Xingzheng Strategy: A-Share K-Shaped Divergence Hits Extreme Not Seen Since 2009; Earnings Momentum Remains the Core Pricing Driver
Alina Collins
The all-A index is up 10.4% year-to-date, yet the median stock is down 10.9% — the sector return spread has hit its widest since 2009. Industrial Securities argues structural economic transition is driving the split, and whether high-growth sectors deliver on earnings will determine if this divergence can last.
The index is up, the median stock is down — how extreme is the K-shaped split?
As of June 18, the all-A index gained 10.4% YTD while the median stock fell 10.9%. The gap has widened steadily since April.
The trailing-one-year return spread across tier-one sectors — the gap between the best and worst performers — has hit a post-2009 high.
In food & beverage, real estate, consumer services, and coal, over 30% of stocks have fallen back to pre-"924 rally" levels. This means → for holders of these sectors, last year's rebound gains have been fully erased.
Why has it diverged this far — sentiment or fundamentals?
Industrial Securities concludes the driver is not shifting risk appetite or overseas spillover, but a deepening domestic consensus that the economy and policy are structurally splitting.
May data illustrates the point: retail sales and fixed-asset investment growth both turned negative, yet AI-related high-tech exports grew nearly 65% YoY over the first five months — far above the 15.5% pace for total exports. In plain terms = the old economy is slowing while tech exports are surging, and the two lines keep pulling apart.
Signals from the Lujiazui Forum reinforced the same direction: regulators stated that "maintaining past credit growth rates across the board is neither feasible nor necessary," while expanding the STAR Market's fifth listing standard to cover artificial intelligence. This reflects a policy centre of gravity that has decisively shifted toward tech innovation rather than broad-based easing.
What does Japan's 1970s–80s experience tell us?
Industrial Securities draws on Japan's post-first-oil-crisis transition to high-end manufacturing: autos, electronics, and precision instruments became the bull-market leaders for the entire golden era.
Consumption and real estate lagged the core sectors but saw periodic improvement once manufacturing upgrades lifted middle-class purchasing power.
This means → if tech and advanced manufacturing become China's new growth engine, real estate and consumption become late-cycle "followers." A style "broadening" is unlikely to be a systematic "rotation" — instead, the leading sectors deliver first, and spill-over follows.
What to buy now — where is the earnings-momentum consensus?
With global liquidity tightening at the margin and July earnings season approaching, the market's primary pricing driver is shifting from valuation to earnings delivery.
The consensus is highly concentrated: AI compute hardware — optical communications, semiconductors, PCBs — remains the strongest conviction call. Select advanced-manufacturing segments (AI upstream equipment, battery storage, shipbuilding) have seen upward earnings revisions. Upstream resources (minor metals, energy metals, plastics) are also being pulled along by AI demand.
In plain terms = the market's highest-conviction theme is "building AI infrastructure" — from optical modules to chips to circuit boards — where consensus is tightest and capital is most concentrated.
Which areas still have room to catch up?
Industrial Securities notes that optical modules, fibre-optic cable, memory, and semiconductor OSAT currently sit at moderate or below-average crowding levels.
Fibre-optic cable, power grids, edge-side chips — AI chips used in phones and end-devices — and robotics still show catch-up potential relative to comparable US-listed names.
This means → whether earnings momentum continues to deliver will be the key validation point for this divergence to persist — and July earnings season is the first test.
Content is for reference only, not financial advice.