China A-shares outperformed offshore markets in June, with AI infrastructure becoming the main theme

Overview

This report reviews the performance of the China A-share market in June 2026, sector rotation, fund flows, valuation and earnings revisions, and macro data. The core conclusion is that A-shares significantly outperformed Hong Kong equities and offshore Chinese stocks, mainly driven by the AI infrastructure theme, onshore liquidity, and a preference for growth style; however, at the real-economy level, consumption, property, and fixed-asset investment still showed substantial pressure.

Core views

The market focus in June centered on AI-related infrastructure and high-tech manufacturing. The IT sector continued to lead gains, while AI-related names in materials such as fiberglass and MLCC materials also performed strongly; financials saw internal divergence, with brokers supported by catch-up beta trades, while banks came under pressure from tighter regulation. Meanwhile, utilities, energy, and real estate lagged due to macro weakness, falling oil prices, and insufficient momentum in industry data.

Analysis framework

The report cross-validates market drivers by combining index and sector returns, the relative performance of A-shares versus Hong Kong and Chinese ADRs, EPFR fund flows, margin financing and securities lending, fund issuance, CSI-300 earnings revisions and valuations, and China's monthly macro indicators.

Methodology notes

• Market performanceComparison of index and sector returns

  Measure the relative strength of A-shares through monthly and year-to-date returns of the CSI-300, CSI-500, CSI-1000, Wind All A, HSI, and HSCEI.

  This framework shows that in June, A-share small- and mid-caps and growth style significantly outperformed offshore China equities, reflecting investor preference for AI infrastructure and assets benefiting from onshore liquidity.

• Earnings and valuationCSI-300 EPS revisions and FTM valuation

  Track CSI-300 consensus EPS growth, FTM P/E, FTM PEG, and sector-level EPS revisions.

  The report uses a 14.6x FTM P/E, 0.7x FTM PEG, and 24% 2026E EPS growth to assess the relative match between valuation and earnings expectations.

• LiquidityEPFR fund flows, margin balance, and fund issuance

  Use foreign fund flows, margin balance as a share of market cap, margin purchases as a share of turnover, and mutual fund issuance size to gauge market liquidity.

  A-shares saw an EPFR net outflow of US$0.4bn in June, but IT recorded a small net inflow; margin balance as a share of market cap rose to 2.85%, showing that onshore trading activity still had support.

• Macro validationActivity, inflation, credit, and FX indicators

  Assess the macro backdrop by combining industrial production, retail sales, fixed-asset investment, CPI, PPI, credit, TSF, FX reserves, exchange rates, and government bond yields.

  Macro data indicate that overall demand remains weak, but AI-related high-tech manufacturing, exports, and price pass-through provide selective bright spots.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China A-shares / CSI-300 / CSI-500 / CSI-1000

  Core assets covered by the report.

  Strengths

  Significantly outperformed Hong Kong equities and offshore Chinese stocks in June, supported by the AI theme, growth style, and onshore liquidity.

  Weaknesses

  Macro demand, consumption, and property investment remained weak, while foreign investors still posted a small net outflow.

  Comparison

  CSI-500 and CSI-1000 outperformed the CSI-300 and also significantly outperformed the HSI and HSCEI.

  Risks

  Stimulus policy below expectations, crowded AI thematic trading, and continued weakening in macro data.

• IT / AI infrastructure

  The strongest main theme and leading sector in June.

  Strengths

  The IT sector rose about 20% in June, supported by AI infrastructure proxy names, upstream semiconductors, and downstream electronics demand.

  Weaknesses

  Short-term gains have been large, which may create valuation and positioning crowding pressure.

  Comparison

  IT was the only A-share sector in EPFR data to record a small net inflow.

  Risks

  A slowdown in AI capex, weaker-than-expected earnings delivery, and regulatory or supply-chain disruptions.

• Materials

  A beneficiary sector of upstream AI-related materials.

  Strengths

  AI-related materials such as fiberglass and MLCC materials performed strongly.

  Weaknesses

  Pullbacks in gold- and aluminum-related stocks offset part of the gains.

  Comparison

  The materials sector returned about +3% in June, ranking among the top three.

  Risks

  Falling commodity prices, fluctuations in AI materials demand, and weaker-than-expected earnings revisions.

• Financials

  A sector influenced by both market beta and regulation.

  Strengths

  Non-bank financials, especially brokers, were supported by catch-up beta trades.

  Weaknesses

  Banks were pressured by tighter regulation and weak credit demand.

  Comparison

  Financials overall were about -1% in June, but internal performance diverged.

  Risks

  Further decline in loan growth, weaker TSF, regulatory penalties, or cooling capital-market turnover.

• Utilities / Energy / Real Estate

  The main lagging sectors in June.

  Strengths

  Some assets have defensive or dividend characteristics, but they did not receive market preference during the month.

  Weaknesses

  Utilities were dragged by macro weakness and the loss of favor for yield factors, energy by falling oil prices, and real estate by insufficient momentum in industry data.

  Comparison

  The three fell about 14%, 12%, and 11% respectively, significantly underperforming the broader market.

  Risks

  Further declines in property sales and investment, continued weakness in oil prices, and changes in preferences for rates and dividend styles.

• Consumer proxy assets

  Potential beneficiaries of policy stimulus trades.

  Strengths

  Offshore investors are paying more attention to a new round of stimulus around the July Politburo meeting, which may bring bargain-hunting interest.

  Weaknesses

  Local investors have low stimulus expectations, while May retail and auto sales remained weak.

  Comparison

  Compared with AI and high-tech manufacturing, consumption data currently lack clear improvement.

  Risks

  Insufficient policy stimulus, slow recovery in household confidence, and continued declines in auto and goods consumption.

Key data

• Performance of major A-share indices in JuneCSI-300 +1.8%, CSI-500 +8.0%, CSI-1000 +4.8%Over the same period, the HSI was -9.1% and the HSCEI was -10.3%, with A-shares significantly outperforming Hong Kong equities.
• Wind All A performanceJune +3.2%, year-to-date +11.5%Shows that A-shares overall still maintained positive returns.
• Top-performing sectors in JuneIT +19.6%, Materials +2.7%, Financials -1.3%IT was driven by AI infrastructure proxy names; materials were supported by AI-related materials but dragged by declines in gold and aluminum.
• Lagging sectors in JuneUtilities -14.1%, Energy -12.2%, Real Estate -10.6%Utilities were dragged by macro weakness and the loss of favor for yield factors, energy by falling oil prices, and real estate by insufficient momentum in industry data.
• CSI-300 earnings expectations2026E EPS growth 24%Consensus expectations remained broadly stable at the end of June.
• CSI-300 valuationFTM P/E 14.6x, FTM PEG 0.7xFTM P/E was about 1.7 standard deviations above the median since 2016, while FTM EPS growth YoY was 19.7%.
• Foreign fund flows into A-sharesEPFR net outflow of US$0.4bnThe period covers June 1 to 26, 2026; outflows mainly came from industrials, financials, and consumer discretionary, while IT was the only sector with a small net inflow.
• Margin trading activityMargin balance/market cap 2.85%, margin purchases/turnover about 10%Both are end-June data, showing that onshore risk appetite and trading activity still had support.
• Fund issuancePreliminary June equity/hybrid fund issuance of Rmb19bn/Rmb12bnFinal May data were revised up to Rmb26bn/Rmb56bn.
• May consumptionRetail sales YoY -0.6%, auto retail sales YoY -16.4%Overall consumption continued to weaken, with services consumption relatively better than goods consumption.
• May fixed-asset investmentFAI YoY -10.7%, year-to-date -4.1%Property FAI YoY -24.3% was the main drag; manufacturing and infrastructure investment also contracted.
• May industrial productionIndustrial production YoY +4.5%, seasonally adjusted MoM +0.2%High-tech manufacturing rose 15.1% YoY and equipment manufacturing 9.5% YoY, driven by the technology cycle and policy support.
• May inflationCPI YoY +1.2%, PPI YoY +3.9%AI-driven demand for computing power pushed up prices of metals, electrical equipment, and electronics.
• FX and ratesFX reserves US$3442.2bn, USD/CNY about 6.79, 10-year CGB yield 1.72%FX reserves increased by US$31.7bn, while the RMB exchange rate was broadly stable.

Impact & implications

The report suggests that short-term relative returns for A-shares will still depend on whether the AI infrastructure chain, growth style, and onshore trading activity can be sustained. If the July Politburo meeting delivers a stronger stimulus signal, consumer proxy assets may attract bargain-hunting allocation; but if stimulus falls short of expectations, combined with continued weakness in consumption, property, and investment, the market may shift back to defensives or see a pullback in crowded thematic trades.

Risks

• China's domestic demand continues to weaken, with no improvement in retail sales, property investment, and medium- to long-term corporate loans.
• The July Politburo meeting or subsequent policy stimulus may fall short of offshore investors' expectations.
• The AI infrastructure theme has risen too much in the short term, which may lead to crowded trades and valuation pullbacks.
• Foreign investors continue to post net outflows from A-shares, weighing on market risk appetite.
• Real estate industry data may fail to sustain momentum, further dragging fixed-asset investment and related industrial chains.
• Tighter regulation continues to pressure banks and some financial stocks.

What to watch

• Whether the July Politburo meeting releases a new round of pro-growth or consumption stimulus signals.
• Whether A-share trading activity, turnover, margin balance, and margin purchases as a share of turnover continue to rise.
• Changes in EPFR foreign fund flows and sector allocation across IT, consumer discretionary, financials, and others.
• Whether EPS revisions continue to trend upward for AI infrastructure, semiconductors, MLCC materials, and downstream electronics.
• Whether retail sales, auto sales, property FAI, and manufacturing FAI can stabilize.
• The impact of CPI, PPI, and AI-related cost pass-through on upstream materials and electronics prices.
• The impact of USD/CNY, FX reserves, and 10-year CGB yields on risk appetite.