Guosheng Securities Inc. has released a research report suggesting that the widespread and significant correction in global technology stocks in July resulted from a combination of macroeconomic, industry-specific, and structural trading factors. These include fluctuating expectations for Federal Reserve rate hikes, a market reassessment of AI capital expenditure returns, and concentrated deleveraging following previously crowded trades. For the A-share market, the listing of Changxin Technologies also contributed to capital diversion. In the short term, renewed US-Iran tensions pushing oil prices higher, coupled with still-congested trading, suggests technology stocks may continue to experience high volatility. However, from a medium-term perspective, the strong underlying logic of the AI industry, sustained high capital expenditure from tech giants, and the practical difficulty for the Fed to implement further hikes indicate that the post-correction phase could represent an opportunity to re-enter the market. The key points from the report are outlined below.
Focus Point One: Assessing the Deep Tech Correction
Since late June, global technology stocks have experienced a notable correction. As of July 17, compared to their closing prices at the end of June, the US Nasdaq index has retreated only 2.6%, but the Philadelphia Semiconductor Index has fallen 18.1%. In South Korea, the KOSPI and KOSDAQ indices dropped 19.5% and 13.6%, respectively. In the A-share market, the ChiNext and STAR 50 indices fell 21% and 22.3%, respectively. While US broad market indices remained relatively stable, semiconductor and tech sectors in China and South Korea generally saw declines approaching or exceeding 20%. Sectors that were previously characterized by high valuations, substantial gains, and high leverage led the decline, reflecting the crowded nature of AI-related trading since the start of the year, which increased profit-taking pressure and led to a concentrated sell-off.
The report attributes this adjustment to three main factors. First, on the macro front, the Fed's rate hike expectations have fluctuated since May, and with oil prices rebounding in July, concerns about inflation and rising real interest rates have resurfaced, putting pressure on high-valuation tech stocks first. Second, from an industry perspective, the market has begun to re-evaluate the return on investment for AI capital expenditures, leading to a loosening of the previously overly certain and linearly extrapolated high-valuation logic for tech stocks. Third, regarding trading structure, sectors related to semiconductors and memory, exemplified by the South Korean market, had already seen extensive trading. Combined with high leverage and implied volatility in the Korean stock market, profit-taking and concentrated deleveraging amplified the decline once the trend weakened. For A-shares, the listing of Changxin Technologies and its associated capital diversion is also considered a factor.
The report leans towards the view that while short-term disturbances are not yet fully resolved and volatility may remain high, the fundamental logic of the AI industry has not reversed. Therefore, after the correction, technology stocks may offer a renewed opportunity for strategic positioning. This view is supported by three reasons. First, while Fed hike expectations may fluctuate in the near term, the central bank is likely to maintain rates unchanged for the year, neither hiking nor cutting. However, if the US-Iran situation worsens, sustaining an oil price rebound over the next few months alongside a reacceleration of the US economy and core inflation could repeatedly suppress market risk appetite. Second, the global AI export cycle remains strong, AI investment continues to have a significant economic pull effect, and capital expenditure from US tech giants remains elevated. Demand for chips, memory, servers, and data centers is unlikely to see a trend reversal. Third, on the trading front, highly crowded sectors have undergone some deleveraging, and forced selling pressure has been partially released. However, as market positioning is not yet fully cleared, short-term fluctuations between rebounds and position reductions may persist.
Focus Point Two: Strait of Hormuz Blockade Pushes Oil Prices Higher
Escalating US-Iran tensions have led to a renewed blockade of the Strait of Hormuz. Iran announced the closure of the strait on the 11th, and the US began a maritime blockade of Iran from the 14th GMT. By July 18, total vessel traffic of all types had dropped to 13 ships, with oil and gas tankers falling to 3, essentially returning to pre-Memorandum of Understanding levels, indicating a return to a blocked state.
The recurring US-Iran conflict has driven oil prices back to elevated levels. Over the past fortnight, escalating geopolitical tensions have pushed the Brent crude spot price back to $85 per barrel. Current market expectations suggest an average Q3 price of $78.3 per barrel, rising to $84.7 per barrel in Q4, with a full-year average expectation of $87.4 per barrel.
Global floating crude oil storage volumes initially rose and then fell over the past fortnight, aligning with the disruption to Strait of Hormuz traffic. Due to the ongoing US-Iran conflict and rising expectations of a strait blockade, Middle Eastern shipments were obstructed, forcing crude to be held at sea and rapidly pushing floating storage up to 120 million barrels. Subsequently, previously accumulated inventory began offloading and entering the supply chain. By July 12, floating storage had declined to 77 million barrels. During the same period, Middle Eastern floating storage dropped to 10.292 million barrels, showing significant volatility. Current global floating storage is below the level of June 28, indicating that previously accumulated buffer stock is gradually being consumed, increasing supply-side uncertainty.
Supply Trends: Divergence Between Upstream and Downstream Operations
In the steel sector, the average operating rate for 247 sampled blast furnaces nationwide over the past fortnight fell 0.9 percentage points sequentially to 83.3%, weaker than the seasonal pattern and essentially flat compared to the same period in 2025. For coal, the average operating rate for coking enterprises rose 0.8 percentage points sequentially to 70.7%, stronger than the seasonal pattern and 2.7 percentage points higher than the same period in 2025. In infrastructure, the average operating rate for petroleum asphalt plants rose 2.6 percentage points sequentially to 18.4%, while the average cement shipment rate fell 0.7 percentage points to 40.8%. In chemicals and fibers, the average PTA operating rate fell 8.0 percentage points sequentially to 53.9%, weaker than the seasonal pattern and 26.8 percentage points lower than the same period in 2025. The average operating rate for polyester filament in the Jiangsu-Zhejiang region rose 0.7 percentage points sequentially to 74.3%, down 18.1 percentage points year-on-year. For automobiles, the average operating rate for semi-steel truck tires fell 2.6 percentage points sequentially to 61.7%, weaker than the seasonal pattern and down 12.8 percentage points year-on-year.
Demand Trends: Divergent Property Sales, Mostly Recovering Production
Regarding production resumption, power coal consumption in eight coastal provinces over the past fortnight rose 8.2% sequentially, weaker than the seasonal pattern, down 5.9% compared to the same period in 2025, but up 27.2% compared to the same period in 2019. The average land transaction area in 100 cities fell 33.8% sequentially, weaker than the seasonal pattern, at its lowest absolute value for recent comparable periods, down 10.9% compared to the same period in 2025 and down 48.9% compared to 2019. The average apparent steel demand rose 1.4% sequentially, stronger than the seasonal pattern, though average apparent demand for rebar fell 18.3% sequentially, weaker than the seasonal pattern, with its absolute value remaining the lowest for recent comparable periods.
For offline consumption, new home sales improved while secondary home sales weakened slightly. For new homes, the year-on-year decline in sales narrowed in July. From July 1-18, the average daily transaction area for commercial housing in 30 major cities was 189,000 square meters, down 33.9% from the June average (weaker than seasonal), with a year-on-year decline of 0.4% (compared to a 6.7% decline in June). For secondary homes, the year-on-year sales growth narrowed in July. From July 1-18, the average daily transaction area for secondary homes in 18 key cities was 245,000 square meters, down 2.8% from the June average (weaker than seasonal), with year-on-year growth of 7.5% (compared to 14.1% growth in June). For passenger vehicles, from June 30 to July 12, average daily sales were 37,000 units, down 0.9% sequentially and 15.4% year-on-year (compared to a 19.0% decline in June).
Price Trends: Mostly Rising Upstream Prices, Pork Prices Turn Higher
Among upstream resources, crude oil prices rose due to recurring US-Iran tensions, while thermal coal prices fell under pressure from high inventories and increased hydropower during the flood season. Coking coal and iron ore prices fluctuated narrowly amid supply-demand dynamics, and copper prices edged up. Over the past fortnight, the average Nanhua Industrial Products Index rose 0.9% sequentially, with a year-on-year increase of 4.1%. Among key commodities, the average Brent crude price rose 8.7% sequentially to $80.2 per barrel, with its year-on-year increase widening to 15.7%. The average ex-ship price for Q5500 thermal coal at Huanghua Port fell 4.1% sequentially, with its year-on-year increase narrowing to 27.2%. The average settlement price for coking coal futures (continuous contract) rose 0.4% sequentially over the past fortnight, with its year-on-year increase narrowing to 43.5%. The average settlement price for iron ore futures (continuous contract) rose 0.4% sequentially, down 0.9% year-on-year. The average LME copper spot price rose 0.8% sequentially, with its year-on-year increase widening to 38.0%.
For midstream industrial goods, the average rebar spot price fell 0.6% sequentially over the past fortnight, up 0.5% year-on-year. The average cement price fell 1.3% sequentially and 14.5% year-on-year. For downstream consumer goods, pork prices rose while vegetable prices fell over the past fortnight. The average pork price rose 8.4% sequentially to approximately 15.7 yuan per kilogram, down 24.0% year-on-year. The average vegetable price fell 1.0% sequentially, weaker than the seasonal pattern, down 4.7% year-on-year.
Inventory Trends: Slight Increase in Energy Stockpiles
In the energy sector, coal inventories at power plants in eight coastal provinces over the past fortnight rose 1.8% sequentially on average, 8.7% higher than the same period in 2025 and 16.2% higher than the same period in 2019. As of July 10, 2026, total US crude oil and petroleum product inventories increased by 124,000 barrels sequentially to 1.53 billion barrels. For metals, steel inventory rose 1.6% sequentially over the past fortnight, while electrolytic aluminum inventory fell 11.8%. For building materials, asphalt inventory fell 7.1% sequentially and 31.3% year-on-year. The average cement storage capacity ratio rose 0.9 percentage points sequentially to 65.8%, 0.8 percentage points higher than the same period in 2025.
Transport and Logistics: Flight Operations Recover, Subway Passenger Numbers Decline
Regarding personnel movement, the number of flights operated recovered, while subway passenger numbers decreased. Over the past fortnight, the number of flights operated rose 8.9% sequentially, stronger than the seasonal pattern, but down 0.1% year-on-year. Subway passenger numbers in 10 key cities fell 2.5% sequentially, weaker than the seasonal pattern, down 4.9% year-on-year. For export freight rates, the Baltic Dry Index rose 10.9% sequentially and 75.5% year-on-year over the past fortnight. The China Export Containerized Freight Index rose 7.4% sequentially and 44.6% year-on-year.
Liquidity Tracking: Stable Domestic Funding During Tax Period, Rising US Treasury Yields
Money market liquidity overall followed a pattern of "looser early in the month, stable during the tax period" over the past fortnight. In early July, the central bank conducted an additional 200 billion yuan in 3-month outright reverse repos, signaling supportive intent. This intent was more evident around the tax period, with a net OMO injection of 1,285 billion yuan over the fortnight, supplemented by an additional 500 billion yuan in 6-month outright reverse repos on July 15 to counter tax payment pressure. Money market rates were "stable early in the month, rising slightly during the tax period," with overall liquidity maintaining a tight balance. The average rates for DR007, R007, and Shibor (1-week) fell 6.6bp, 8.0bp, and 6.9bp sequentially to 1.436%, 1.443%, and 1.435%, respectively, generally moving narrowly around the policy rate. The R007-DR007 spread fell 1.4bp, remaining low, indicating minimal liquidity stratification between institutions. The average issuance yield for NCDs fell sequentially, with 3-month AAA and AA+ NCD yields down 0.6bp each.
In the bond market, total issuance of interest rate bonds over the past fortnight was 1,257.81 billion yuan, 111.47 billion yuan less than the previous period. Specifically, treasury bond issuance was 715.00 billion yuan, 19.00 billion yuan less sequentially. Local government bond issuance was 277.81 billion yuan, 217.47 billion yuan less sequentially, including 107.20 billion yuan in local special bonds. Cumulative issuance year-to-date is 2,176.42 billion yuan; based on a quota of 4,400 billion yuan, the issuance progress is approximately 49.5%, slower than the same period in 2025. Policy bank bond issuance was 265.00 billion yuan, 125.00 billion yuan more sequentially. Treasury bond yields saw the long end rise and the short end fall. The average 10-year treasury bond yield rose 0.3bp sequentially to 1.740%, while the average 1-year yield fell 1.7bp sequentially to 1.144%.
Regarding exchange rates and overseas markets, recurring US-Iran tensions pushed oil prices higher, exacerbating inflation concerns and driving US Treasury yields up; weaker-than-expected US June CPI data dampened rate hike prospects, weighing on the dollar. Over the past fortnight, the average dollar index fell 0.3% sequentially to 100.762; the offshore yuan exchange rate initially depreciated past 6.8 before rebounding and appreciating, closing at 6.778, with its average down 0.1% sequentially. Driven by inflation expectations from US-Iran tensions, the average 10-year US Treasury yield rose 6bp sequentially to 4.55% by July 17. German, French, Italian, and UK government bond yields rose, while Japanese government bond yields fell. The China-US yield spread (China minus US) inverted by 281bp, widening by 5.8bp.
Risk warnings include unexpected changes in policy intensity, external environment, and geopolitical dynamics, as well as potential estimation errors.
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