On Tuesday, the Shanghai Composite Index (SSE) narrowly defended the psychologically significant 3900-point level. While a sudden surge in property stocks boosted market sentiment, its sustainability remains uncertain. For a decisive breakout, broader market participation is required.
The SSE opened slightly lower and declined rapidly before staging an afternoon rebound from intraday lows. However, it failed to turn positive throughout the session, facing clear resistance from both the 5-day and 20-day moving averages. The index ultimately closed down 0.23% at 3900.5 points.
In contrast, the Shenzhen Component Index showed stronger performance. After an early dip, it rebounded steadily and turned positive in the afternoon, supported by heavyweight stocks. The index closed up 0.29% at 13316.42 points, maintaining its position above multiple short-term moving averages. The ChiNext Index edged down 0.02% to 3209 points, with trading volume continuing to contract across both exchanges.
Sector performance was mixed. Property, retail, aerospace equipment, and forestry sectors led gains, while consumer electronics, IT equipment, components, and photovoltaic equipment lagged. Despite the index fluctuations, individual stocks showed significant divergence—over 2,400 stocks advanced with more than 50 hitting their daily upside limits, while over 2,800 declined including three limit-down stocks.
The property sector's dramatic afternoon rally drew particular attention.
Industry analysts attributed the rally to renewed market speculation about potential mortgage interest subsidies—a recurring theme in recent months. "The policy-driven structural opportunities may emerge despite ongoing sales declines," noted one sector expert. Institutional views suggest that as residential property remains a key asset class for Chinese households, stabilizing the housing market is crucial for domestic economic circulation. Recent policy signals about promoting high-quality development in the sector have fueled expectations of further supportive measures.
Looking ahead to 2026, BOCOM International anticipates the property sector will explore new development models under policy support, with structural opportunities emerging in quality housing and urban development projects.
Market sentiment remains cautious amid the ongoing consolidation. Analysts highlight key factors needed for a sustainable breakout: sustained tech sector leadership, emergence of new market themes, and meaningful volume expansion. "The indices remain trapped between support and resistance levels, requiring more time for directional confirmation," commented one securities analyst.
Jufeng Financial cautioned that the current rebound represents part of a complex bottoming process rather than a new market cycle. Investors are advised to monitor two major risks: unexpected shifts in major central banks' policies and potential sharp pullbacks if the current rebound loses momentum.
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