Huatai Securities strategy: Focus on AI inflation and resource inflation

Huatai Securities strategy points out that the industry prosperity index in May has slightly fallen, which is consistent with the decline in PMI, possibly reflecting that current demand still needs improvement. Looking at different sectors, in the past three months, midstream materials, upstream resources, and TMT have seen the most improvement in prosperity. At the industry level, the clues of prosperity improvement are more concentrated compared to the previous month: in AI, declining mining power has boosted prosperity in optical communications, storage, MLCC climbs, and prosperity in end-consumer electronics and application-based gaming has also improved. The slope of prosperity improvement in the price increase chain is leading, such as in coal, iron and steel, decoration building materials, some chemical products, minor metals, industrial metals, and shipping ports. The midstream manufacturing sector represented by new energy is on the rise in prosperity, such as batteries, general equipment, marine equipment, and agricultural machinery.