profit-taking and forming selling pressure when encountering external catalysts. On the other hand, the stronger-than-expected U.S. May non-farm payrolls data has significantly dampened market expectations for a Federal Reserve rate cut, which may suppress overall market risk appetite. Consequently, funds may flow from high-valuation growth sectors towards more defensive sectors due to risk-aversion needs.
Overall, the A-share market may experience a volatile phase in the short term. However, from a medium- to long-term perspective, supported by both fundamentals and industrial trends, the market is expected to gradually trend upward amidst fluctuations. On one hand, fundamentals remain the most robust underlying support, with price factors being the primary variable. The trend suggests that the average PPI in the second quarter will be significantly higher than in the first quarter, which will further drive the profitability of listed companies upward in Q2. On the other hand, the AI industry trend is still in its early stages. Against a backdrop of no significant fundamental disruptions, stock prices still have room for appreciation, and short-term shocks from macro factors may instead present better entry points for positioning.
Defensive Sectors for the Short Term, Three Growth Themes for the Medium Term
In the short term, defensive sectors, such as high-dividend and value stocks, may see temporary outperformance, though such opportunities may be more driven by trading sentiment. From a medium- to long-term perspective, high-growth areas remain the core for allocation. However, the view extends beyond just the technology sector. In addition to technology, sectors like the export chain and resource commodities are expected to see continued improvement in their fundamentals and are worth close attention. Within hard technology, focus on industries such as electronics, communications, and defense. For the export chain, pay attention to industries like power equipment, machinery equipment, and light industrial manufacturing. Regarding upstream resource commodities, monitor sectors including non-ferrous metals, coal, petroleum and petrochemicals, and basic chemicals.
Risk Analysis: 1) Policy implementation progress falls short of expectations; 2) Market sentiment deteriorates significantly; 3) Economic growth rate substantially underperforms expectations; 4) China-U.S. relations deteriorate markedly; 5) Middle East situation continues to escalate.