【Focus Review】The Shanghai Composite Index rose to highs and then pulled back, losing the 3,900-point level again. The commercial aerospace concept remains active, while Zhang Xue’s locomotive concept breaks out against the trend.

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Caixin Media, March 31: Today, 53 stocks hit the daily limit up, 17 hit limit-up but then failed (“broke the board”); the board-closure rate was 76%. Shenjian Co., Ltd. achieved four consecutive limit-ups; Jin Yao Pharmaceutical reached three consecutive limit-ups; Xinnengtai Mountain reached five limit-ups in six days; Shu’a Sports reached five limit-ups in eight days; Wanbangde reached four limit-ups in six days; Datongnan reached three limit-ups in four days; China Railway Materials reached three limit-ups in five days. The market rose sharply throughout the day and then pulled back; both the ChiNext Index and the STAR 50 Index fell by more than 2.5%. The total trading value on both the Shanghai and Shenzhen markets was 1.99 trillion yuan, up by 76.8 billion yuan from the previous trading day. On the trading front, market hotspots rotated in weakness, and more than 4,300 stocks across the whole market closed lower. By sector, sports, high-speed rail track transportation, complete automobiles, and banks led; agriculture, wind-power equipment, lithium batteries, and semiconductors led the declines. By the close, the Shanghai Composite Index fell 0.8%, the Shenzhen Component Index fell 1.81%, and the ChiNext Index fell 2.70%.

Analysis of Momentum and Consecutive Limit-Up Stocks

The qualification rate for stocks to advance to the next stage of consecutive limit-ups dropped to 16.67%. Stocks with three or more consecutive limit-ups still remained at a low level of only 2. Among the 10 stocks that were on two consecutive limit-ups yesterday, only 1 managed to advance. After the earlier five-day consecutive limit-up “highest leader” Minowa Pharmaceutical broke its board and plunged, the maximum consecutive-limit height fell to four consecutive limit-ups—Shenjian Co., Ltd. As market continued to digest heightened expectations regarding tensions in the Middle East, the new-energy tracks that had previously led—led by lithium batteries and energy storage—as well as price-increase concepts driven by tight energy supply such as chemicals and coal saw a synchronized pullback today. Many stocks, including Jinniu Chemical, rushed close to limit-down; Haibo Si Chuang and Yiwei Lithium Energy, among others, landed near the top of the decline list. At present, uncertainty in market expectations for listed companies’ annual reports and first-quarter reports remains the main reason behind the gradual unraveling of the trend of “crowding into positions” in the market direction. Some lagging areas that previously had high-growth earnings expectations can still be actively explored.

Main Line Hot Topics

On March 30 at 19:00, the Lijian-2 Yao-1 launch vehicle completed its maiden flight successfully at the Dongfeng Commercial Aerospace Innovation and Test Zone, sending the Xinzai Cheng 01 and 02 satellites, as well as the Tian Shi satellite 01, into orbit. The commercial aerospace concept was boosted again. The consecutive-limit-up momentum stock Shenjian Co., Ltd. achieved another upgrade to four consecutive limit-ups, driving Shunhao Co., Ltd., Juliliyi, and Datongda Co., Ltd. to reach the daily limit up; Transcend Technology and SenCe Testing also refreshed historical highs. According to a set of cost data disclosed by CASC Space—this 625-ton-lift rocket’s unit cost in a non-recovery mode is already close to the level of SpaceX Falcon 9 in recovery mode. After SpaceX’s upcoming IPO ignition of sector heat, domestic series of catalysts are also expected to matter even more. Since last year, multiple commercial aerospace companies—including Blue Arrow Aerospace, Galaxy Aerospace, Yixin Aerospace, CASC Space, MicroNova Xinkong, Tianbing Technology, and Xinghe Power—have submitted tutoring and filing materials to prepare to list on the capital market. However, compared with the many catalytic “side-quests” that previously helped, such as space computing and space photovoltaics, the overall performance of the sub-sectors that historically drove the commercial aerospace concept trading has still been relatively calm. Therefore, trying to replicate the strength of the green-power industrial chain remains extremely difficult.

A CCTV Finance report said that the Shanghai–Chongqing–Chengdu riverside high-speed railway—one of the 109 major projects in the “15th Five-Year Plan” period—is accelerating its progress: total investment of over 500 billion yuan, planned total length of about 2,000 kilometers, extending from Shanghai to Chengdu and connecting the three major urban agglomerations of the Yangtze River Delta, the mid-Yangtze River region, and the Chengdu–Chongqing region. After a period of unusual movement yesterday afternoon, the high-speed rail industry chain became active again. After Shenzhou High-Speed Rail opened and quickly achieved a two-day consecutive limit-up, it drove Jin Ying Heavy Industry, China Railway Engineering, and Jinxi Rolling Stock to hit the daily limit up, while Jiaotong University Railway and Tongye Technology both rose by more than 10%. Looking back at the entire large infrastructure buildout sector, the prior round of high-level momentum in this sector dates back to the super hydropower concept in July last year. After reaching tops, most momentum stocks within the sector have already undergone adjustments lasting more than half a year. Therefore, with news-driven stimulation, the pulse-like rebound and catch-up gains in these oversold low-position directions are also understandable. Similar to the large infrastructure sector, the recent sustained activity in the Fujian sector is also in sync with its own oversold characteristics and the impact of some sudden news stimuli; with overall market sentiment weak at the moment, some independent-logic directions are still easier for short-term speculative capital to favor.

According to reports, in the World Superbike Championship (WSBK) Portuguese round that ended on March 29, in the WorldSSP category, the Chinese motorcycle manufacturer “Zhangxue Motorcycle” won in both races of that event. In the afternoon, the motorcycle concept rebounded against the trend. Hongchang Technology achieved a 20-centimeter two-day consecutive limit-up, which then drove Zhenghe Industrial, Qianjiang Motorcycle, and Fu’ao Shares to hit the daily limit up; Hongquan Technology, Huayang Racing, and Jiuqi Shares were among those that also topped the gain list. As Zhangxue Motorcycle’s popularity increases, orders for related bestselling models are expected to surge further, which may also drive high-visibility growth in relevant subfields such as key components. In fact, in recent times, sports concept heat has already been rising steadily. In addition to Shu’a Sports approaching its historical high—reflecting the popularity of the Fujian sector—sports-related names such as China Sports Industry, Nanjing Sports, and Create Grass Lawn have also recently performed impressively. This may be related to the upcoming local football events such as “Jusuper” and “Yue Super,” as well as the World Cup opening in June that follows. However, today Zhangxue Motorcycle’s concept quickly accelerated and then drove batch catch-up gains in subfields such as motorcycles and auto parts; whether short-term strength can be further enhanced still needs to be observed—specifically, whether there will emerge consecutive-limit-up momentum stocks with high recognizability.

Recently, a large number of leading companies in the innovative drug industry have shown strong overall performance. Innovative drug concept momentum has remained high. Yesterday, two CXO concept stocks that released annual reports—Kailaiying and Zhaoyan New Drug—both hit the daily limit up on the back of performance that exceeded expectations. However, the earlier intraday shock and divergence in Minowa Pharmaceutical, which had five consecutive limit-ups, still had some impact on high-position stocks within the sector. Today, San Sheng Guojian and Rongchang Biotech—both of which refreshed historical highs yesterday—both began to adjust. This shows that the current sector-wide activity in innovative drugs is still mainly led by oversold repair driven by a batch of prior momentum stocks that have already experienced deep adjustments. From the overall growth storyline of the innovative drug industry, during the process of realizing earnings, it is still inevitably affected by many factors such as the surge in R&D expenses and uncertainties in clinical and commercialization timelines. As a long-duration growth industry, negative factors such as global liquidity tightening still easily disrupt sector momentum.

Outlook for the Next Phase

After the market briefly stabilized earlier, today it once again fell into a volume-driven broad sell-off. The Shanghai index surged and then pulled back again, once more failing to hold the 3,900-point level. The ChiNext Index, which had been more resilient, closed with a “bare-legged” bearish candle, and it broke through the six-month moving average in one go. From the perspective of individual stocks: today, while more than 4,300 stocks fell, although only 1 non-ST stock hit the daily limit-down, the batch pullback of leading weight stocks in several growth tracks may further pressure indices for growth directions such as “Dual Creation” (startup and innovation). Summarizing the March market performance: both the Northern Exchanges 50 (North Board 50) and the STAR 50 indices fell by more than 15%; the micro-cap index also dropped by more than 8%. This reflects a significant increase in the “losing money effect” for micro- and small-cap themed stocks this month. Whether the weight stocks of the ChiNext can continue to stand alone remains highly uncertain. With the concentrated release of many companies’ annual reports and first-quarter reports in April, a group of themed small-cap stocks that are currently still at historical or phase highs should mainly be avoided.

Today’s Limit-Up Analysis Chart

(Caixin Media, Jin Haoming)