The A-share market experienced a volatile and weakening session on July 17th.
As of 9:39 AM, the Shanghai Composite Index was down 0.74%, the Shenzhen Component Index had fallen 2.18%, and the ChiNext Index plunged 2.91%.
Market analysis points to three primary factors significantly impacting today's trading.
Firstly, overnight weakness in overseas technology stocks has unsettled sentiment in the A-share tech sector.
The decline in the Nasdaq and a widespread pullback in semiconductor and AI-related stocks in the US have dampened risk appetite for domestic electronics, communications, and computing power segments.
Secondly, profit-taking pressure continues to unwind from previously crowded trades in hot technology sectors.
Recent consecutive adjustments in high-flying areas like semiconductors, memory, and advanced packaging have prompted a shift of market funds from high-valuation themes towards lower-priced and defensive sectors.
Thirdly, market confidence has turned cautious following the continuous decline, with insufficient short-term buying interest to provide support.
The Shanghai Composite Index's fall below the 3900-point mark in the previous session, combined with significant drops in the ChiNext and STAR 50 indices, has created a negative momentum affecting today's market.
Simultaneously, trading volume has contracted, intensifying competition among existing funds.
The previous session's turnover shrank to approximately 2.4 trillion yuan, indicating weak willingness for new capital to enter the market, which can amplify sector rotation and index volatility.
In terms of sector performance, the intelligent driving concept was active, with Suo Ling Co., Ltd. hitting the limit-up, followed by gains in Dazhong Transportation, Laisai Laser, Wanji Technology, and Xingmin Zhitong.
The retail concept saw repeated activity, with Zhongbai Group reaching the limit-up, and stocks like Sanjiang Shopping, Dalian Friendship, Bubugao, Guoguang Chain, and Central Emporium following higher.
On the downside, precious metals, memory chips, and semiconductors were among the biggest decliners.
Market Outlook and Broker Views
Looking ahead, GF Securities believes the correction process in high-valuation technology sectors is not yet fully complete, and a full stabilization of market sentiment will require more time.
GF Securities views this round of adjustment as a concentrated release of combined internal and external pressures.
Externally, the overnight decline in the US memory sector continued, compounded by a surprise rate hike by South Korea's central bank that triggered a more than 7% single-day plunge in the Korean stock market, with a major local memory stock tumbling significantly, directly transmitting volatility from overseas tech sectors to A-shares.
Internally, during the semi-annual earnings verification period, some companies' growth fell short of expectations, triggering concentrated profit-taking that caused a chain reaction, further amplifying the correction in high-flying sectors.
In the short term, while the correction in high-valuation tech sectors may not be over and sentiment stabilization needs time, the momentum for further declines is rapidly dissipating after the consecutive pullback.
Coupled with the approaching catalyst of the World Artificial Intelligence Conference, sector sentiment is expected to find a window for recovery in the middle to late part of the month.
Founder Securities maintains that a subsequent market stabilization and continuation of a structural bull market remains highly probable, advising investors to focus on individual stocks rather than the overall index in their operations.
Founder Securities attributes the market decline to A-shares' own need for adjustment combined with the global tech sell-off, viewing the correction process as one of risk release.
Some technology stocks with high earnings growth and relatively reasonable valuations have released downward pressure through this adjustment; once global markets stabilize, they could again become targets of capital inflow.
Despite the ongoing market adjustment, stabilization and a continuation of the structural trend later on is still the most likely scenario.
Operationally, it is recommended to "focus on individual stocks, downplay the index," and seize opportunities with high certainty.
Orient Securities observes a clear reversal in A-share market style, driven by capital rebalancing and earnings verification, with future focus needed on the sustainability of this shift.
Orient Securities notes a visible reversal in A-share style, with significant divergence between sectors.
The technology sector, highly sought-after in the first half of the year, continues to decline, while previously neglected "old economy" sectors, which saw sustained capital outflows earlier, are now performing strongly.
Previously, driven by the grand narrative of AI computing power and massive capital expenditure from tech giants, sectors like electronics and communications were in the spotlight.
Under the influence of high valuations, earnings realization, and severe external volatility, these sectors have faced intense selling pressure.
Meanwhile, the other side of the market is quietly recovering, with previously overlooked or continuously declining industries seeing capital inflows, notably the pharmaceutical and biological sector leading gains.
Amid extreme market volatility, A-share style has shifted towards capital rebalancing and earnings verification drivers.
The future requires attention to the sustainability of this shift, with a strategic focus on defense and trading within ranges.
From a technical analysis perspective, the support level for the Shanghai Composite Index after breaking below 3900 is near 3870, which is also around the key level since the "9.24" market rally.
A break below this level would mean a return to the top of the trading range that has defined the market for nearly a decade, implying the failure of the rally over the past two years, a scenario considered to have a low probability.
In terms of allocation, the future market trend after this adjustment is still expected to be dominated by the technology sector.
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