Today's market saw a robust V-shaped recovery in A-shares, with technology stocks leading a broad-based rally. Similar strength was observed in South Korea, where Samsung Electronics rose 6% and the KOSPI index surged 4%, while Japan's Nikkei 225 gained over 2%. In contrast, the Hong Kong market, with its relatively lower technology sector weighting, edged down slightly, closing 0.04% lower.
As discussed yesterday, the China Securities Regulatory Commission (CSRC) held a symposium where investors voiced their concerns and suggestions. Key points included strengthening regulation across primary and secondary markets, attracting long-term capital, standardizing quantitative and AI-driven trading, urging listed companies to increase dividends, and intensifying penalties for securities violations. The regulator responded by committing to stringent market risk control, enhanced supervision, standardized institutional operations, improved corporate information transparency, and bolstering investor protection to foster a fair market environment where investors can share in its growth. The core message is clear: curb disruptive quantitative trading and ensure significant capital inflows to prevent systemic risks.
Reports have emerged since yesterday of brokerage houses initiating forced liquidations. Many margin trading clients are proactively deleveraging, with feedback indicating the most aggressive leveraged investors have already unwound their positions. The average market-wide margin maintenance ratio has dropped from 296.44% on June 30th to 261.6% on July 17th (last Friday), a single-day plunge of 11 percentage points, with further declines likely in recent days. Technology sector positioning has largely returned to pre-rally levels, suggesting the squeeze on this bubble has reached an extreme. Without a rebound, overall market confidence would be severely damaged. Hence, the CSRC's confidence-boosting symposium and commitments from major insurance companies to provide market support. However, words alone are insufficient; tangible capital inflows are crucial.
Indeed, substantial broad-based funds have entered the market over the past two days. The critical task, however, was to reignite the technology sector, as it concentrates the most capital and has suffered the deepest losses. Today, targeted action materialized: the largest fund tracking the STAR 50 Index, the ChinaAMC STAR 50 ETF, attracted a record inflow of 13.8 billion yuan ($2 billion), directly igniting the tech rebound. The leader was Huahong Grace Semiconductor Manufacturing Ltd (01347), which also benefited from a fundamental catalyst. Reports indicate TSMC may raise prices for mature-node chips in early 2027, its first price hike for non-advanced processes in over three years. This signals the AI-driven semiconductor demand boom is spreading from GPUs and high-performance computing to areas like power management chips and power devices using mature nodes. As mentioned before, TSMC's focus on advanced nodes naturally cedes market share in mature processes, a gap that Huahong is well-positioned to fill. Its shares surged nearly 18% today. Semiconductor Manufacturing International Corp (00981), focused on advanced nodes, rose over 8%, while Nexchip Semiconductor Corporation (02249) and Shanghai Fudan Microelectronics Group Company Limited (01385) both gained 8%.
The US is also accelerating its AI deployment. Besant Capital has boldly declared that the US share of global computing power will jump from the current 50%-60% to 80%, framing dominance in compute as a national strategic imperative that it "must not lose." This trend suggests the AI race will intensify, inevitably accelerating domestic Chinese efforts. Yesterday's highlighted sector focus, besides semiconductors, included GigaDevice Semiconductor Inc (03986), which surged over 15%, and Montage Technology (06809), which soared over 17%. Other notable gainers were Biren Technology (06082), Iluvatar CoreX (09903), and NOVOSENSE (02676), all up over 11%. The rally extended to PCB makers Ding Tai High Technology Co., Ltd. (01377), Kingboard Holdings Limited (00148), and Han's Laser Technology Industry Group Co., Ltd. (03200), each gaining over 8%.
Zhipu AI (02513) announced it has completed the construction of a 1GW-scale domestic AI computing data center, fully utilizing domestic AI chips. Furthermore, Zhipu today finalized its acquisition of XCoreSigma, a domestic AI heterogeneous computing software company. Originating from the Compilation Laboratory of the Institute of Computing Technology, Chinese Academy of Sciences, XCoreSigma has deep expertise in heterogeneous computing software stacks and compilation optimization, regarded as a top-tier domestic AI infrastructure team. Insiders suggest these moves address two critical capabilities: computing power supply and computing power utilization. Its shares jumped nearly 37% today. The full domestic AI chip supply chain is a significant highlight. Strong performance from domestic large language models directly boosts token usage, from which Xunce Data Technology Limited (03317) undoubtedly benefits most, rising nearly 17% again today. The Chairman of OpenAI predicts token-based billing will end within a year, with the industry moving towards a new business model of "paying for business outcomes." From this perspective, Mobvoi Inc. (02556) best fits this description, gaining 3% today.
There are signs of potential de-escalation in the Middle East. Qatar, Oman, and Egypt jointly proposed a 10-day cooling-off and ceasefire, though no consensus has been reached. Senior US officials indicate President Trump is expected to decide within days whether to expand military action against Iran and resume full-scale operations. For now, given US casualties and concerns over potential Red Sea blockades, a temporary ceasefire appears possible. Spot gold rebounded in early trading today, dipping below $4,000 before recovering above $4,030. The latest rationale for gold's rise is hedging against currency depreciation. The key going forward is whether related gold ETFs see sustained inflows. Today's strong performers included China Gold International Resources Corp. Ltd. (02099), Zijin Mining Group Company Limited (02259), and Zhaojin Mining Industry Company Limited (01818), all up over 10%.
Stocks with share buybacks and insider purchases also performed well. Huaqin Technology Co., Ltd. (03296) announced that its Chairman, CEO, and Executive Director, Mr. Qiu Wensheng, plans to increase his direct holdings of H-shares over the six months starting July 21, 2026, with a total investment of 10 million yuan, expressing confidence in the company's stable development and long-term value. Its shares rose over 12%. Jiaxin International Group Limited (03858) announced last night a proposed share repurchase plan for the second half of 2026, with up to HK$200 million earmarked, also rising over 12%. Lingyi iTech (Guangdong) Company (01688) recently announced it plans to double the upper limit of its share repurchase fund from 400 million yuan to 800 million yuan, gaining over 4% today.
Sector Spotlight: Power Grid Strain from AI and Data Centers
The US Department of Energy released a draft study warning that data center expansion, domestic manufacturing growth, and large-scale electrification are pushing the national power grid to its limits. The massive electricity demand from AI and industrial development, intertwined with extreme weather from climate change, is testing the grid's capacity. Energy officials state US electricity demand is growing at its fastest pace in decades. PJM Interconnection, the largest US grid operator, also noted data center demand is driving up power supply costs. Meanwhile, electricity demand in Texas is nearing record highs, and parts of the Midwest have issued grid emergency alerts. Severe domestic shortages and extended delivery cycles for power equipment in North America are significantly boosting import demand. This primarily benefits domestic Chinese power equipment manufacturers: Dongfang Electric Corporation (01072), Weichai Power Co., Ltd. (02338), Harbin Electric Company Limited (01133), and SiGen New Energy Technology Co., Ltd. (06656).
Stock Deep Dive: Montage Technology
Montage Technology (06809) recently saw its Chairman propose an A-share buyback plan of 300 to 600 million yuan. For Q1 2026, the company reported operating revenue of 1.461 billion yuan, up 19.5% year-on-year, and net profit attributable to shareholders of 847 million yuan, up 61.3% year-on-year. The company plans a cash dividend of 3.90 yuan per 10 shares (pre-tax) for 2025.
Analysis: The company maintains stable profitability and benefited from strong industry demand driven by AI trends in the first half. Globally, only Montage Technology, Renesas Electronics, and Rambus can mass-produce server DDR5 memory interface chips, with a combined market share (CR3) exceeding 93%. Montage holds a 36.8% global market share, ranking first. Its core business benefits from growing AI server demand and the ongoing penetration of the DDR5 platform. In Q1 2026, shipments of its DDR5 RCD chips increased significantly, with the proportion of third and fourth-generation RCD chips rising further. According to its 2025 annual report, the fifth-generation DDR5 RCD chip reduces power consumption by 35%-40% compared to the first-generation product at the same speed, showcasing the company's technical expertise in high-performance, low-power memory interface chips. As AI servers demand higher memory bandwidth, capacity, and energy efficiency, the company's DDR5-related products are poised to continue benefiting.
The company is expanding from memory interface chips into high-speed interconnect chips. In Q1 2026, revenue from its interconnect product line reached 1.417 billion yuan, up 24.4% year-on-year. Revenue from four new products—MRCD/MDB, PCIe Retimer, CKD, and CXL MXC—combined for 269 million yuan, surging 93.8% year-on-year and increasing their share of interconnect chip revenue to 19.0%. Rising demand for high-speed data transmission in AI computing systems is driving growth for PCIe Retimer and CXL products. Concurrently, the company continues to expand its PCIe high-speed interconnect chip portfolio. As of the end of Q1 2026, total assets stood at 21.681 billion yuan, up 57.70% from year-end, while equity attributable to shareholders was 20.846 billion yuan, up 61.30% from year-end, primarily due to proceeds from its H-share issuance. Operating cash flow improved markedly, with net cash flow from operations at 627 million yuan in Q1, a 232.88% year-on-year increase.
Order visibility remains robust. The company holds strong orders for DDR5 basic chips, with downstream memory module makers typically locking in capacity 3-6 months in advance. Shipments of MRCD/MDB (for AI chips) have shown significant sequential growth for two consecutive quarters, with domestic computing power clients steadily converting samples to volume orders. Domestic orders for PCIe Retimer are growing steadily, while overseas customer validation continues. CXL products are in the small-batch testing phase. Recent announcements by Tencent Cloud regarding large-scale deployment of domestic computing power and the acceleration of domestic AI cluster construction directly fuel long-term demand for high-speed interconnect chips. The company anticipates strong demand in Q3 2026, with order visibility remaining high. Capacity utilization is maintained at elevated levels due to the upturn in the overseas memory cycle and domestic AI capital expenditure. The company's mid-term dividend and buyback plans have significantly boosted investor confidence.
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