Today, the three major stock indices opened lower but climbed higher, turning positive against the trend, marking another highly volatile trading session.
The total market turnover reached 3.5 trillion yuan, shrinking by a mere 34.67 billion yuan compared to the previous session, an amount that is almost negligible. Market trading activity remains high, and the bullish sentiment persists.
Across the market, 2,469 companies saw their share prices rise today, with 127 hitting the daily limit-up. Conversely, 2,933 companies declined, and 75 fell by the daily limit. Overall, the market's ability to generate profits is acceptable, and the difficulty of making money is not as high as it was in the recent past.
From a sector perspective, the best performers today were in the biopharmaceutical sector, particularly innovative drug stocks. Shares of Junshi Biosciences and BeiGene both surged over 10%, while leading innovative drug firm Hengrui Pharmaceuticals also briefly hit the limit-up, closing with a gain of 8.75%. Pharmaceutical services provider Pharmaron reached the limit-up, with WuXi AppTec and Tigermed also posting significant gains. In the biological vaccine segment, companies like Canhua Biological, Beijing Wantai Biological Pharmacy, and Zhongshan Bio all achieved substantial increases.
What is the reason behind the sudden surge in the biopharmaceutical sector?
The fundamental reason is that this sector has been in a downtrend and correction for too long; the CSI 300 Health Care Index has already retreated to levels seen in 2019. At the individual stock level, some shares are now trading at only about 10% of their 2021 peak prices.
On the other hand, the biopharmaceutical sector has recently been driven by specific events. First, the National Healthcare Security Administration today publicized the list of drugs that have passed the preliminary review for inclusion in the 2026 national reimbursement drug list. The accelerated pace of drug list inclusion means the cycle from approval to reimbursement and commercialization for innovative drugs is shortening, which benefits innovative pharmaceutical companies with rich R&D pipelines and numerous products in development. Second, from January to May this year, the transaction value of China's innovative drug outbound patent licensing deals surged by 73%.
Consequently, today's strongest gains were still seen in the innovative drug and CXO (contract research, development, and manufacturing) sectors.
In addition, the major consumer sector initiated an upward trend today, with the CSI Consumer Staples Index rising 2.87%. The long-declining baijiu (Chinese liquor) sector also rose today, with Kweichow Moutai gaining 2.25% and JiuGuiJiu soaring 6.56%. In the livestock farming industry, Muyuan Foods and Wens Foodstuff Group rose 7.24% and 3.37%, respectively. Inner Mongolia Yili Industrial Group increased by 1.28%.
The rise of these types of stocks, unlike the extreme moves seen during AI and tech rallies, tends to more easily drive a broad market advance. Therefore, the number of advancing stocks today continuously expanded from just over 1,000 to nearly 2,500 by the market close.
The performance of AI and technology stocks continued to diverge today, with the CPO (co-packaged optics) segment collectively retreating. Tianfu Communication fell 7.19%, while other stocks like Infinera, Foxconn Industrial Internet, and Sugon also closed lower. However, the memory sector continued its ascent, with GigaDevice surging another 9.09%. There is talk of memory capacity shortages persisting until late 2027 or even 2030 before easing. In any case, this suggests the shortage is unlikely to be resolved within a year. However, this does not necessarily mean share prices of memory companies will continue to surge in the future. Often, stock price increases anticipate industry developments, meaning the current gains for some memory stocks may already reflect future expectations.
The upcoming period will bring the semi-annual earnings season. For AI concept stocks that previously exceeded expectations, the focus will be on whether they can deliver on those expectations in their actual financial results. Stocks that can and cannot deliver may see diverging performance. In contrast, the earnings of many traditional blue-chip and white-chip stocks are relatively stable, and they often experience a rally during earnings seasons.
Recently, the upward momentum in AI and technology stocks has clearly shown signs of fatigue, making further sustained advances difficult. The market is exhibiting a need for a shift in leadership. However, determining whether the market style will genuinely switch to the so-called "old guard" stocks requires more than just observing one or two days of gains; continued observation is necessary.
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