In the short term, the A-share market has encountered resistance in its attempt to break through key levels, with several factors at play: 1. Containing excessive market exuberance is a necessary measure. 2. While short-term inflows into sector-specific ETFs are not pronounced, actively managed public funds focused on single themes are generally experiencing positive feedback loops. The nature of this capital requires monitoring for the possibility of a negative feedback loop triggered by a correction phase. 3. Rising oil prices, pushing up inflation, combined with the "Warsh appointment trade," have led to an increase in U.S. Treasury yields, dampening risk appetite. 4. Subsequent risks in the second quarter may stem from product shortages in the overseas oil industry chain, simultaneously impacting both production and demand.
Short-term, the accumulation of profitable effects in A-shares has reached a qualitative turning point, leading to a market phase attempting to initiate a positive feedback loop. However, resistance from various aspects has emerged, prompting the market to enter a minor correction phase.
Medium-term, the cycle of accumulating profitable effects in A-shares continues. The current rally has reached a point where these effects have qualitatively transformed. New catalysts from industrial trends are expected to drive the next market phase. Conditions for initiating a positive feedback loop with incremental capital and unlocking further upside potential are likely to improve.
The second phase of the rally warrants patience. Over time, more positive factors may accumulate, including cyclical improvements in fundamentals—particularly in real estate, mass consumption, and service consumption; the translation of Chinese manufacturing competitiveness into pricing power; further deepening of the overseas AI industry trend; and breakthroughs in domestic large-scale AI model applications. In an upward breakout scenario, a broader range of optimistic expectations could materialize, leading to a more diverse set of sectors participating in the gains.
If the market relies solely on the AI industrial trend to initiate a positive feedback loop with incremental capital, many medium-term positive factors may not be fully reflected in this rally. These could instead become supporting elements for the next major upward phase. If the consolidation period between the two rally phases extends further, more positive catalysts may accumulate. These primarily include: 1. Cyclical improvement in fundamentals, especially in real estate, mass consumption, and service consumption. 2. The transformation of Chinese manufacturing influence into pricing power, leading to broader profitability improvements in midstream manufacturing. 3. Further deepening of the overseas AI industry trend coupled with breakthroughs in domestic large-scale AI model applications. This could expand the market narrative beyond just AI hardware. Consequently, when the second phase of the rally arrives, the scope for optimistic expectations would be more comprehensive, and the structure of the advance would be richer.
During the short-term correction phase, emphasis should be placed on the hedging role of traditional and new energy sectors, while also monitoring opportunities for chemical companies to pass on costs overseas. Medium-term, portfolio allocation should continue to focus on the AI industry chain and strategic resources.
Factors potentially extending the short-term correction are primarily related to the long-tail effects of rising oil prices, possibly exacerbated by a blockade of the Strait of Hormuz. Therefore, both traditional and new energy sectors serve as hedging assets. Sectors that can increase global market share based on China's energy security and supply chain security, and effectively pass on costs overseas, will also provide a hedging effect. Key areas to watch include new energy, new energy vehicles, and basic chemicals.
Medium-term, the core assets of this rally remain unchanged. Continued attention should be paid to allocation opportunities within the AI industry chain and strategic resources. Optical communication, energy storage, memory, and gas turbines are expected to remain high-growth, high-momentum assets in the medium term. Non-ferrous metals are also unlikely to miss the second phase of the rally, although a short-term seesaw effect may exist between the oil industry chain and non-ferrous metals. A resurgence in non-ferrous metals may require a period of consolidation and rest.
Risk warnings include overseas economic recession exceeding expectations and domestic economic recovery falling short of expectations.