- In the morning session of this trading day, the Chinese equity market displayed a structurally divided trend. The Shanghai Composite Index rose by 0.4% to 4094.8 points, the Shenzhen ChiNext Index surged significantly by 2.3%, while the SSE STAR Market 50 Index slightly declined by 0.3%, reflecting the rotation of funds across different sectors.
- Macroeconomic policy expectations became the core variable dominating the market. Signals from the Central Politburo meeting, such as stabilizing real estate, resolving local debt, and supporting pig prices, directly drove the China Securities Animal Husbandry Index up by 1.9%, while the CSI 300 Real Estate Index rose by 1.7%.
- Geopolitical and supply chain dynamics continue to disrupt the pricing of specific industries. The U.S. Department of Commerce's halt on chip equipment supply to Huahong Semiconductor has pressured its stock price to fall by 5.2%, while tensions in the Middle East have increased market risk aversion.
Politburo Meeting Tone and Structural Long Sentiment
The micro-trading structure of the current Chinese equity market is quickly responding to the latest high-level macro guidance. After recording a 5% unexpected economic growth in the first quarter, the Politburo meeting did not introduce aggressive stimulus policies but rather focused on implementing existing policies and resolving stock risks. Ping An Securities' report highlighted that the meeting's statements on stabilizing and boosting confidence in the capital market effectively repaired prior pessimistic market expectations. On the trading floor, funds have evidently concentrated in traditional industries supported by marginal policy improvement and niche tracks with expected industrial cycle reversals, driving moderate overall index gains. If subsequent specific guidelines on urban renewal and reform of small and medium financial institutions are implemented, the valuation recovery logic of related weighted sectors may be further reinforced.
Excess Return Logic of Rare Earth and New Energy Sectors
In the morning session of this trading day, resource products and high-end manufacturing sectors formed a notable upward synergy. The China Securities Rare Earth Industry Index surged by 4.6%, driven by strong fundamental data from leading industry companies. For instance, Northern Rare Earth saw its net profit grow by over 1.1 times due to year-on-year increases in the average prices of major rare earth products in Q1, directly triggering a limit-up scenario during trading. Simultaneously, the China Securities New Energy Vehicle Index rose by 3.6%, reflecting market optimism about downstream production recovery and overseas expectations of the new energy industry chain. Funds have persistently settled in such manufacturing sectors with global competitive advantages, constituting the main driving force for growth stock rebounds.
Geopolitical Risk Premium of Semiconductor Supply Chain
Behind the overall weak performance of the STAR Market lies continued structural frictions in the US-China tech domain as the core negative factor suppressing valuations. Market reports disclose that the U.S. Department of Commerce has requested multiple equipment suppliers to halt shipments to China's second-largest wafer foundry, Huahong Semiconductor, marking the risk of intensified external restrictions on mature and advanced processes. This event directly caused Huahong's A-shares to slump in the morning and dragged down the STAR Market 50 Index's performance. This phenomenon illustrates that although domestic semiconductor equipment substitution is accelerating, the expectation of supply chain disruptions at critical nodes still requires the market to price in higher geopolitical risk premiums for related stocks in the short term.
The trajectory of China's A-shares on Wednesday morning clearly reflected the complex transition phase of the domestic real economy and the fundamental divergence among industries under the intertwining of policy intervention and external environments. The targeted deployments of the Politburo meeting on real estate, local debt, and agricultural production are reshaping the short-term supply-demand expectations of related industry chains. Meanwhile, the contrast between the external blockade faced by the semiconductor industry chain and the profit boom of the rare earth industry chain highlights the challenges and opportunities for China's core industries against the backdrop of global restructuring. Under the premise of maintaining firmness in aggregate policy, the in-depth game surrounding industry prosperity inflection points and policy bottom-line effects will become the main theme of the equity market in the second quarter.
Industry Chain Transmission
The marginal changes in macro policies are rapidly transmitting downstream across specific industry chains. For example, in the agricultural sector, the Politburo meeting's rare mention of "stabilizing prices of pork and other agricultural products" directly addressed the current pain points of the livestock breeding industry. Against the backdrop of long-term cyclical bottom in pork prices and widespread losses for breeding companies, the high-level statements have triggered strong market expectations of accelerated capacity reduction and intensified reserve policies. These expectations have quickly transmitted to the capital market, driving the China Securities Animal Husbandry Index to soar significantly during the session. Similarly, in the real estate industry chain, the policy deployment on solidly promoting urban renewal and solving the arrears of corporate payments aids in easing the cash flow pressures of building materials and upstream and downstream suppliers, thereby repairing the valuation center of the CSI 300 Real Estate Index at the expectation level.
Competitive Landscape
Amid the long-term trend of Sino-US tech rivalry, the global competitive landscape in core hard-tech fields is undergoing profound reshaping. The latest equipment supply halt directive from the U.S. Department of Commerce targeting Huahong Semiconductor essentially seeks to delay China's wafer foundry capacity expansion and technological iteration through chokehold tactics. This non-market administrative intervention inevitably weakens the capacity elasticity and capital expenditure expectations of relevant enterprises in the short term, leading to significant pressure on their stock prices. However, from the perspective of long-term competitive landscape evolution, the continued blockade of the external supply chain will compel China's semiconductor manufacturing sector to tilt towards domestic equipment, which objectively may accelerate the customer introduction and market share growth of domestic semiconductor equipment manufacturers. In contrast, China's absolute dominance in key raw material fields such as rare earth provides another competitive advantage dimension, as evidenced by Northern Rare Earth's significant performance realization reflecting this industrial pricing power.
Sector Allocation Strategy During Policy Observational Period
Following the stabilization of the macroeconomic data in the first quarter, the market generally expects that domestic economic governance has entered a policy effect observational period. With reduced probability of strong incremental policy stimulus in the short term, institutional investors' asset allocation strategies are becoming more refined. On one hand, defensive sectors aligned with policy guidance, such as agriculture and animal husbandry benefiting from supply-side optimization and cyclical products with high dividend characteristics, attract stock funds seeking certainty. On the other hand, in the context of irreversible global energy transition and automotive electrification trends, the new energy vehicle industry chain, with its scale effect and cost advantage, continues to be the preferred choice for elastic allocation. If future local debt resolution plans can effectively reduce macro systemic risks, the market's overall risk appetite may experience a substantial improvement.
