The Shanghai Composite Index has mounted a strong comeback, breaking through three significant technical resistance levels in a single session. This vigorous rebound has shifted market sentiment, sparking a debate over whether this marks a temporary recovery or the start of a sustained trend reversal.
Following a sharp decline that breached the psychologically important 4000-point mark and its uptrend support line, the market found its footing. On July 9th, the Shanghai Composite opened slightly higher and tested the strong resistance at 3985 points before retreating. It found a bottom at 3938.88 points and then initiated a powerful rally, especially in the afternoon session. The index successively reclaimed its uptrend line, the 4000-point level, and its 5-day moving average, decisively overcoming three major pressure points.
Other major indices also posted strong gains. The Shenzhen Component Index staged a similar rebound, reclaiming the key 15250-point resistance and its 5-day moving average. The ChiNext Index managed to close above both its 60-day and 5-day moving averages. The standout performer was the STAR 50 Index, which surged 8.41% to close at its second-highest historical closing level, driven by strength in heavyweight semiconductor stocks.
At the close, the Shanghai Composite was up 1.65% at 4036.59 points, the Shenzhen Component jumped 3.07% to 15398.73 points, and the ChiNext Index soared 4.49% to 4018.17 points. Trading volume, which had been shrinking for several days, expanded notably during this rebound. The combined turnover for the Shanghai, Shenzhen, and Beijing markets reached 2.93 trillion yuan, an increase of nearly 350 billion yuan from the previous session.
Sector performance was led by the semiconductor industry, which surged over 8%. Other technology-related sectors such as electronic components, communication equipment, optical and optoelectronic devices, and consumer electronics also posted significant gains. In contrast, sectors like energy metals, tourism, hotels & catering, and steel retreated. Market breadth improved, with nearly 2,500 stocks advancing across the A-share market, including 75 that hit their daily limit-up. Although declining stocks still outnumbered gainers at nearly 2,900, the ratio began to show signs of balancing.
Analyst Perspectives on the Rebound
Following this 'V-shaped' recovery, market participants are divided on its nature. One securities analyst commented that despite the impressive rally, she views it more as a rebound than a fundamental reversal. She pointed to trading volume, which expanded from recent lows but remains significantly below previous peaks, suggesting limited upside if volume fails to sustain. She also noted that the tech-led rally could face pressure if high-flying tech stocks experience volatility again, given their current trading concentration. While the rebound may boost market sentiment and allow for some follow-through momentum, she sees multiple short-to-medium-term moving averages acting as overhead resistance.
Another senior investment advisor offered a more optimistic view, suggesting that A-shares may be concluding a phase of correction and entering a period of consolidation and structural strength. He observed that there were no signs of large-scale capital flight, with overall turnover remaining high. The morning sell-off, in his view, represented a healthy release of high-level筹码, easing previous market crowding pressures and paving the way for a steadier advance. He highlighted the upcoming interim earnings season, where strong performance expectations for sectors like hard tech and advanced manufacturing could bolster investor confidence. Continued policy support for the hard tech sector and the domestic substitution strategy further strengthen the long-term growth thesis for technology. He concluded that with the recovery of the 4000-point level, downside support is more defined, making a sharp correction less likely, and the subsequent market path is more probable to be one of volatile, gradual ascent.
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