Table of Contents

• You might want to know


• Main Topic


• Key Insights Table


• Afterwards...

You might want to know

1. With the recent market rotation, will semiconductor-related stocks sustain their relative strength amid broad declines?

2. Can the renewed momentum in coal and power sectors coexist with long-term decarbonization goals and still drive meaningful returns?

Main Topic

On Thursday, China’s A-share market experienced broad-based weakness: the three major indexes declined and market breadth was heavily negative, with over 4,100 stocks falling. Total A-share turnover reached approximately RMB 2.78 trillion, down by about RMB 374 billion from the previous trading day. Despite the overall retreat, technology-related sectors—particularly segments of the semiconductor chain—showed pockets of relative strength, highlighting a rotation both within tech and between tech and non-tech sectors.

Market action over the recent sessions can be read as a sequence: last Friday and earlier this week traders executed a pattern of selling at higher levels and buying back at lower ones, producing a ‘high-low cut’ effect across sessions. On Wednesday the market fell sharply in the afternoon but technology names staged a late recovery into the close — a move that likely set the stage for the follow-through observed on Thursday. While key indexes such as the Shanghai Composite and ChiNext did not materially change their medium-term trajectories, internal dynamics within sectors evolved with fresh leadership emerging in certain semiconductor-related niches and divergent behavior among traditional cyclical names.

Focusing on semiconductor themes, the optical module (CPO) index on the Wind platform had rebounded earlier in the week but slipped with the broader market on Wednesday, leaving a significant upper shadow on its price bars — a technical indication that some profit-taking or consolidation was needed. Intraday price action and ETF flows in telecom-related products showed attempts at intraday recovery, but net trading favored longer intervals of volatility below the highs. Against that backdrop, parts of the chip supply chain that had shown more muted rebounds in the earlier ‘high-low cut’ episodes—such as electronic chemicals, glass substrates, memory chips, and advanced packaging—attracted fresh buying interest. This selective buying suggests that investors were rotating into themes perceived to have clearer fundamental or catalytic drivers.

A representative example among individual names is BOE Technology Group (京东方A), which in the morning session rallied to a daily limit and printed a year-to-date high. On June 3, BOE was added to the CPO concept on the Tonghuashun platform and disclosed during an institutional research meeting that it is investing RMB 993 million in a glass substrate packaging carrier test line. The company reported that it has delivered samples to domestic customers and that some clients have passed concept verification and entered technical testing phases. Crucially, however, the firm emphasized that the line has not reached mass-production yields and the business has not yet generated volume revenue; timing of scalable production remains highly uncertain. Such disclosures illustrate the tension between technological progress and the practical uncertainties that can limit near-term earnings impact.

Macro and industry forecasts add context to the bullish case for semiconductors. The World Semiconductor Trade Statistics organization projects the global semiconductor market could expand by nearly 90% between 2025 and 2026, reaching about USD 1.51 trillion (roughly RMB 10.2 trillion). Similarly, TrendForce has materially raised its global memory output value estimates: its 2026 projection jumped from USD 55.16 billion to USD 88.93 billion, and its 2027 outlook was revised above USD 128 billion, corresponding to an approximate annual growth rate of 44%. Such revisions reflect stronger-than-expected demand and tighter supply conditions in certain segments of the memory market.

Sentiment and event-driven flows also matter. Market chatter reported that NVIDIA CEO Jensen Huang was expected to visit South Korea for a multi-day trip, meeting key semiconductor partners, internet platforms, gaming companies, and startups. Historically, high-profile trips and partnership news around NVIDIA have triggered short-term sector rotation and speculative flows into related chains. Some short-term funds may have therefore taken positions in storage chip plays anticipating a new catalyzing announcement or partnership momentum.

Broker commentary provides an additional lens. For example, China Post Securities highlighted the potential upswing in niche DRAM pricing during an upcycle and suggested that niche memory types could see continued price appreciation into 2026, with a possible plateau or mild reversion from peak levels afterward as incremental capacity comes online. The firm noted that even if prices moderate post-2027, they may still remain elevated relative to previous cycles—another factor underwriting investor interest in memory-related exposure now.

Beyond tech, certain traditional sectors demonstrated renewed strength. Coal and power stocks had been notable performers in recent sessions. On Thursday, the power sector initially rallied but retreated, while coal-related equities advanced and the coal-mining and processing index set a new historic high according to Tonghuashun data. Spot and futures prices in coking coal rose more than 4% intraday, driven in part by widespread mine shutdowns for safety inspections in late May that tightened physical supply. Policy and investment trends also support the rally: the International Energy Agency’s 2026 World Energy Investment report forecasts global energy investment near USD 3.4 trillion, with coal-related investment projected to rebound to roughly USD 18 billion in 2026—the highest since 2012—with China accounting for close to 70% of global coal supply investment.

Broker research teams covering coal cite four main drivers for the sector’s current strength: persistent geopolitical risk and high oil prices that increase the relative value of coal under energy-security considerations; production curbs and fiscal policy shifts in major exporters like Indonesia that support seaborne coal prices; China’s domestic policy mix—balancing energy security, emissions goals, and capacity rationalization—that points to reduced supply and higher prices; and tight domestic inventories heading into seasonal demand peaks. Combined, these factors provide a multi-front case for near-term upside in coal prices and related equities.

Overall, Thursday’s market paints a picture of selective resilience amid broad weakness: technology, especially parts of the semiconductor chain, drew strategic flows backed by industry forecasts and company-level developments, while cyclical energy segments—coal in particular—benefited from supply-side tightening and policy-driven investment flows. Investors face a dual dynamic: discerning which sector-specific fundamentals can deliver sustainable earnings upgrades, and navigating event-driven, short-term rotations that amplify volatility.

Key Insights Table

Afterwards...

Looking ahead, investors should weigh two concurrent threads: fundamental upgrades in specialized semiconductor subsegments supported by raised market forecasts and corporate R&D efforts, and cyclical strength in energy-related names driven by supply-side adjustments and geopolitical dynamics. For longer-term positioning, prioritize companies with demonstrable paths to scaled production or durable pricing power. For shorter-term trading, remain attentive to event-driven catalysts—earnings, supply-chain announcements, and high-profile industry visits—that can quickly reallocate market leadership. Balance conviction with risk management: volatility may persist as the market digests shifting sector leadership and evolving macro signals.