The weight concentration rivals MAG7, with valuation and profitability both leading the way – ChiNext Index is rapidly evolving into the “Chinese version of Nasdaq.” As the robust performance in computing power and energy storage continues to materialize, along with the deepening clustering effect among leading technology exporters, the index attributes of the ChiNext Index have become increasingly aligned with those of Nasdaq. The fundamental logic supporting its medium-term outperformance continues to strengthen.

This week, the ChiNext Index surged by 6.65%, closing at 3,678 points, far outpacing all other broad-based indices in the A-share market and approaching the historical high of 3,982 points reached in June 2015. The latest research report from Guotou Securities’ strategy team, led by Lin Rongxiong, pointed out that the combined weighting of the top seven companies in the ChiNext Index – CATL, Zhongji Xuchuang, Neweasy, Eastmoney, Sungrow, Shenghong Technology, and Tianfu Communication – has risen sharply from approximately 10% in 2019 to about 47% to 48% currently, closely mirroring the evolution trend of MAG7’s weight in the Nasdaq.

This significant rise in concentration has been viewed by multiple institutions as a structural signal indicating that the ChiNext Index has entered a healthy operational mode. In a contemporaneous research report, Shenwan Hongyuan’s strategy team, led by Fu Jingtao, characterized the current rally of the ChiNext Index as “a typical case of momentum-driven investment”. The report concluded that stronger-than-expected earnings verification in computing power and energy storage, coupled with the resurgence of U.S. technology stocks and their spillover effects on the A-share market, together form the basis for the ChiNext’s independent performance. They also predicted that this favorable pattern may continue for some time.

From the perspective of valuation and profitability, the ChiNext Index currently trades at a P/E ratio of approximately 43x, below the historical 40th percentile, leaving an estimated upside potential of about 15% relative to the median historical valuation. Combined with forecasted earnings growth rates of 20% to 30% between 2026 and 2027, the predicted PEG stands at only 0.88, which is below 1 and relatively low among broad-based indices, suggesting that the process of earnings digesting valuation has entered a virtuous cycle.

Weight Concentration: The ‘MAG7-like’ Evolution from 10% to Nearly 48%

Guotou Securities’ strategy team conducted a systematic comparison of the historical evolution of weight concentration in the ChiNext Index with MAG7.

Data shows that the market capitalization proportion of MAG7 in the Nasdaq rose steadily from around 20% before 2012, reaching a peak of nearly 50% in 2024, and has since slightly retreated to approximately 45%. Similarly, the combined share of the top seven weighted companies in the ChiNext Index climbed sharply from about 10% in 2019 to the current level of approximately 47% to 48%, showing a highly consistent trend direction and final proportion.

The Guotou Securities team believes that the logic behind this structural evolution can be summarized as “where there is a trend, there is clustering.” Leading tech and export-oriented growth companies such as CATL, Zhongji Xuchuang, and Neweasy, supported by consistently strong performance, have become core targets for concentrated pricing by market funds, driving the ChiNext Index’s attributes closer to becoming the “Chinese version of Nasdaq.”

Valuation and Profitability: PEG Below 1, Growth Rate Leading All Broad-Based Indices

A horizontal comparison with Nasdaq further supports the above positioning.

According to research data from SDIC Securities, the ChiNext Index is currently valued at approximately 42 to 43 times the price-to-earnings (P/E) ratio, while the Nasdaq Index stands at around 43 to 44 times. The valuation levels are similar. However, in terms of projected earnings growth for 2026 to 2027, the ChiNext Index is expected to grow by 20% to 30%, significantly higher than the Nasdaq’s 10% to 20% during the same period. Overall, the predicted PEG for the ChiNext Index is about 0.88, lower not only compared to the Nasdaq but also below the average of all broad-based indices in the A-share market, giving it a relative advantage in current cross-sectional comparisons.

Notably, in the third quarter of last year, the P/E ratio of the ChiNext Index once exceeded 50 times, with its historical percentile reaching above 75%. Currently, however, the P/E ratio has returned to around 43 times, placing it below the historical median and at the 40th percentile. Based on this, the SDIC Securities team concluded that the ChiNext Index has entered a “benign mode of digesting valuations through profit growth,” alleviating valuation pressures in the short term.

Independent Trend: Dual Drivers of Growth Momentum Validation and U.S. Market Spillover

The strategy team at Shenwan Hongyuan provided further explanation for the standout performance of the ChiNext Index based on the structural logic of the market trend.

The team’s research report noted that during the consolidation phase between the two stages of a rising market trend, historical patterns show weak sector linkage, making independent trends among a few sectors the norm. The current independent trend of the ChiNext Index is driven by two factors:

First, better-than-expected earnings validation in the computing power and energy storage sectors provides support as a ‘classic example of momentum-driven investment.’

Second, the resurgence of U.S. technology stocks, with the Nasdaq reaching new highs in this cycle, has created a spillover effect in the A-share market, driving the ChiNext Index to similarly achieve new cyclical highs.

The Shenwan Hongyuan team further outlined the general path of structural market trends: industry momentum validation → stock price increase and valuation expansion → reduced short-term attractiveness and emerging medium-term valuation constraints → market stagnation awaiting new catalysts. Based on this framework, the team judged that the recent gains in leading technology companies with better-than-expected earnings have matched their valuation digestion. ‘Short-term attractiveness remains, and medium-term attractiveness stays unchanged,’ indicating that the ChiNext Index may continue to outperform for some time.

Market Outlook: ‘New Ning Combination’ Anchors Dual Themes of Technology and Overseas Expansion

The SDIC Securities team contextualized the current ChiNext trend within a longer-term structural narrative, defining the ‘AI supply-demand gap (price hikes) + overseas new energy (including power equipment)’ as the ‘New Ning Combination,’ analogous to the pivotal role played by the 2021 ‘Ning Combination’ centered on broad new energy in the A-share market. They believe the historical transition ‘from the MSCI China A50 Index to the Ning Combination’ corresponds to the ongoing structural reallocation process currently underway.

The team believes that the core logic behind the mid-term optimism for the ChiNext Index lies in the potential for the proportion of “technology + overseas expansion” to A-shares’ overall profitability to rise continuously from the current range of around 30%. Historical experience shows that when this proportion exceeds 50%, it will trigger a new upward cycle for A-shares. Against this backdrop, “even if subsequent fluctuations may occur at higher levels, it is unlikely to shake the sustained positive outlook for the ChiNext Index based on the New CATL Combination.”

The Shenwan Hongyuan team maintains its earlier judgment on structural recommendations, focusing on technology sectors that were already demonstrating strength prior to the conflict, such as optical communications, gas turbines, and energy storage. They also highlighted that the validation of growth momentum in new energy, new energy vehicles, and the export chain will continue to expand, emphasizing that “investing in high-growth areas could yield significantly better results than investing in hedging strategies.”