Markets Show Mixed Performance as Sector Rotation Continues
Chinese markets exhibited divergent performance on Wednesday, with the ChiNext Index leading gains during a day of volatile trading. The Shanghai and Shenzhen exchanges recorded combined turnover of 1.29 trillion yuan, representing a 137.4 billion yuan increase from the previous session.
Sector performance varied significantly, with CPO technology, football-related concepts, power IoT, and stablecoin-related stocks among the top gainers. Conversely, beauty care, food processing, beverage manufacturing, and CRO sectors underperformed. Benchmark indices closed with modest gains: the Shanghai Composite rose 0.23%, the Shenzhen Component gained 0.58%, while the ChiNext Index advanced 1.17%.
Key Takeaways from Brokerage Morning Meetings
Major Chinese brokerages highlighted three critical developments during their morning briefings:
CITIC Securities emphasized the implications of Hong Kong’s stablecoin legislation for financial technology acceleration. Galaxy Securities analyzed the potential impact of new power system pilot projects on renewable energy integration. Meanwhile, Huatai Securities cautioned about potential moderation in export growth momentum.
CITIC Securities: Stablecoin Legislation Marks FinTech Milestone
CITIC Securities analysts highlighted the significance of Hong Kong’s Stablecoin Ordinance, published in the government gazette on May 30. This landmark legislation establishes a licensing framework for fiat-backed stablecoin issuers, representing the world’s first comprehensive regulatory framework based on value-anchoring principles.
The ordinance rests on three pillars: risk-based supervision, licensing requirements, and multi-currency compatibility. The brokerage identifies three investment opportunities emerging from this regulatory development:
Stablecoin Ecosystem Opportunities
1. Issuance and Custody Infrastructure: Licensed issuers and qualified custodians stand to benefit from the new regulatory clarity.
2. Technical Infrastructure: Blockchain providers, security certification services, and regulatory technology providers will see increased demand.
3. Application Layer: Cross-border payments, real-world asset (RWA) tokenization, and FinTech solutions represent promising downstream applications.
Galaxy Securities: Power System Pilot Projects to Boost Renewable Integration
Galaxy Securities analysts pointed to China’s National Energy Administration notice issued June 4, launching pilot projects across seven critical areas of power system modernization. These include grid-forming technologies, renewable-friendly power stations, smart microgrids, and next-generation coal power integration.
The initiative aims to address renewable energy curtailment challenges while creating opportunities for equipment manufacturers and technology providers specializing in advanced power solutions.
Huatai Securities: Export Growth May Moderate
Huatai Securities economists observed that while May economic activity data showed year-on-year stability, certain indicators displayed sequential moderation. They attribute recent export volatility to temporary factors including US tariff policy fluctuations and inventory rebuilding.
The analysts caution that export growth may face headwinds as the front-loading effect diminishes and global inventory levels normalize. Meanwhile, government bond issuance continues to expand year-on-year, though at a decelerating pace, suggesting policymakers may adopt a wait-and-see approach regarding additional stimulus measures.
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