CITIC Securities: Rational perspective needed on the follow-up space of the technology sector

According to the financial news app Zhitong Finance, CITIC Securities released a research report stating that financial and core CPI data are lower than expected, and the market is waiting for further fiscal stimulus and monetary easing. Recently, attention has been focused on opportunities in the electronics/semiconductor sector. In the context of existing funds, the electronics/semiconductor sector has driven the technology sector to experience structural trends under certain catalysts and expectations. Overall, the market's recovery from the adjustment phase requires waiting for liquidity and policy catalysts. Compared to the AI and Huawei chain trends in the second half of last year, a rational assessment of the future space of the technology sector is needed, with a focus on stock selection and trading capabilities.

Financial and core CPI data are lower than expected, and the market is waiting for further fiscal stimulus and monetary easing. Fiscal deposits increased by 763.3 billion yuan year-on-year, with an additional 526.4 billion yuan. M1 decreased by -4.2% year-on-year, compared to the previous -1.4%. Deleveraging on the household side is active, while fiscal stimulus on the government side is still pending. Combined with manual interest rate regulation policies, financial data overall is weak, and the market is awaiting further policy stimulus.

The performance of industries such as electronics is as expected. After the TMT transaction ratio reached a low point since 2023 in mid-May, there has been marginal catalysts recently. The central bank's accelerated implementation of technology innovation refinancing, the establishment announcement of the third phase of the large fund, Apple's release of Apple Intelligence, and marginal improvement in the semiconductor industry's sub-sectors. In the context of existing market dynamics, with recent macro and meso data lower than expected, some funds from consumption and cyclical sectors have flowed into the previously weak technology growth sectors.

The start of the technology trend depends on catalysts at low levels, and the sustainability and space of the trend depend on the continuity of prosperity. The validation of this round of technology prosperity logic is limited to specific sub-sectors, with sector-wide validation in the next two years. Overall, the elasticity of the industrial chain's prosperity is still insufficient.

A reference point is the two rounds of TMT trends in the second half of 2023, when macroeconomic and capital markets, combined with certain industrial logic catalysts, the market still showed relatively restrained performance.

CITIC Securities stated that the overall duration of the TMT sector trend in the second half of 2023 is around one month, but trading levels and stock selection remain crucial. Under the catalyst of AI applications, the media sector had excess returns of around 20%, while the electronic industry index under the catalyst of Huawei chain performed around 10%, but both industry indices subsequently fell below the starting point of the trend. After experiencing this "A" shaped trading trend, some funds will have higher requirements for catalysts and validation for future technology sector trends before participating. Therefore, after the technology sector shows some performance, a rational assessment of its future space is needed.

Risk Warning: Geopolitical risks, higher-than-expected US inflation, and the implementation effects of domestic economic recovery or stable growth policies may fall short of expectations