Recently, the index has been significantly impacted by the decline of new energy, dividend-paying stocks, and resource stocks. The plummeting wholesale price of Feitian Moutai and the dumping by scalpers have caused even the most resilient Moutai to accelerate its decline, with the Shanghai Composite Index approaching 3,000 points at one point today. In the afternoon, two major positive news items emerged, with the real estate and securities sectors surging and driving market sentiment to warm up. At the same time, core assets such as liquor and new energy also bottomed out and rebounded, turning the three major indexes red.

However, if one observes the market closely, there is no need to be overly concerned about A-shares. Although A-shares have indeed been weakening recently, they are not that weak. While heavyweight stocks are weakening, the technology sector is showing strength against the trend. Since the beginning of the year, due to the leading increase of state-owned enterprises, the Shanghai Composite Index has been at a relatively high level compared to other indexes. The current pullback in the Shanghai Composite Index is a combination of a market correction and institutional rebalancing. Institutions are selling state-owned enterprises and high-dividend stocks that performed well in the first half of the year and then buying technology growth stocks. State-owned enterprises are precisely the heavyweight stocks that have a significant impact on the index, making it appear weaker.

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Last week, the semiconductor sector showed strength, and this week, AI core stocks such as InnoLight Technology, Huidian Shares, Foxconn, and New Easy Power have reached new highs. Therefore, behind the index adjustment is a structural shift. Today's sharp decline in Yangtze Power indicates that even the most core high-dividend stocks have shown signs of loosening.

Specifically, looking at today's major news:

U.S. May PPI Lower Than Expected

Last night, the U.S. Bureau of Labor Statistics announced that the U.S. PPI fell by 0.2% month-on-month and rose by 2.2% year-on-year, with core data remaining unchanged month-on-month and rising by 2.3% year-on-year, all lower than market expectations. In addition, the number of first-time unemployment claims in the U.S. last week was 242,000, higher than the market's estimated 225,000. After the PPI announcement, the market's pricing for the number of Fed rate cuts within the year has also reached twice, possibly as early as a rate cut in September, with U.S. ten-year bond yields plunging close to the 4.2% threshold.

U.S. Stock Market's Nasdaq Index Sets New Record High, Apple Rises by 0.55%, with a company market value reaching $3.285 trillion, for the first time since January, "closing market value" higher than Microsoft, NVIDIA rises by 3.52%, with a market value of $3.188 trillion.

AI Computing Power SoarsNVIDIA announced its first-quarter earnings and has been setting new highs consecutively, with an increase of over 36%. Even after the stock split, the price continues to rise, while the NVIDIA industry chain in the A-share market has been slow to reach new highs, leaving room for catch-up gains. Today, the A-share AI computing power concept sectors such as CPO, PCB, and servers finally erupted. Cambridge Technology led the way with a morning trading halt, while InnoLight Technology and New Easy-Seng surged by more than 10%. Hu Die Shares hit a trading halt during the day, and many stocks in the core NVIDIA industry chain set new highs.

Why did AI computing power explode today? We believe there are three main reasons:

1. This week, the U.S. announced May CPI and PPI data that fell short of expectations, leading to a rise in market expectations for a Federal Reserve rate cut, which boosted market sentiment. NVIDIA and Apple reaching new highs served as a demonstration effect.

2. Benefiting from the demand for Ethernet communication chips, Broadcom's FY24 Q2 AI-related revenue reached a record $3.1 billion, raising the full-year AI-related revenue guidance to over $11 billion. The company also believes that $11 billion is a conservative estimate. Last night, Broadcom's stock price soared by more than 12%. The company announced that 7 out of the 8 largest AI clusters currently use its Ethernet solutions, expecting that by 2025, all large-scale GPU clusters will use the Ethernet protocol. It is anticipated that the tomahawk6 chip, with a speed of 100T, will be launched by the end of 2025.

3. During today's trading, it was reported that the volume of 800T optical modules for tomorrow exceeds market expectations, which is a direct stimulus factor.

Haitong Securities hit the trading halt today, leading to a surge in the securities sector. However, according to a report by Caixin, when a reporter called Haitong Securities as an investor, the relevant person indicated that the company currently has no such plans. Additionally, there is news of a potential interest rate cut, which may be the reason for the real estate sector's significant increase.

Longbai Group plummeted today, opening lower and diving, with a closing drop of over 8%. In terms of news, Zheshang Securities cited an EU document today, pointing out that the preliminary draft of this round of anti-dumping duties on Chinese titanium dioxide shows an additional 39.7% tariff on Longbai Group and its subsidiaries, a 14.4% tariff on Jinxing Titanium Industry (Sinotitan), and a 39.7% tariff on other companies. "This round of tariff policy exceeds market expectations, with market expectations around 10% to 20%."Central Bank's Major Move

The central bank's website posted an article today stating that in April 2024, the People's Bank of China, in conjunction with the Ministry of Science and Technology and other departments, established a 500 billion yuan re-lending facility for technological innovation and technical transformation. Of this amount, 100 billion yuan is specifically allocated to support the first loans for technology-based small and medium-sized enterprises (SMEs) in their start-up and growth stages, encouraging financial institutions to invest more significantly in early-stage, small-scale, and hard-tech ventures. Recently, relying on the "innovation points system" evaluation, the People's Bank of China and the Ministry of Science and Technology have selected the first batch of nearly 7,000 eligible enterprises and have recommended them to 21 national banks.

A quick look at the market shows that by the close, the Shanghai Composite Index had risen by 0.12%, the ChiNext Index had increased by 0.5%, the Hang Seng Index had fallen by 0.81%, and the Hang Seng Tech Index had dropped by 0.70%. The total turnover in the two markets increased to 0.84 trillion yuan, with roughly an equal number of gains and losses.

Next week, from June 19th to 20th (next Wednesday and Thursday), the 2024 Lujiazui Forum will be held, for which there has been a previous announcement of significant policy releases. In July, there is the super heavyweight Third Plenary Session, and it's time to start speculating on policy expectations again. Therefore, we have always believed that there is no significant risk of a sharp decline in the A-share market; we are just waiting for new expectations.