A-share midday review | False bull market or true stock disaster? Index slightly down, individual stocks collapse, the reason for this wave of diving has been found!

On May 27th, the morning performance of the three major A-share indices showed mixed gains and losses, with most individual stocks falling, with over 4600 stocks falling. By the midday close, the Shanghai Composite Index fell by 1.11%, the Shenzhen Component Index fell by 0.42%, and the Growth Enterprise Index rose by 0.70%. The total turnover of the Shanghai and Shenzhen markets in the morning session was 2.07 trillion, a decrease of 898 billion from the previous trading day. Analyzing the market trend, it was found that the recent plunge in A-shares is fundamentally caused by "profit-taking in high-tech stocks at high levels" and "funds switching between extremes of high and low" leading to structural stampedes. Firstly, profit-taking in high-tech stocks at high levels. Semiconductor, AI computing power, optical modules, CPO, and other high-growth technology sectors (with gains of 2-10 times) have become severely overvalued. On May 26th, the net outflow of funds from the semiconductor sector exceeded 25 billion, and in the morning session today funds continued to take profits, resulting in a stampede effect. Secondly, funds switching between extremes of high and low. Funds flowed out of high-valuation sectors such as technology and communication equipment and flowed into undervalued sectors such as non-ferrous metals and power for defensive purposes. This "seesaw" effect has resulted in a significant divergence between the indices (supported by heavyweight stocks) and individual stocks (with over 4600 falling), leading to a disconnected situation of "earning the index but not making money". In terms of sectors, the semiconductor industry chain including IGBT, analog chips, MCU concepts, MLCC, advanced packaging, continued to show strength. Stocks like Huizhou CEE Technology Inc. and Nantong Jianghai Capacitor hit their daily limit. AI anime, short play concept stocks also rose collectively, with Beijing Baination Pictures and IReader Technology hitting their limit. Coal stocks rose, with Liaoning Energy Industry hitting the limit. Inverter, photovoltaic equipment, solid-state transformers, and Google's industry chain all saw gains. Electric power concept stocks also rose, with stocks like DaTang HuaYin Electric Power hitting their limit. On the flip side, gold, silver, precious metals, and non-ferrous metal concepts all fell. Robotics concepts like Swancor Advanced Materials Co., Ltd. and Shandong Daye saw significant declines. Traditional cyclical concepts like oil, natural gas, chemicals, steel, and cement all went down. Financial concepts like banking, securities, cross-border payments, and internet finance all declined. Healthcare concepts like CRO, innovative drugs, and weight loss drugs remained weak. Consumption concepts like liquor, retail, pet economy, and new and old industries continued to decline. AI application concepts like physical AI, AI e-commerce, and AIGC continued to weaken. Hot topics like quantum technology, autonomous driving, computing power, and commercial aerospace all saw weakness. Looking ahead, China Securities Co., Ltd. analyst Xia Fanjie believes that in the second half of 2026, the overall difficulty of "pulling valuation" in the A-share market will increase, and the upward slope of the entire A-share index may slow down, with the market showing more structural trading characteristics. He also mentioned that the AI computing power sector has not yet reached full-on bubble territory, and the market will not retreat solely due to fears of high valuations. Popular sectors 1. Coal stocks rose Coal stocks rose, with stocks like Liaoning Energy Industry hitting the limit, followed by Huaibei Mining Holdings, Jinneng Holding Shanxi Coal Industry, and Yankuang Energy Group. Commentary: CITIC SEC pointed out that the summer peak season demand at home and abroad may resonate starting from the end of May, coupled with structural demand for high-calorie coal like in Japan and South Korea replacing natural gas, overseas coal prices may enter a new round of upward trend, driving up domestic spot prices. 2. Semiconductor industry chain remains strong IGBT, analog chips, MCU concepts, MLCC, advanced packaging, and other parts of the semiconductor industry chain continue to show strength, with stocks like Huizhou CEE Technology Inc. and Nantong Jianghai Capacitor hitting their limit. Commentary: On May 25, 2026, Huawei officially presented the "Law of 'Tao' in the Semiconductor Field" in Shanghaia new technological path where "temporal microshrinking" replaces "geometric microshrinking". The key point is to compress signal propagation delay systematically through architectural innovations like "logical folding", achieving a leap in transistor density and system performance without relying on extreme physical processes. 3. Active short play concept The short play concept was active, with stocks like IReader Technology, H&R Century Union Corporation, and Beijing Baination Pictures hitting their limit. Commentary: According to reports, this year, the overseas orders for AI short plays have surged, with some companies expecting orders to increase by 5000%. Many companies are expanding their overseas customized content offerings. Institutional viewpoints Galaxy Securities: Three factors resonate to amplify market fluctuations, but the technology theme remains strong Galaxy Securities recently stated that external macro disturbances, sector rotation acceleration, and short-term profit-taking have amplified market fluctuations, but the technology theme remains strong. The underlying market is still abundant in incremental funds, and there has been no fundamental change. In the future, opportunities for structural investments can continue to be explored around the main themes. EB SECURITIES: "Algorithmic-electricity" has become an important theme in the defense logic of the power sector EB SECURITIES stated that for algorithmic-electricity itself, the continuous support of various local policies combined with the successive commercialization of specific projects has created a positive industry outlook. Recently, growth sectors have risen significantly, catalyzing emotions; as a stable "anchor", the defense sector has become an important sector for configuration. Under the continuous catalysis of the algorithm-electricity synergy theme, power stocks balance defense attributes. China Securities Co., Ltd.: Power shortage remains the main theme for the year, continuing to be optimistic about the gas turbine industry chain According to a research report by China Securities Co., Ltd., recently, there have been frequent overseas orders for domestic gas turbines, represented by Dongfang Electric Corporation, China Shipbuilding Industry Group Power, and AECC Aviation Power, leading to a continued implementation of industrial chain price hikes. Following the price increases of companies like GEV in March, the order prices of Jerry have continued to rise, showing a trend of rising domestic gas turbine prices and a further improvement in profitability. Power shortages remain the main theme for the year, and there is continued optimism about the gas turbine industry chain. According to China Securities Co., Ltd.'s estimation, global gas turbine demand will exceed 150GW by 2028, while global supply will not reach 100GW, leading to a widening gap, and continued optimism about the gas turbine industry chain and trends like ship-to-gas conversion. This article is a translation from "Tencent Selected Stocks", GMTEight editor: Wang Qiujia.