Northbound net inflow exceeds 5 billion in a single week, "high dividend + high technology" barbell strategy continues to attract attention

In the first week of June 2024, northbound funds flowed into China with a total of 5.305 billion yuan: Shanghai-Hong Kong Stock Connect saw a net inflow of 5.611 billion yuan, while Shenzhen-Hong Kong Stock Connect saw a net outflow of 0.308 billion yuan.

Foreign investors are bullish on Chinese assets. On June 4th, UBS released a report stating that they have raised the year-end target for the MSCI China Index, indicating a positive outlook on the Chinese stock market. The report predicts that the sales volume of mainland real estate will gradually stabilize in the next two quarters, with real estate prices expected to stabilize next year.

With the support of new catalysts and continuously rising valuations, UBS has further raised the year-end target for the MSCI China Index to 69 points. In an optimistic scenario where earnings growth exceeds expectations, UBS expects Chinese stock market valuations to rise slightly above the long-term average level, supporting the MSCI China Index target to rise to 72 points.

Over 10 Billion Yuan Invested in Three Major Industries

The top three industries with the highest net inflows of northbound funds this week are electronics (38.03 billion yuan), electricity and utilities (34.29 billion yuan), and pharmaceuticals (33.73 billion yuan); while the industries with the most outflows are food and beverages (-30.81 billion yuan), home appliances (-18.81 billion yuan), and non-bank financials (-18.04 billion yuan).

The electronics industry benefited mainly from the strong performance of the PCB sector this week.

Zheng Securities pointed out that the internal PCB of GB200NVL72 mainly includes Superchip, NIC, DPU, NVLinkSwitch, and other accessory cards. The integration level of GB200NVL72 continues to increase, with performance, high-frequency materials, bandwidth transmission rates, and power dissipation and heat dissipation all increasing significantly. The increase in integration corresponds to an increase in PCB wiring density, as well as the enhancement of transmission and heat dissipation capabilities, which are the advantages of HDI boards. The NVLinkSwitch PCB, similar to switch products or adopting an HDI solution, will further increase the usage of HDI in servers.

It is estimated that the total value of GB200NVL72's PCB is about $24,900 to $33,945, corresponding to a value of about $263 to $459 per single GPU HDI, with an increase of approximately 171.9% to 374.4% compared to the $97 of H100. It is evident that AI server PCBs are evolving towards full HDI.

There were still unusual movements in the power sector reform this week. On the news front, on June 4th, the National Energy Administration issued a notice on "Ensuring the Guarantee of New Energy Consumption Work to Promote the High-Quality Development of New Energy." The notice mentions fully leveraging the role of the electricity market mechanism. Provincial energy regulatory authorities, dispatched agencies of the National Energy Administration, and relevant departments will accelerate the construction of electricity market mechanisms that are compatible with the characteristics of new energy according to their responsibilities China Thai Securities believes that the power system reform brings incremental benefits to "generation, transmission, distribution, and sales". Firstly, the acceleration of smart grid construction brings new development opportunities for the power reform of "generation, transmission, distribution, and sales", with the investment proportion in the consumption/transformation/distribution of electricity gradually increasing, and the consumption of electricity ranking first in power intelligence investment. Secondly, looking at different segments, on the generation side, multi-directional coordination and flexible interaction through source-grid-load-storage promote the access and management of distributed energy; on the transmission/distribution side, the use of automation technology and real-time data analysis improves the dispatch efficiency and reliability of the power grid; on the consumption side, the transition from fixed electricity prices to market-based electricity prices achieves more efficient power consumption.

The pharmaceutical industry received a major policy catalyst this week. On June 6th, the General Office of the State Council issued the "Key Tasks of Deepening the Reform of the Medical and Health System by 2024". It formulated guiding documents to support the development of innovative drugs throughout the entire chain. Accelerate the evaluation and approval of innovative drugs, orphan drugs, urgently needed clinical drugs, as well as innovative medical devices and epidemic prevention and control drugs.

Caxin Securities stated that during the 13th Five-Year Plan period, the initial construction of the domestic innovative pharmaceutical industry has completed a relatively complete innovation ecosystem integrating the three major elements of policy, talent, and capital. The fundamental changes in the system and the successful construction of the system have driven the rapid aggregation of production factors, and the industrial structure is being reshaped. Entering the 14th Five-Year Plan, the industry is moving towards high-quality development stages such as research and development upgrades, innovation pursuit, and international integration, and the pharmaceutical and biological industry is facing a historical opportunity for transformation and upgrading.

Contrarian Bottom Fishing in AI PC Popular Stocks

In terms of individual stock increase ratios, Longyang Electronics ranks first with 2.88%, followed by Xinda Securities and Raina Intelligent with ratios of 2.60% and 2.14% respectively.

Longyang Electronics was previously a popular AI PC stock, but experienced a significant pullback this week.

The company has been deeply involved in the consumer electronics field for many years, mastering core technologies such as winding-type vacuum magnetron sputtering and composite coating technology, flexible shielding material technology, and has established long-term stable cooperative relationships with well-known OEM factories such as Foxconn, Quanta, Compal, Wistron, and Inventec.

CITIC Securities stated that since 2023, the year-on-year decline in global PC shipments has gradually narrowed by quarter, indicating that the PC market is gradually emerging from its trough. In 2024, benefiting from the arrival of the replacement cycle, the discontinuation of Windows 10, and the penetration of AIPC, the PC industry is expected to resume growth, and the company's electromagnetic shielding and heat dissipation material business is expected to return to a growth trajectory. In addition, with the gradual release of the production capacity of the company's first composite copper foil factory, the company is expected to open up growth space.

Although the brokerage sector experienced a sharp decline on Friday, the trend of industry consolidation is evident.

China Aviation Securities stated that the current regulations clearly encourage industry consolidation. Under the trend of policy-driven high-quality development of the securities industry, mergers and acquisitions are an effective means for securities firms to achieve external development. Mergers and acquisitions in the securities industry play a positive role in enhancing the overall competitiveness of the industry, optimizing resource allocation, and promoting healthy market development. At the same time, industry consolidation helps to increase industry concentration and form economies of scale. It is expected that mergers and acquisitions in the industry will continue to accelerate Earlier, according to Xinhua Finance, it has been confirmed by industry insiders that China Cinda, Oriental Asset, and Great Wall Asset, three asset management companies, will be transferred to China Investment Corporation in the near future. China Cinda is the major shareholder of Cinda Securities, while Oriental Asset is the major shareholder of Dongxing Securities.

In terms of increased positions, leading blue-chip companies such as Yangtze Power and semiconductor company Nothern Huachuang received significant buying from northbound funds exceeding 1 billion.

Data shows that Yangtze Power, as a leading domestic hydropower company, with its high dividend characteristics, is one of the most favored directions for funds this year. Haitong Securities predicts that in the second quarter, with the improvement in water supply, the performance of the company's large hydropower business is expected to increase year-on-year. At the same time, they believe that the company's stable cash dividend total, which is steadily increasing, is valuable. Against the backdrop of declining return rate demands from investors, the value of the company's stable dividend is expected to increase, and the timing for the company's valuation system to be reshaped is just right.

This week, Nine Energy, which was bought by institutions and northbound funds simultaneously, received a net purchase of over 80 million yuan from institutions and nearly 30 million yuan from the Shanghai-Hong Kong Stock Connect