A-Share Market Enters 'Thematic Precision War': ChiNext Briefly Surpasses SSE Index Amid Intensified Stock-Picking Battle

Liquidity Reallocation Behind Extreme Divergence: A-Share Market Enters a New Phase of “Thematic Precision Warfare”

On the morning of May 27, the A-share market exhibited a rare “ice-and-fire dichotomy”: over 4,600 stocks across the Shanghai, Shenzhen, and Beijing exchanges declined, while only 803 advanced—indicating broad-based weakness. Yet, paradoxically, the ChiNext Index surged 2.2%, peaking at 4,134.58—briefly surpassing the Shanghai Composite Index (4,099.23) for the first time in history. Although the STAR 50 Index edged down 0.86%, the CSI 1000 Index fell further, by 1.07%—revealing intense fragmentation within the small-cap growth segment. Even more telling was the stark contrast in thematic performance: short-video dramas, photovoltaics, semiconductors, and power generation stocks saw concentrated surges, while robotics, precious metals, and oil & gas sectors suffered sharp corrections. This was no mere sentiment-driven, random tremor—it reflected an accelerated structural rebalancing, driven by converging forces including mutual fund portfolio reallocation, a phased return of Northbound funds, and rapidly shifting margin leverage toward technology application sectors. It signals that the A-share market has deeply entered a new phase of “thematic precision warfare” under a prevailing environment of stagnant aggregate liquidity.

The Surface Divergence: Index Divergence and Sector Fragmentation Reveal Selective Capital Migration

Superficially, the divergence manifests as striking dislocations among broad-market indices: the Shanghai Composite fell 1.11%, the Shenzhen Component Index dipped modestly by 0.42%, yet the ChiNext Index posted a robust gain of 0.70%–2.20%. Similarly, the CSI 300 dropped 0.72%, the CSI 500 fell 0.82%, and the CSI 1000’s decline widened to 1.07%. This “the smaller, the weaker; the newer, the stronger” paradox reveals a qualitative shift in how the market perceives “small-cap” equities—capital is no longer chasing market-cap factors indiscriminately, but instead piercing through market-cap labels to precisely anchor on industrial trend certainty and earnings realization timing.

At the sector level, divergence is even more directional: short-video drama stocks (e.g., Baina Qiancheng and Huanrui Century surged to daily limits), power generation names (e.g., Huadian Energy and Huayin Power hit daily limits), and semiconductor equipment/materials firms (e.g., Yangjie Technology and Jingfeng Mingyuan rose over 10%) emerged as key long-side battlegrounds. Meanwhile, prior hotspots—including robotics (e.g., Shangwei New Materials plunged over 10%), precious metals (e.g., Sichuan Gold fell 7%), and oil & gas—faced systematic selling pressure. Such “zero-sum” dynamics are far from simple style rotation; rather, they represent active capital allocation following high-intensity horizontal comparisons across policy catalytic strength, earnings visibility, and technological breakthrough timelines. For instance, short-video dramas benefit from AI-powered content generation lowering production costs and improving efficiency, coupled with optimized platform traffic-revenue sharing mechanisms; the power sector gains direct tailwinds from accelerated construction of next-generation power systems and improved green-power trading mechanisms—both offering significantly higher near-term earnings elasticity and mid-term policy certainty than robotics hardware, which remains in its early industrialization stage.

Core Drivers: Three Capital Forces Jointly Reshaping Allocation Weightings

The deep drivers behind this rebalancing stem from synchronized reinforcement by three critical capital pools:

First, mutual funds have entered a “deep thematic excavation” phase of portfolio adjustment. Data from end-Q1 shows active equity funds’ allocation to the TMT sector has reached a historical high—but their holding structure is shifting from “broad tech” to focused exposure along two key value chains: (i) the “AI application rollout chain” (e.g., AIGC content production, intelligent terminal interaction) and (ii) the “new-quality-productivity infrastructure chain” (e.g., next-generation power systems, advanced packaging). The outperformance of short-video dramas, power equipment, and domestic AI-computing chips directly mirrors this reallocation logic.

Second, Northbound funds’ phased return is reinforcing the technology theme. Though still net sellers overall, Northbound investors recently increased purchases of ChiNext constituents—particularly global-competitive leaders in semiconductor equipment and niche new-energy subsectors. The MSCI Emerging Markets Index’s record high further reflects international capital’s reassessment of China’s technology-growth assets.

Third, margin leverage is accelerating toward high-beta themes. Total turnover on the Shanghai and Shenzhen exchanges reached RMB 2.08 trillion in the morning session, with margin buying heavily concentrated in short-video dramas, AI computing, and power equipment. Margin capital reacts with exceptional sensitivity to near-term catalysts—such as detailed policy implementation rules or blockbuster product launches—thereby amplifying both the slope and sustainability of thematic rallies.

Liquidity Allocation Mechanism: A Paradigm Shift from “Casting a Wide Net” to “Drilling Deep Wells”

This round of divergence fundamentally reflects an upgrade in the A-share market’s liquidity allocation mechanism. The old “chasing small caps and low-quality stocks” logic relied on abundant aggregate liquidity and broadly rising risk appetite. Today, amid constrained total liquidity, allocation has pivoted to “efficiency-first, theme-supremacy.”

• Across the time dimension, capital favors themes with clear earnings realization paths within the next 6–12 months (e.g., short-video drama revenue recognition in Q2, rapid order ramp-up for power equipment), not long-term narratives lacking near-term earnings traction.
• Across the space dimension, capital “drills deep wells” within niche subsectors—for example, bypassing chip design entirely to focus directly on semiconductor equipment and materials, where domestic substitution is more certain and strategic positioning tighter.
• Across the risk dimension, investors use ETFs for thematic hedging: CSI 1000 and CSI 500 ETFs saw significant net outflows in the morning session, whereas ChiNext ETFs and STAR Chip ETFs attracted sustained inflows—confirming that capital is not abandoning small caps per se, but rather abandoning small caps lacking thematic support, while embracing those empowered by strong thematic narratives.

Forward Implications: Structural Rebalancing Window Opens for CSI 1000/500 ETFs

For investors in CSI 1000 and CSI 500 index ETFs, the current divergence presents a major opportunity for structural rebalancing. While both indices face overall pressure, many of their constituent companies are deeply embedded in national strategic priorities—including AI applications, next-generation power systems, and advanced manufacturing. As thematic momentum intensifies, high-quality names aligned with these trends will likely be rapidly identified and absorbed into mainstream institutional portfolios. Going forward, continued policy catalysis—such as dedicated support for AI applications or detailed investment guidelines for next-generation power systems—could trigger valuation upgrades and capital inflows for CSI 1000/500 constituents well-positioned within these themes. This would drive related ETFs beyond passive tracking toward “thematic enhancement.” Investors must move beyond viewing indices as monolithic entities and instead assess how closely their underlying assets align with national strategic imperatives—capturing structural alpha within the index framework.

This episode of extreme A-share divergence represents an efficient “stress test” conducted by the market under liquidity constraints. It marks the definitive end of the era of crude, cyclical style rotation—and heralds the dawn of a new competitive cycle, where core competencies center on industrial insight, thematic penetration, and executional precision. When capital no longer asks “large-cap or small-cap?” but only “are you positioned at the irreversible entrance to a megatrend?”, true excess returns will forever belong to rational participants who can fluently interpret the language of policy, industry pulse, and capital flows.