The stock market experienced a volatile rebound recently, with the benchmark index fluctuating around the 3900-point threshold. As the market retreated again, the battle to defend the 3900-point level reignited.
Analysts suggest that while the broader trend remains healthy, short-term volatility is likely to dominate market movements.
**Index Pulls Back After Rally** Following two consecutive days of gains that pushed the index above multiple moving averages, upward momentum weakened, leading to a fresh round of corrections.
On December 9, the Shanghai Composite Index opened slightly lower and remained volatile throughout the session, failing to turn positive despite multiple intraday rebounds. Selling pressure intensified in the afternoon, widening the losses. The index closed below the 20-day moving average, signaling potential pressure on the 3900-point level. The Shenzhen Component Index also opened lower, briefly turning positive in the morning before a sharp afternoon decline, with volatility exceeding that of the Shanghai market. In contrast, the ChiNext Index outperformed, supported by tech stocks, and managed to close in positive territory despite heightened afternoon swings.
At the close, the Shanghai Composite Index stood at 3909.52 points, down 0.37%, while the Shenzhen Component Index fell 0.39% to 13277.36 points. The ChiNext Index rose 0.61% to 3209.6 points. Trading volume shrank slightly during the correction.
**Sector Performance** Communications, electronics, commerce, and banking sectors bucked the downtrend, while non-ferrous metals, steel, real estate, and agriculture lagged. Over 1,300 stocks advanced, with more than 50 hitting the daily limit-up, but decliners exceeded 4,000.
**Tech Leaders Hit Record Highs** Cyclical and blue-chip stocks underperformed, dragging on the broader market, while tech sector rotation buoyed the ChiNext Index. Within tech, the CPO (co-packaged optics) concept remained a standout. Stocks like Decent, Shaanxi Huada, Zhongci Electronics, and Ultrasonic Electronic surged to their daily limits. The "Big Three" of the optical module industry—New Essex, Zhongji Innolight, and TFC Optical—also posted gains.
Notably, Zhongji Innolight and TFC Optical reached new all-time highs, while New Essex closed at a record peak.
**CPO Sector's Strong Momentum** The CPO sector has repeatedly outperformed this year, drawing significant investor interest. Industry experts note that as AI model parameters and computational demands grow exponentially, real-time data exchange within data centers has surged, exposing the cost and efficiency limitations of traditional pluggable optical modules in high-frequency, short-distance transmission scenarios.
To meet rising demand, photoelectric interconnect technology is evolving toward higher integration, smaller size, and better energy efficiency, with CPO emerging as the cutting-edge solution. Although CPO's current market scale is modest, its performance advantages are clear, positioning it as a potential long-term standard for data center photoelectric conversion modules.
**Market Outlook: Consolidation Expected** After a brief rebound, the market's pullback has reignited debates over short-term direction.
Han Lei, a securities analyst, commented, "Since the April rebound, the market has seen significant gains, with some thematic sectors posting even stronger advances. The current high-level volatility helps release pressure and lays the groundwork for further upside. However, near-term resistance is evident, and subdued trading volume limits upward potential. Consolidation is likely to dominate in the coming sessions."
CICC analysts noted, "The market remains relatively healthy, with reasonable valuations and intact underlying bullish drivers. However, after over a year of gains since September 2024, managing volatility will be key."
Jufeng Financial observed that the A-share market is at a critical juncture in its recovery phase. Tuesday's decline highlighted fading upward momentum, signaling the recovery's late stage. Until policy clarity emerges and external conditions stabilize, the market is expected to remain range-bound without a clear directional trend.
*Disclaimer: This content is for informational purposes only and does not constitute investment advice.*
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