Recent declines in the ChiNext board have unsettled many investors. However, periods of significant market volatility are precisely when it's most crucial to stay calm and analyze what has fundamentally changed and what has not.
We can use an analogy of "body temperature" and "physical constitution."
The "body temperature" represents sentiment, market crowding, and fund structures. These can change abruptly due to an external shock.
The "physical constitution" represents industrial trends, profit realization, competitive landscapes, and policy direction. Like a person's bones and muscles, these do not collapse from a single fever.
The current pullback resembles a "fever" breaking rather than a collapse of the underlying "constitution."
What Triggered This Round of Adjustment?
At its core, it is the result of multiple factors converging.
Internationally, a broad and deep correction in global tech stocks in July dampened risk appetite for A-share technology, creating an emotional contagion. The initial catalyst was Meta's announcement in early July of plans to sell surplus AI computing resources, sparking market concerns about "computing oversupply" and "peak capital expenditure." Subsequently, deleveraging in the South Korean stock market, with forced selling creating a negative feedback loop and triggering consecutive trading halts, further spread pessimism to A-share tech.
Domestically, the inherent fragility of A-share trading structures amplified the correction through a release of crowded positions. After a sustained rally in the first half of the year, profit-taking pressure was high, and capital was highly concentrated. Holdings in high-volatility sectors like semiconductors and chips were heavily overlapped, making them susceptible to synchronized selling on any disturbance. This was compounded by the negative feedback from margin financing: price declines triggered forced liquidations, whose selling pressure further depressed prices, creating a downward spiral.
However, it is important to note that these shocks have been primarily driven by sentiment transmission, not a reversal of fundamental industrial trends. High-frequency indicators show the "fever" has already broken quite clearly: as of July 16, 2026, the total margin balance for the entire market has declined for 11 consecutive trading days, shrinking by nearly 170 billion yuan cumulatively.
Has the Fundamental Picture Changed After Such a Large Correction?
What ultimately determines medium- to long-term returns is not short-term sentiment swings over a week or two, but the realization of profits and underlying industrial trends.
Data indicates that technology remains one of the strongest themes for current profit validation. Long-term drivers like AI computing demand and semiconductor import substitution remain clear. The best window to test the market's "constitution" is now at hand—the intensive disclosure of interim earnings forecasts is underway. As the emotional shock subsides, market pricing logic will gradually shift towards profit verification.
As of July 16, approximately 1,700 A-share companies have disclosed their 2026 interim earnings forecasts, with a positive pre-announcement rate of 43%. Notably, the ChiNext board's positive pre-announcement rate is as high as 79%. For companies that have already disclosed, earnings expectations have improved compared to the start of the year.
How Should Investors Position at This Level?
Following a rapid correction, investors can easily fall into two extremes: one is thinking "it has fallen so much, a sharp rebound must be imminent"; the other is fearing "since it could fall this much, it could get even worse."
Currently, the medium-term trend does not appear weakened, but the short-term market is likely to go through a process of "consolidation and volatility—profit verification—refocusing on main themes."
For most investors, betting on which specific sub-sector will rebound first or which company's interim report will most exceed expectations has become significantly more difficult. For those hoping to control individual stock risk while retaining exposure to a potential market recovery, utilizing broad-based index tools like the ChiNext Index may be more suitable. The E Fund ChiNext ETF (159915), for instance, employs a management fee rate at the market's lowest tier of 0.15% per annum and is currently the largest ETF tracking the ChiNext Index.
Investors without a stock trading account can gain exposure through the E Fund ChiNext ETF Link Fund (A/C/Y: 110026/004744/022907).
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