CICC: Mid-term market support for A-shares is stable, focusing on two major directions

The Zhitong Finance App learned that CICC released a research report saying that looking ahead to the market, the booming industry had shown excess profits in the early stages, but since trade in the Strait of Hormuz was still blocked, after crude oil leaving the Middle East before the US-Iran conflict arrived one after another in April, global onshore oil stocks will face degenerative pressure. Crude oil prices may remain high in the second quarter, which may affect market sentiment. However, the current profit situation of A-share companies has improved. Market valuations are relatively reasonable, and the share risk premium of the Shanghai and Shenzhen 300 Index exceeds 5%. The Politburo meeting at the end of April set a positive tone and proposed “stabilizing and enhancing confidence in the capital market”. The effectiveness of the capital market in supporting China's economic transformation in the medium term will continue to be unleashed, and the logic of stabilizing the market situation still holds true.

In terms of configuration, the growth style still has an advantage, but the relative performance of other sectors has subsided this year. CICC believes that the determining factors in the growth market are booming industrial trends and profit delivery, and their importance often exceeds other factors such as macro, valuation, and capital. After the past three years of de-capacity cycles and the promotion of policies such as “anti-internal volume”, more and more procyclical industries are expected to benefit from the rebalancing of supply and demand. Focus on: 1) Economic growth: the capital expenditure of AI leaders continues to grow at a high rate, and it is still recommended to focus on infrastructure, such as semiconductors, electronic hardware, optical communications, etc. Fields such as energy storage batteries and innovative drugs also deserve attention. 2) Cycle improvement: Considering the geographical situation and the possibility of an increase in the oil price center, as well as the position of the industry's production capacity cycle, it is recommended to focus on chemicals, energy metals, etc. that support price increases in the supply and demand pattern, and power grid equipment, construction machinery, etc. that benefit from the trend of going overseas.

Overequipped industries in May: power and electrical equipment, power generation and power grids, communication equipment, semiconductors, basic chemicals.

Low-grade industries in May: construction and engineering, textiles and clothing, education, light and household goods, retail.

Crude oil prices were high in April, but after the US and Iran reached a phased cease-fire agreement, optimistic expectations boosted the recovery of major global stock markets, and structurally traded around performance and prosperity. The Shanghai Composite Index, the Shanghai and Shenzhen 300 Index, and the GEM Index rose by 6%, 8%, and 15% respectively. The GEM index hit new highs in recent years. The electronics, communications, machinery and other industries led the increase, and the booming sector became the main line of increase.

The quarterly reports of listed companies have been revealed one after another, and the trend of improving A-share profits has been verified. The overall net profit growth rate of A-shares has rebounded steadily, and the structure is fragmented. With domestic demand to be boosted, commodity price increases, global artificial intelligence capital expenditure expansion, export resilience of Chinese companies, and improved supply and demand patterns are still areas where the A-share market is relatively prosperous. Sectors that have achieved positive net profit growth in 2025 and have the highest year-on-year increase in net profit in 2026Q1 include: basic chemicals (adhesives, potash, textile chemicals, coal chemicals, fluorochemicals, adhesives and tape, etc.), non-ferrous metals (lithium, silver, tungsten, aluminum, cobalt, gold, rare earth, etc.), communication network equipment and devices, communication cables and accessories, printed circuit boards, digital chip design, semiconductor equipment, integrated circuit packaging, passive components, consumer electronic components and assembly, lithium chemicals Special electric equipment, lithium batteries, games, air transportation, marine equipment, Cross-border e-commerce, natural attractions, hotels, express delivery, innovative drugs, power transmission and transformation equipment, etc. In the future, we will continue to pay attention to the transmission of price increases for resource products and basic materials, and the improvement in downstream demand.

With the continuous iteration of AI model technology and the spread of agent applications, demand for computing power drives the performance improvement of related companies. Currently, the computing power industry chain is in a period of performance realization, and overseas computing power chains are showing strong performance. Major North American cloud vendors will continue to upgrade Capex in 2026, directly benefiting from optical modules, PCBs, server power supplies, and computing power leasing. In terms of domestic computing power, DeepSeek V4 is built based on the Huawei Shengteng ecosystem. Major model manufacturers such as Smart Spectrum have adapted domestic computing power chips, and the net profit of some chips and servers has increased year-on-year in 2026Q1.

Capital expenditure represents an enterprise's optimistic expectations of future demand, and is also an important factor in determining the sustainability of profits and the ability to grow. Before 2023, China's inventory cycle time span showed a clear pattern. The average duration of a cycle was about 3 years. The growth rate of capital expenditure of listed companies was directly related to the inventory cycle, but this pattern was changing as the real estate chain boom declined and the economy transformed. Capital expenditure is mainly achieved by increasing profits and improving ROE through production expansion. The timing of production expansion determines the sustainability and flexibility of profit release, and there are differences between industries. The capital expenditure growth rate of A-share non-financial enterprises turned negative from 2Q24 and experienced negative growth for 6 consecutive quarters. 2026Q1 continued to correct, with a year-on-year growth rate of 4%. Operating cash flow is the main source of funding for capital expenditure improvements, with a year-on-year increase of 4% in 2026Q1. Non-ferrous metals, components, consumer electronics, communication equipment, power grid equipment, marine equipment, aerospace equipment, medical services and other industries are in the process of improving cash flow and expanding capital expenditure.

Chart 1: CICC A-share industry allocation views and sub-segments

Note: Data as of April 30, 2026

Source: FactSet, Wind, CICC Research Division

Chart 2: Fundamentals of A-share segments

Note: Data as of April 30, 2026, using Wind's consistent expectations

Source: FactSet, Wind, CICC Research Division

Chart 3: Price performance of major energy and basic materials

Note: Data as of April 30, 2026

Source: Wind, CICC Finishing, CICC Research Division