For months, a central debate has paralyzed China’s equity markets: whether to stay with the high-flying 'crowded' trades in artificial intelligence or pivot to the 'cold stoves'—undervalued sectors like real estate and consumption that have long been neglected. Lin Rongxiong and his strategy team at SDIC Securities are now weighing in with a definitive stance. They argue that despite recent volatility, the AI-driven tech rally is far from its final peak, and a systematic move into laggard sectors remains premature.
The concept of 'herding' or 'clustering' (baotuan) is a defining characteristic of Chinese institutional behavior, where capital concentrates heavily in a single high-conviction narrative. Lin suggests that this trend is not merely speculative but reflects a lack of viable alternatives. While the 'rebalancing' pressure in A-shares reached a high point in mid-June, the structural dominance of AI has not been fundamentally shaken by these short-term price fluctuations.
Critically, the SDIC analysis points out that the macro 'grey swans'—unforeseen but impactful risks—needed to derail the AI momentum are not currently visible. Furthermore, the massive capital expenditure in AI globally remains difficult to disprove in the near term. This creates a vacuum where investors find more safety in the momentum of technology than in the bottom-fishing of distressed sectors like property or domestic consumption.
For those looking for a safety net, SDIC suggests a selective approach rather than a broad sector rotation. High-dividend assets like coal and high-beta sectors like brokerages offer some tactical value, but they are viewed as 'buffers' rather than replacements for the tech core. Emerging growth areas outside of AI, such as robotics and outbound new energy ventures, are also highlighted as potential beneficiaries should capital seek internal diversification within the growth category.
The strategy team’s advice to 'not sweat the first peak' suggests a belief in a classic 'M-top' or double-top market pattern. They contend that the market is currently experiencing a tactical rotation rather than a strategic exit. In their view, the 'General shouldn't dismount'—investors should remain committed to the primary industrial trend until the global tech cycle, particularly in the U.S. market, shows definitive signs of exhaustion.