On July 20th, the A-share market opened higher in the morning session and experienced volatile trading, with all three major indices staging a collective rebound. By the midday close, the Shanghai Composite Index had risen by 1.18%, the Shenzhen Component Index increased by 0.21%, and the ChiNext Index gained 1.13%. The number of advancing stocks significantly outpaced decliners across the board, with nearly 3,000 stocks in positive territory. The total half-day turnover reached 1.67 trillion yuan, an increase of approximately 68.1 billion yuan from the previous day. Domestic institutional capital recorded a net outflow of 12.85 billion yuan.
In terms of sector performance, defensive sectors showed signs of recovery. Power stocks fluctuated higher, with Huaneng Power International, Inc. and Fuling Power Generation Co., Ltd. among those hitting the daily limit-up. The coal sector also rebounded amid volatility, with Dayou Energy, Zhengzhou Coal Industry & Electric Power Co., Ltd., and Liaoning Energy Investment Co., Ltd. reaching the limit-up, followed by gains in China Coal Energy Company Limited, Haohua Energy Co., Ltd., and Yankuang Energy Group Company Limited. Baijiu (white liquor) stocks were active against the broader trend, with Anhui Gujing Distillery Company Limited hitting the limit-up. The innovative drug concept saw a partial recovery, with Zhejiang Hisun Pharmaceutical Co., Ltd. hitting the limit-up and InnoCare Pharma Ltd surging over 13%.
On the downside, the computing power hardware sector opened high and closed low, with the PCB and copper foil concepts retreating; Tongguan Copper Foil Group Co., Ltd. and Nanya New Material Technology Co., Ltd. were among the stocks that fell by the daily limit. The optical module concept weakened, with Cambridge Technology Holdings Limited and Yuanjie Semiconductor Technology Co., Ltd falling by the limit or dropping over 10%. The memory chip concept continued its weakness, with Demingli Technology Co., Ltd. and Shikong Technology Co., Ltd. among those hitting the limit-down. The lithium battery industry chain continued to decline, with Tianqi Lithium Corporation briefly touching the limit-down during the session. The industrial gas concept slumped, with Zhongchuan Special Gas Co., Ltd. and Sanfu New Materials Technology Co., Ltd. hitting the limit-down. Additionally, sectors such as AI phones, fluorochemicals, and photovoltaic equipment performed poorly.
Market analysis suggests the index strength is primarily linked to several factors: 1) The "national team" has taken the lead in market stabilization efforts, with mechanisms continuing to support the A-share market. China Reform Holdings Corp., Ltd. announced on the evening of the 19th that it had utilized special relending funds for stock repurchases and share buybacks, along with supporting capital exceeding 50 billion yuan, to increase holdings in central state-owned enterprise (SOE) stocks. On the same day, China Chengtong Holdings Group Ltd. also announced the completion of nearly 10 billion yuan in share purchases. 2) In a rare pre-market announcement, five listed subsidiaries of central SOEs—China Shenhua Energy Company Limited, CRRC Corporation Limited, Aluminum Corporation of China Limited, NARI Technology Co., Ltd., and China Coal Energy Company Limited—intensively issued announcements regarding actions such as asset injections, shareholder buybacks, share repurchases, and dividends, collectively sending positive signals to the market. 3) The China Securities Regulatory Commission is scheduled to hold a symposium on July 20th with listed companies, securities firms, and fund institutions to solicit opinions and suggestions on promoting the stable and healthy development of the capital market. 4) On the evening of July 19th, several A-share listed companies released share buyback-related announcements, sparking heated market discussion. Multiple large-scale private equity firms, including Lingjun Investment and Square Sum Investment, also announced buyback plans. 5) Suzhou TFC Optical Communication Co., Ltd., a major player in the optical module sector, announced that its first-half net profit is expected to increase by 78% to 103% year-on-year, benefiting from sustained growth in AI-related computing power investments and product structure optimization.
Looking ahead, CITIC Securities believes the index is currently in a phase transitioning from the consolidation of a mid-term rally to the incubation of a new one, with short-term clearing nearing its end.
Key Sector Movements
Power Stocks Fluctuate Higher
Power stocks experienced volatile gains, with Huaneng Power International, Inc. and Fuling Power Generation Co., Ltd. hitting the daily limit-up. Commentary: On the news front, the maximum electricity load on the Jiangsu power grid reached 157.59 million kilowatts, setting a new historical record. This marks the tenth consecutive year since 2016 that Jiangsu's peak load has surpassed the 100-million-kilowatt threshold.
Coal Sector Rebounds Amid Volatility
The coal sector saw a volatile rebound, with Dayou Energy, Zhengzhou Coal Industry & Electric Power Co., Ltd., and Liaoning Energy Investment Co., Ltd. hitting the limit-up, followed by gains in China Coal Energy Company Limited, Haohua Energy Co., Ltd., and Yankuang Energy Group Company Limited. Commentary: Data shows that as of July 17th, the Qinhuangdao port thermal coal price rose to 821 yuan per ton, an increase of 29 yuan per ton from the previous period. The coal index rose 2.79% this week. National raw coal output in June plummeted 9.7% year-on-year, the largest decline in nearly a decade, while output from sample mines in Shanxi, Shaanxi, and Inner Mongolia also saw a year-on-year decline widening to 4.4%. Daily coal consumption at southern power plants has risen to 6.12 million tons, reducing inventory days of consumption to 19.6 days, signaling the release of restocking demand.
Baijiu Sector Stages Volatile Rebound
The baijiu concept rebounded with volatility, with Anhui Gujing Distillery Company Limited hitting the limit-up, followed by gains in Kweichow Moutai Co., Ltd., Jinhuijiu Co., Ltd., Huangtai Wine Industry Co., Ltd., and Luzhou Laojiao Co., Ltd.. Commentary: Kweichow Moutai Co., Ltd. announced that starting from 00:00 on July 18, 2026, the retail price for the Feitian 53% vol 500ml Kweichow Moutai (2026) on the iMoutai platform will be adjusted from 1,539 yuan per bottle to 1,639 yuan per bottle, while the sales contract price will be adjusted from 1,269 yuan per bottle to 1,369 yuan per bottle.
Innovative Drug Concept Recovers with Volatility
The innovative drug concept recovered intraday with volatility, with Zhejiang Hisun Pharmaceutical Co., Ltd. hitting the limit-up and InnoCare Pharma Ltd surging over 13%, followed by gains in RemeGen Co., Ltd., InnoStar Bio-Tech Co., Ltd., Hitech Biological Co., Ltd., InnoCare Pharma Ltd, and WuXi AppTec Co., Ltd.. Commentary: The latest data from the National Medical Products Administration shows that from January to June this year, China's innovative drug out-licensing deals totaled 81 transactions, with a total transaction value of approximately 110 billion US dollars, reaching 80% of the full-year 2025 total and setting another historical record.
Institutional Perspectives
CITIC Securities: Index in Transition from Mid-Term Consolidation to New Rally Incubation
A CITIC Securities research report outlines four key judgments. First, the index is in a phase transitioning from the consolidation of a mid-term rally (characterized by tech sector corrections) to the incubation of a new one (requiring new sectors with valuation upside potential to emerge), with short-term clearing nearing its end. Second, the North American AI supply chain may serve as a short-term safe haven within the tech sector, potentially seeing a recovery around the guidance from North American CSPs at the end of July. However, reaching a new plateau requires another leap in AI model/product capabilities and commercial monetization expansion, crucially breaking the cyclical stock valuation framework for hardware companies and achieving a new system-wide uplift for both hardware and applications. Third, the domestic Chinese AI supply chain heavily relies on catalysts and trend-driven capital intensity. Major catalysts have largely been realized, while capital intensity is unlikely to recover quickly after a sharp pullback. The relatively healthy financing environment domestically suggests a lack of a clear bottom-fishing opportunity based on筹码 clearing. Convergence in valuations between domestic and North American plays appears more likely. Fourth, non-AI sectors are characterized by rotational recovery, starting with innovative drugs and non-bank financials, transitioning to industrial chains like non-ferrous metals, chemicals, and lithium batteries, accompanied by policy expectation trading in domestic demand sectors.
Huaan Securities: Emotional Plunge Unlikely to Persist, Confidence in Recovery Rally
Last week's market displayed significant irrational declines. Reviewing historical similar declines, the recent drop is clearly oversold in the short term, making further substantial declines less probable. As tech stocks continue to validate high earnings growth and expectations for large IPOs materialize, the market is poised for a rebound. The market's main focus should remain on the upstream and midstream segments of the AI industry, a structural trend expected to persist until year-end. Regarding allocation strategy, the logic of prioritizing growth sectors with strong industrial cycle performance amid a weak economic cycle remains clear. The second phase of earnings-driven行情 has not concluded, and the significant correction in the growth/tech sector since late June has opened more upside potential. Therefore, it remains advisable to increase positions围绕 the AI industry trend, with computing power centers and supporting hardware in the upstream/midstream being the most indispensable direction. This segment has a sufficiently long industrial chain and investment capacity and is currently in a中期 phase of significant institutional concentration. Although some areas show signs of短期 overheating, the赛道 is broad enough to allow for rotation within the trend without altering the中期 upward trajectory. Investors should be prepared to position when trading activity cools and turnover rates reach low levels.
Guojin Securities: Adjustment Nears Later Stages; Market Restructuring Paves Way for Structural Rebound
The core market矛盾 may not be a shift in the main trend, but rather the final演绎 path of the AI hardware行情. Guojin Securities posits three potential future market scenarios. The first: industry chain concerns are disproven, and non-linear technological breakthroughs reemerge. In this case, the current adjustment is merely a deleveraging event, potentially allowing prices to突破 previous highs. The second: industry chain concerns are validated, leading to a prolonged基本面-driven adjustment phase following the leveraged decline. The third, deemed most probable: total AI-related investment has not yet slowed,基本面 reversal signals remain insufficient, the market's trading structure completes its adjustment, leading to a structural rebound.
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