Farewell to the "weak recovery" game: The ChiNext Index is reshaping A-share pricing logic with dual drivers of profit and valuation.

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The points of the ChiNext Index and the Shanghai Composite Index have once again come close. Strictly speaking, the two indices have different calculation methods, sample spaces, and weight rules, so the point itself is not something that can be directly compared in financial terms. But the market never just looks at math: if the ChiNext Index surpasses the Shanghai Composite Index again, what is being priced is not a number, but a change in the position of new and old economic momentum within the capital market.

Wang Jun and other strategists at BOC International gave their core judgment in the May 10 strategy weekly report: "The ChiNext Index is expected to thoroughly surpass the Shanghai Composite Index in this cycle." The problem behind this statement is not simply "growth style will rise," but a tougher question: Can the stabilization and rebound of the traditional economy be stronger than the penetration and diffusion of the new economy?

In 2021, the ChiNext Index briefly surpassed the Shanghai Composite Index. This happened from July 29 to August 6, lasting 7 trading days, marking the first time the ChiNext Index closed above the Shanghai Composite Index in history. However, this was not confirmation of a new cycle, but more like an unsuccessful summit attempt. At the time, key sectors on the ChiNext Index such as new energy and electronics benefited from strong global demand, with rising capacity expansion, capital spending, revenue, and performance; later, as global demand fell, overseas interest rates rose, and earlier capacities gradually became fixed assets, revenue growth began to lag behind asset growth, systemic profitability slowed down, and the ChiNext Index also declined from its peak.

The difference this time is that the ChiNext Index is supported by clearer industry trends like AI, computing power, optical modules/CPO, and innovative drugs going overseas; whereas the Shanghai Composite Index relies more on macro credit expansion, liquidation of old models, and profitability recovery in traditional industries. The former has a verification path, the latter is limited in elasticity, and the short-term answer is unclear. Currently, the ChiNext Index's forecast net profit growth rate remains high, and its price-to-earnings ratio relative to the Shanghai Composite Index is still significantly lower than in 2021, so it is not replaying the earlier extreme valuation scenario.

The 2021 surpassing failed due to misalignment of capacity and demand cycles

The ChiNext Index surpassing the Shanghai Composite Index for the first time was not a coincidence.

At that time, global demand for Chinese products was surging, and companies expanded production based on high demand assumptions. Within the ChiNext Index, sectors with high exposure to foreign demand, such as new energy and electronics, accounted for significant weight; financial data showed sustained growth in construction in progress and fixed assets, expansion in capital expenditures like purchase of fixed assets, and revenue and performance were also in a high growth stage.

The problem came in the latter half.

After the pandemic, global demand declined and the overseas liquidity environment changed. The capacities previously expanded gradually became fixed assets and the asset side kept growing, but revenue growth began to lag behind asset growth. For the index, this meant the profitability of key stocks shifted from high growth to slower growth. As a result, the 2021 "surpassing" not only failed to continue, but became the peak for the following years.

So within this framework, the lesson from 2021 is not "the ChiNext can't surpass the Shanghai Composite," but: A breakthrough in index points without sustained profitability is likely to be an overdraft at high levels.

The core difference this time is not valuation, but whose profitability is stronger

The current "intersection debate" between the two indices easily falls back into the old script: The Shanghai Composite has low valuation and defensive attributes; the ChiNext has strong growth, but its valuation is more easily suppressed by risk appetite.

The problem is, if funds are limited and institutions are evaluated by relative returns, "defending the old" and "embracing the new" is close to a zero-sum game. Continuing to trade Shanghai Composite weights based on low valuation, short-term macro pulses, and mean reversion may trap pricing in narrative noise.

The more crucial comparison is in profitability.

The profitability recovery for the Shanghai Composite depends on macro credit expansion and the clearing of old models. Even with relatively low price-to-earnings ratios, nominal price transmission obstacles and macro leverage constraints still dampen the slope of profitability recovery. The current trend for PPI is positive, but mostly driven by rising prices of production materials, and there is still a profitability scissors difference in traditional fields.

The ChiNext's profitability growth is more tied to the resonance of the global technology industry cycle and its own breakthroughs in hard strength. At present, forecast net profit growth for the ChiNext remains high, and its price-to-earnings ratio relative to the Shanghai Composite is notably lower than in 2021. In other words, it's not replaying the old story from an extreme valuation standpoint as in 2021.

This is also the difference between "valuation bottom" and "profitability-valuation double play": The former has limited downside and possibly limited upside; the latter is riskier, but the payoff comes from continued realization of industry trends.

Risk appetite may hit valuations, but not necessarily industry trends

The times when the ChiNext overshoots relative to the Shanghai Composite usually happen when the market is concerned about declining risk appetite or tightening overseas liquidity. Growth stock valuations are more sensitive to these variables and short-term pullbacks can be amplified.

But this logic separates volatility and trend.

The strong profitability trend brought by AI is not necessarily interrupted by macro disturbances in the short term. Overall valuation can be suppressed, but specific directions may still pass through volatility. Core directions listed in the framework include optical modules/CPO, computing power infrastructure, and innovative drug chains going overseas. Their commonality is a stronger certainty in profitability growth.

This explains why "decline in risk appetite" does not necessarily equal "end of industry trends." If it's just a valuation compression, then it's necessary to return to orders, profitability, capital expenditure, and performance realization later.

Last week the market compressed the main line to hard technology

From May 4 to May 9, major global stock indices broadly rose, with emerging markets outperforming developed markets. MSCI Emerging Markets rose 6.86% for the week, Korea Composite rose 13.63%, Wind All A rose 3.09%. Commodities were clearly differentiated: Brent crude fell 11.39%, LME copper rose 4.15%, London gold rose 2.25%, and the Dollar Index weakened slightly by 0.37%.

Domestic data also gave some support to the growth style. From January to April, import and export growth rates remained relatively high, and high-tech product export growth was strong, showing that prosperity in the AI industrial chain is still driving exports.

Within A-shares, sector rotation strength continued to decline, and the main line is becoming more centralized. The communications sector led gains, followed by defense/military, computers, electronics, machinery, and building materials; petroleum, petrochemicals, and coal performed worst, matching the decline in oil prices. Style-wise, small-cap growth outperformed, with technology growth and high-end manufacturing stronger, while consumption and finance were relatively weaker.

The AI chain also differentiated internally. Optical modules rose 12.08% for the week, AI programming rose 15.67%, AI advertising 13.10%, AIDC and cloud services 10.39%; domestic computing power, foundational large models, and AI agents also rose but were relatively weaker. The market did not diffuse indiscriminately, but funds continue to focus on segments where profitability or prosperity can be realized.

Funds are buying hard technology, but sentiment is already high

Funds are also showing a "clear main line, short-term crowding" pattern.

This week, net buying of main funds in A-shares reached 154.309 billion yuan, the second consecutive week of net buying and the highest in four weeks. By sector, electronics had a net inflow of 54.134 billion yuan, communications 36.391 billion yuan, and machinery 27.116 billion yuan, ranking top three. Sectors with the largest net outflows were power equipment, basic chemicals, and non-bank finance.

But equity ETFs are still experiencing net redemptions. The week saw net redemption of 75.897 billion yuan, the ninth consecutive week, an increase of 4.538 billion yuan over the previous week. Main fund inflows coexist with ETF redemptions, showing that incremental funds are not flooding in without restraints, and the market relies more on structural focus.

Sentiment indicators also show short-term volatility risk. As of May 8, BOCIASI slow line sentiment rose from 73.0% to 76.3%, already triggering the lowering position threshold of 75.1%; fast line sentiment rose from 48.4% to 58.8%. Wind All A equity risk premium is 2.26%, down 0.12 percentage points from April 30; Wind All A closed at 7099.31, corresponding to a theoretical value of 7369.85 at the upper limit of two times the rolling three-year standard deviation, leaving a space of 3.7%.

In other words, the main line remains intact, but the short-term slope is already high.

The point is not a math problem; the real answer is in switching old and new momentum

Whether the points of ChiNext and Shanghai Composite can be compared is surely debatable. The differences in index calculation mean they're not the same yardstick.

But the market doesn't care about textbook answers. If the ChiNext Index surpasses the Shanghai Composite again, the symbolic meaning is greater than the computational meaning: it means the weight of technological growth, high-end manufacturing, and new economy assets in pricing continues to rise, and it also means that traditional weights relying on low valuation and defensive attributes to attract funds becomes harder.

The disruptors to the subsequent path are also clear: geopolitics exceeding expectations causing persistently high oil prices; rapid tightening of dollar liquidity triggering global capital flowing back to the US from emerging markets; duration and scope of conflicts disturbing risk appetite; domestic economic fundamentals failing to recover as expected, making it hard to offset external liquidity tightening.

Therefore, this is not simply betting on the ChiNext Index surpassing the Shanghai Composite. What really needs verification is: whether the profitability spread brought by AI and high-end manufacturing can consistently outpace the weak recovery of the traditional economy. If the answer continues to favor the former, the two indices converging is not just market excitement, but could be a confirmation of the direction of asset pricing.

Risk warnings and disclaimersThe market has risks, investment needs caution. This article does not constitute individual investment advice, nor does it take into account users' special investment objectives, financial circumstances, or needs. Users should consider whether any opinions, views, or conclusions in this article suit their specific circumstances. Investment based on this is at your own responsibility. ```