CITIC SEC: Rebalancing of A-share style has begun, focus still needs to be on directions with clear performance logic in terms of allocation.

CITIC SEC released a research report stating that the recent cooling of the technology sector may be related to the imminent listing of Longi Solar Technology and the slowdown in the growth of ARR of overseas model giants. The market is concerned that the listing of Longi Solar Technology may cause a significant short-term impact on the liquidity of the domestic technology sector, leading investors to reduce positions in advance. There are also concerns that the speed and space of commercialization of model factories may be downgraded. In addition, there are accumulating concerns at the macro level. Although the media frequently release information about a ceasefire agreement between the US and Iran, Iran's recent strong stance seems to indicate that Iran is looking to reshape its geopolitical position and discourse in the Middle East. Regardless of whether the US-Iran agreement can be reached quickly, its impact on the market is different from that of April to May. If reached, the recovery of global industrial production will change the macroeconomic situation of the "non-AI" field, leading to a short-term correction in the K-shaped differentiation. If the agreement continues to be delayed, inflation and tightening expectations may warm up, affecting the sentiment of overseas technology sectors. The A-share market has recently seen a slowdown in the pace of major fund reductions and weakened selling pressure, leading to a more balanced funding situation and the repair of non-popular sectors. The style rebalancing has actually begun, but it still needs to focus on directions with clear performance logic, rather than switching for the sake of switching. CITIC SEC's main points are as follows: The cooling of the technology sector may be related to the imminent listing of Longi Solar Technology and the slowdown of ARR of overseas model giants. 1) The listing of Longi Solar Technology may have a significant short-term impact on the liquidity of the domestic technology sector. Looking at the listing of five domestic "jumbo" companies since 2020 (Semiconductor Manufacturing International Corporation, China Telecom Corporation, China Mobile Limited, CNOOC Limited, Hua Hong Grace Semiconductor), the average returns of their primary industries in the 20 trading days before listing were 4.9%. However, in the four trading days before and the six trading days after the listing, the average returns were -5.6%, with the impact fading after six trading days. Depending on different valuation assumptions, free float assumptions, and turnover rate assumptions, it is estimated that Longi Solar Technology's listing will require an incremental liquidity demand in the range of 56 billion to 268.7 billion yuan on the first day. Considering Longi Solar Technology may trigger a reconstruction of the cost-effectiveness of the technology sector, its liquidity impact may mainly focus on the science and technology innovation board and the electronics industry with limited spillover. 2) The slowdown in ARR growth of Anthropic may lead to market concerns about the speed of commercialization realization. On April 7th, Anthropic announced that its ARR reached 30 billion U.S. dollars as of March; according to Sacra Analytics' estimate in early May, Anthropic's ARR reached around 43 billion U.S. dollars as of April. On May 28th, Anthropic officially disclosed an ARR of about 47 billion U.S. dollars when announcing a Series H financing of 65 billion U.S. dollars; subsequently, based on the S-1 prospectus submitted by Anthropic to PitchBook Data, its ARR in June is expected to approach 50 billion U.S. dollars. Even looking at the data release, Anthropic's ARR growth in May slowed down. Behind this slowdown is also the combination of competitors lowering prices and large companies in North America controlling token expenditures. On June 10th, The Wall Street Journal quoted sources as saying that OpenAI is considering significantly reducing the prices it charges developers and businesses for API tokens to win customers from competitors like Anthropic. Prior to this, many Silicon Valley giants such as Microsoft, Amazon, Meta, and Uber have begun to stop the "Token frenzy" and gradually move towards more rational "Token budgets." In early June, Walmart imposed limits on its internal AI usage, and Oracle began to try a result-based AI pricing system, rather than simply charging customers based on underlying token consumption. Although these disruptions will not affect the trend of the industry process, considering the high expectations set by the market, significant gains in related stocks, and many institutions adopting a "low position + high tech" holding structure out of FOMO, once the momentum of the technology sector weakens, there is likely to be pressure to rebalance portfolios, which could trigger a style rebalancing. Whether the US-Iran agreement can be reached quickly, the impact on the market is different from that of April to May. Recent subtle changes in the Middle East situation come from Iran's strategic posture. Whether it is actively attacking Israel's homeland when attacked in Lebanon (a historical first) or retaliating strongly against the US when attacked for the plane crash, these actions demonstrate Iran's increasingly hardline stance under the backdrop of the long-term blockade in the Strait of Hormuz. Iran may no longer be satisfied with passively enduring the blockade and is trying to seek a greater geopolitical discourse and change the Middle East geopolitical situation in this round of conflict. Iran's attitude towards core demands such as uranium enrichment and lifting sanctions is much stronger than the market expected. According to Iran's Mehr news agency on June 12, 2026, the US-Iran draft memorandum at 14 points includes lifting sanctions, maintaining the status quo on nuclear issues, not transferring control of the strait, and even calling on the US and its allies to provide a $300 billion reconstruction plan for Iran. If the US agrees to these issues, the US's geopolitical presence in the Middle East will greatly diminish after a war, and the US will only have the opportunity to extend negotiations on the nuclear agreement for 60 more days. However, regardless of whether the US-Iran agreement can be reached quickly, its impact on the market is different from that of April to May. If reached, the recovery of global industrial production will change the macroeconomic situation of the "non-AI" field, leading to a short-term correction in the K-shaped differentiation. If the agreement continues to be delayed, inflation and tightening expectations may warm up, affecting the sentiment of the overseas technology sectors. The market can only hope that the fluctuations in US stocks and bonds will compel Trump to act again. The overall selling pressure in the A-share market has weakened, and the funding situation is starting to rebalance, benefiting the repair of non-popular sectors. Compared to overseas benchmark companies, A-share "non-AI" sectors have recently shown significant weakness. Taking cyclical sectors as an example, since mid-May, the excess returns of overseas cyclical stocks relative to A-share cyclical stocks have continued to expand. As of June 12, the accumulated excess returns of overseas cyclical stocks relative to A-share cyclical stocks this year have reached 7.23 percentage points, a new high for the year. Compared to overseas, A-share "non-AI" sectors have already and more fully reflected some negative expectations, including the continuation of the blockade in the Strait of Hormuz, global economic recession, and tightening of overseas liquidity. In addition to the enhanced recession and tightening narratives, some money has been forced to cut positions due to FOMO and chase technology, leading to pressure on the funding situation. Large funds' continuous redemptions of ETFs and selling pressure have had a continuous impact on non-popular sectors. However, this extreme pressure of funding differentiation has eased in recent times. Since May 28, the slowdown in major fund reductions has become apparent, with net inflows on most trading days, and on June 8, broad-based ETFs even saw the highest single-day net purchases since the second quarter. The overall selling pressure in the A-share market has significantly weakened, and the 10-day moving average of investor sentiment indicators had dropped to 61.1 on June 12, at the 24.1 percentile for the past year, indicating a relatively calm stage. The rebalancing of funds may benefit the repair of non-popular sectors, changing the extreme differentiation that existed previously. The style rebalancing has started, but it still needs to focus on directions with a clear performance logic. Style rebalancing does not mean that all non-AI sectors have enough room for repair; it still needs to focus on fundamentals. The energy chain (new energy, chemical industry, electric equipment, etc.) is still the focus of attention. Even if the US and Iran reach an agreement, the Strait of Hormuz may not return to its pre-war state, as countries around the world accelerate electrification not only as a transformation consideration but also as a consideration of national security and supply chain security. After limited recovery of energy supply, global industrial production will further dispel the recession expectations that have been suppressing cyclical sectors. In addition, on June 17, the new Fed Chair Powell is about to preside over his first FOMC meeting, and compared to simple "dove" or "hawk" statements, Powell is more likely to try to promote the reform of the Fed's decision-making mechanism, avoid excessive economic judgments and long-term guidance, and guide funds towards industrial entities rather than speculating wildly on financial assets based on interest rate judgments. With the vigorous demand for industrial production driven by AI and financing needs, coupled with weak consumer confidence, raising interest rates is clearly not a good choice to address supply-driven inflation. If the market's expectations for hawkish statements fall through, sectors that were heavily sold off due to expectations of liquidity tightening may also see a recovery, such as basic metals. In terms of investment strategies, it is recommended to maintain a structure focused on AI + energy chemistry, paying attention to the cost-effectiveness of new energy, chemical industry, non-ferrous metals, and electric equipment that have fallen out of favor, while in the background of style switching and the end of fund reductions. In conclusion, the large financial sector is showing a turning point this week, and it is recommended to continue to increase allocations to undervalued securities firms and insurance companies. Finally, continue to closely monitor the progress of domestic AI and wait patiently for opportunities after the liquidity shock. Risk Factors Increased friction in the fields of technology, trade, and finance between China and the US; inadequate implementation of domestic policies, economic recovery falling short of expectations; unexpected tightening of macro liquidity at home and abroad; further escalation of conflicts in regions such as Russia, Ukraine, and the Middle East; slower-than-expected digestion of real estate inventory in China.