"Jump on the Tech Bandwagon" or "Stick with the Old Guard"? A-shares May See a Period of Style Balance, with the Interim Reporting Season as a Key Test

June 18: Technology sectors surged across the board, with semiconductors, CPOs, computing hardware, and other AI industry chains continuing to strengthen. In stark contrast, financial sectors such as insurance, banking, and brokerages collectively took a hit, and traditional consumer sectors like liquor and retail also declined. This extreme polarization is a microcosm of the steady flow of funds from traditional blue chips into the technology growth track this year. Some investors joke wryly: "Board the technology train, at most suffer for a day; board the veteran stocks, suffer every day." So, what's next for "veteran stocks"? Should you "surrender" and switch, or grit your teeth and persevere? The strategy team at China Merchants Securities offered their judgment in a June 4 report: Currently, the trading crowding in technology sectors has reached a high level, and with rising overseas liquidity disturbances and the upcoming mid-year earnings window, market style may shift from previously one-sided growth to gradually reach a phase of equilibrium. However, this does not mean that the growth rally is over—in the context of ongoing AI industry trends, the conditions for a full switch back to value style are not yet in place. For investors, the real challenge is not "choosing sides," but understanding the rhythm of structural changes in the market: The mid-term trend of technological growth remains unaltered, but short-term disturbances are increasing; the probability of a phase style rebalance is rising, rather than a systemic turning point. In extreme polarization, whether you can avoid the traps of chasing gains and selling losses relies more on grasping timing and managing positions—these may be the core topics for navigating the current market. TECHNOLOGY CROWDING, CAPITAL OVERFLOW: MARKET ENTERS REBALANCE WINDOW Although the long-term theme of technological growth is still clear, China Merchants Securities' strategy team believes that in the short term, the market faces multiple intertwined factors, and style may enter a period of phase rebalancing. First, the trading crowding in the technology sector is at extreme levels. Looking at broad-based index valuations and trading concentration, indices like STAR 50 and CSI 500 have reached historical highs. April to May was a period of intensive earnings releases for technology companies, where high profit growth repeatedly drove the sector to new highs. But as positive expectations gradually get absorbed, upward catalytic momentum is weakening at the margin. Secondly, historical experience shows that after PPI turns positive, small-cap styles usually outperform. China's PPI returned to positive growth in March, and if it continues to rise, the winning probability of small-cap value is expected to increase. However, this round is different from previous cycles: The AI industry trend is clear, so the market will likely not simply pivot to value, but more likely show a dual theme of “PPI-driven cyclical value” and “AI-driven growth” running parallel. Third, characteristics of stock game in the capital side remain prominent. As of May 28, 2026, margin financing balance reached 2.92 trillion yuan, accounting for 2.79% of the free-float market cap of the A-share market, at the 92.55 percentile since 2010. Meanwhile, ETF net outflows expanded from 261.6 billion yuan in April to 322 billion yuan in May. Although net inflows from margin financing formed a partial hedge at 225.1 billion yuan, total incremental capital remains limited. If market risk appetite is disturbed, the momentum of financing inflows may slow, potentially triggering a phase adjustment in the currently highly concentrated group holdings. For the continually pressured “veteran stocks,” if technology sectors see a phase cool-off, it would provide a breathing window in terms of liquidity rather than a signal of trend reversal. PERFORMANCE ANCHOR RETURNS: MID-YEAR REPORT SEASON AS TECH "TOUCHSTONE" AND VETERAN STOCK "OBSERVATION WINDOW" After short-term disturbances, market attention will shift back to mid-year earnings reports. China Merchants Securities points out that late June will gradually enter the reporting period for mid-year earnings forecasts, and high-growth directions are expected to continue outperforming. This logic echoes the market driven by concentrated technology earnings releases in April and May—high profit growth has always been the core anchor supporting technology’s successive new highs. For the constantly pressured “veteran stocks,” the breathing window brought by short-term cooling in technology is valuable, but a true turnaround still requires fundamental improvement. The arrival of the mid-year reporting season is both a test of the quality of technology growth and an observation window on whether “veteran stocks” will see a profit turning point. The ability to deliver on performance will determine the ultimate allocation direction of funds across sectors. --------------------------- Risk Warning and Disclaimer The market has risks; investment requires caution. This article does not constitute personal investment advice, nor does it take into account special investment goals, financial condition, or needs of individual users. Users should consider whether any opinions, views, or conclusions presented herein are applicable to their specific circumstances. Therefore, investing based on this article is at your own risk.