After the Tech Surge, Will A-Share Market Styles Converge? 10 Top Institutions Weigh In

• Shanghai Composite: -1.08%
• Shenzhen Component: -0.14%
• ChiNext Index: +2.53%

The Chinese stock market just experienced a wild week.

The Shanghai Composite Index fell by 1.08%, the Shenzhen Component Index dropped by 0.14%, while the ChiNext Index rose by 2.53%.

Translation: The market is sending mixed signals.

Tech stocks have been on an absolute tear, but investors are starting to ask the real question—is this run sustainable, or are we heading for a correction and market style rotation?

We dug into analysis from 10 major Chinese financial institutions to break down what’s happening next.

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The Core Question: After Extreme Tech Performance, Is Convergence Coming?

Here’s what everyone’s thinking about right now: The technology sector has dominated the market to an extreme degree.

According to Guosen Securities (Guosen Zhengquan 国信证券) strategy team, looking at the data tells a clear story.

Historical bull markets follow a predictable pattern:

• Extreme differentiation (one sector dominates)
• Phased convergence (leaders cool, laggards catch up)
• Further differentiation (new leaders emerge)

This cycle typically happens 3-4 times during bull markets, based on standard deviation analysis of three-month rolling returns across Shenwan (Shenwan 申万) secondary industries.

The key insight? Current valuation levels are approaching historical extremes, which suggests this tech dominance might soon face a convergence period.

There are two ways this typically plays out:

• The hard correction path: Leading sectors drop deeper while the overall market declines (happened in October 2013 and March 2020)
• The rotation path: Lagging sectors catch up without major market pain (happened January-March 2015 and September-December 2025)

Most investors are hoping for the second option.

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Why a Quick Market Breakthrough Looks Unlikely (For Now)

Shenwan Hongyuan (Shenwan Hongyuan 申万宏源) strategy team just outlined the structural headwinds keeping the market stuck.

Three main problems are preventing an immediate breakthrough:

1. Weak incremental capital inflows — New money isn’t flowing into the market like it should, which means sectors are fighting over existing capital
2. Tech leaders remain strong, but structural differentiation has hit an extreme — When one sector gets too dominant, rotation becomes inevitable
3. Rotation within the tech sector is accelerating — Money is already moving around inside tech itself, not just between sectors

For the market to break through this phase, three conditions need to align:

• New economic trends strengthen
• Broader fundamental metrics improve across more companies
• A positive feedback loop of incremental funds kicks in

Right now, the AI computing inflation focus has narrowed dramatically to sub-sectors like PCB (Printed Circuit Board) and capacitors.

That extreme narrowing is a warning sign.

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AI Penetration: The Real Indicator of How Much Room Is Left

Here’s where things get interesting for the AI bulls.

Industrial Securities (Gongye Zhengquan 工业证券) looked at a metric most investors overlook: penetration rates as a core indicator for industrial life cycles.

The stage of fastest penetration growth? That’s when markets see the steepest slopes and most room for imagination.

Their conclusion is important:

By comparing current AI penetration to the Internet era and previous A-share cycles, AI is only halfway through its current cycle.

Translation: AI’s fastest growth phase isn’t over yet, and the upside potential compared to historical A-share themes is still significant.

This is the bull case for why tech weakness might be temporary positioning, not a trend reversal.

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Is Systemic Risk Actually Low? What the Technicals Say

GF Securities (Guangfa Zhengquan 广发证券) took a step back to look at the bigger technical picture.

Since the bull market started on September 24, the Shanghai Composite Index has only fallen below the 100-day moving average twice:

• April 2025: Tariff concerns
• March 2026: Iran-US conflict

Both were external “Black Swan” events—not fundamental market cracks.

Over the past two weeks, the index has repeatedly tested that 100-day line but held it.

The takeaway from GF Securities: Barring major external shocks, systemic risk is expected to remain low.

The real focus should be on earnings and industrial trends, especially with A-share mid-year report previews coming in late June and US stock reports mid-July.

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High Prosperity Meets High Crowding: A Dangerous Mix

China Galaxy Securities (Yinhe Zhengquan 银he证券) flagged a tension building in the market.

The A-share market’s volatile differentiation is accelerating, and divergence in tech-sector capital is increasing.

While external risks like the Iran-US conflict are converging toward resolution, domestic demand recovery remains slow.

Here’s the problem: Market trading crowding is at a relative high, which could trigger:

• Profit-taking pressure
• Increased investor divergence
• Reduced market liquidity in crowded positions

But China Galaxy made an important distinction: Crowding is a phased emotional characteristic.

The market direction still depends on industrial prosperity.

Leading companies with solid earnings support in tech and high-end manufacturing are best positioned to navigate this volatility.

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June Outlook: Volatile but Strong, With Tech as Main Theme

Huajin Securities (Huajin Zhengquan 华金证券) gave one of the more constructive outlooks for the near term.

A-shares in June may continue a volatile but strong trend.

Here’s the macro backdrop:

• External risks may ease — The geopolitical situation is stabilizing
• Policies are expected to remain positive — Central government support remains in place
• Economic and profit growth trends are likely to continue rising — The fundamentals are still improving

More specifically:

• Consumption growth may stabilize
• Exports will remain high
• Manufacturing investment will rise
• Real Estate (Fangdichan 房地产) investment may remain weak
• Liquidity is expected to stay loose

Translation: The conditions for supporting the tech main theme remain intact, at least through June.

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Is a Market Style Switch Beginning? The Early Signs Are There

Soochow Securities (Suzhou Zhengquan 苏州证券) made a nuanced observation about what happens when liquidity cycles shift.

A shift in the liquidity cycle does not immediately end industrial trends, but it is an important prelude to a style switch.

With strong industrial support, previous main themes won’t see unilateral rapid pullbacks, but rather a complex top formation through repeated volatility.

The prediction: We may be in the early stages of a style switch.

What this means:

• Volatility will increase in a tightening liquidity environment
• The AI boom is not over
• The market will move toward “smaller circle” trading
• Focus will shift to core stocks with actual earnings rather than pure speculation

This is a critical distinction—the move isn’t necessarily away from tech, but away from momentum-based trading toward fundamentals-based selection.

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June Strategy Recommendations: Growth vs. Value

The setup: Since April, the Sci-Tech Innovation and ChiNext indices have risen steeply.

But there’s a problem—a lack of effective rotation has created an extreme micro-structure.

For June, they expect a “scissors gap” to converge.

Their recommendation: Focus on “Growth Expansion + Large-Cap Value.”

For relative return strategies:

• Continue holding Communication (Tongxin 通信) and Electronics (Dianzi 电子) with high earnings certainty

For absolute return strategies:

• Consider “Three-Low Assets” (low position, low valuation, low crowding):
• Coal (Meitan 煤炭)
• Power (Dianli 电力)
• Utilities (Gongyong shiye 公用事业)
• Bank (Yinhang 银行)

Translation: The institutions are positioning for both scenarios—continuation of growth stories AND defensive value plays.

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Waiting for the “Reveal”: Geopolitical Catalysts and Sector Rotation

Guojin Securities (Guojin Zhengquan 国金证券) is watching for a specific catalyst: the reopening of the Strait of Hormuz.

If this happens, the market may return to HALO (High Alpha, Low Overlap) trading—meaning differentiated stocks and sectors will perform better than the broad market.

Their recommended focus areas:

First line: Industrial Metals and chemicals

• Copper (Tong 铜)
• Aluminum (Lv 铝)
• Lithium (Li 锂)

Second line: Stocks benefiting from rising energy prices

• Oil
• Coal
• Lithium
• Wind/Solar

Third line: Sectors where the capacity cycle has bottomed out

• Commercial Vehicles (Shangyongche 商用车)
• Grid Equipment (Dianwang shebei 电网设备)
• Textile Manufacturing (Fangzhi zhizao 纺织制造)

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Is the “Clustering” Trend Finally Loosening?

Zhongtai Securities (Zhongtai Zhengquan 中泰证券) wrapped things up with an assessment of market momentum.

The index may still hit new highs in mid-June, but accelerated rotation and weakened profit effects suggest a “fishtail market” — that’s market jargon for the end of a trend.

While marginal tightening of regulation and liquidity prevents a comprehensive surge, major upcoming IPOs limit the probability of significant near-term risk.

Key focus areas moving forward:

1. Storage and Robotics (Jiqiren 机器人) themes related to major IPO chains
2. Coal and Power sectors as they enter peak season
3. New Energy (Xinnengyuan 新能源), Battery (Dianchi 电池), and power equipment sectors due to global energy supply disturbances

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What This Means for Investors: The Takeaway

The consensus from these 10 major institutions paints a picture of a market in transition.

The tech sector’s extreme dominance is likely to face a convergence period, but this doesn’t necessarily mean a crash.

Instead, expect:

• Increased volatility and sector rotation
• A shift from momentum-based trading to earnings-based selection
• Opportunities in both growth (core tech with fundamentals) and value (defensive plays) sectors
• Catalysts from geopolitical developments and macroeconomic data

The AI story isn’t over—by penetration metrics, we’re only halfway through the cycle.

But the way investors make money from AI is evolving from pure momentum to companies with actual earnings support.

For investors navigating this A-share market volatility, the message is clear: Stay diversified, watch the fundamentals, and be ready for a market style convergence in tech stocks.

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References

• Top Ten Institutions Discuss the Market: After the Tech Surge, Will Market Styles Converge? – East Money (Dongfang Caifu 东方财富)
• Guosen Strategy: After Extreme Technology Performance, Will Styles Converge? – Guosen Securities (Guosen Zhengquan 国信证券)
• Shenwan Hongyuan Strategy: Market Enters Adjustment Phase – Shenwan Hongyuan (Shenwan Hongyuan 申万宏源)
• Financial News Focus – East Money (Dongfang Caifu 东方财富)