China Galaxy Securities reported that the A-share market experienced a period of consolidation and divergence this week.
During the week of July 20-24, the A-share market traded in a range, with major benchmark indices showing mixed performance. The overall All-Share index rose by 0.22%. The Shanghai 50 and STAR 50 indices both increased by over 4%, while the CSI 300 gained 2.65%. In contrast, the Beijing 50 and CSI 1000 indices fell by 4.15% and 2.40%, respectively.
From a style perspective, large-cap stocks outperformed this week. Stable, financial, and cyclical styles recorded gains, while consumer and growth styles declined. At the sector level, performance was also mixed. Non-ferrous metals, oil and petrochemicals, and coal were among the top gainers, while conglomerates, building materials, and media registered the largest losses.
Market trading activity continued to cool. The average daily turnover for the week was 2.503 trillion yuan, a decrease of 143.47 billion yuan from the previous week. The average daily turnover rate was 1.8251%, up 0.04 percentage points. As of Thursday, margin trading and securities lending balances stood at 2.710295 trillion yuan, a decrease of 66.682 billion yuan from the prior week. Between July 16 and July 22, global funds had a net inflow of 10.097 billion dollars into A-shares (compared to 7.69 billion dollars previously). Of this, overseas funds recorded a net outflow of 28 million dollars (compared to a net outflow of 239 million dollars previously).
Valuation metrics saw a slight uptick. The All-Share index's PE (TTM) valuation rose by 0.75% to 21.94 times, placing it at the 83.93% percentile since 2010. Its PB (LF) valuation increased by 0.84% to 1.77 times, at the 44.41% percentile since 2010. The bond-equity yield spread for the All-Share market was 2.8303%, near the 3-year rolling average of 3.2741% minus 0.78 standard deviations, at the 56.05% percentile level since 2010.
Market Outlook: Second-quarter fund holdings data shows that the heavy positions of actively managed equity funds are highly concentrated in the technology and growth sectors, a clear sign of capital herding. Under the influence of this capital attraction effect, the technology and growth sectors led the rally in the second quarter, becoming the core driving force for the market's upward movement. Since July, the technology sector has experienced a phased correction, and the market is entering a phase of structural rebalancing.
This week, regulatory authorities, industrial capital, and institutional funds acted in concert, releasing a series of signals to stabilize the market, providing support for market resilience. The risk of a systematic index correction has clearly diminished, but under a stock-picking environment, the market is expected to continue exhibiting structural opportunities. The long-term growth trend for technology stocks has not ended; the subsequent rally will shift from a broad-based advance to selective opportunities based on earnings performance.
Next week, market focus is likely to center on the dual verification of policy and earnings. On one hand, the July Politburo meeting will set the tone for macroeconomic policy and industrial development in the second half of the year. Based on second-quarter economic data, the meeting may anchor precise policy support, with more proactive statements expected around expanding domestic demand (the "six networks") and new quality productive forces (such as AI, high-end manufacturing). On the other hand, the quarterly earnings season for US tech giants is entering a concentrated release period. Their performance, technological progress, and capital expenditure plans will directly impact the valuation and sentiment of A-share technology stocks. The A-share market is also in its mid-year report disclosure window, where earnings fundamentals will become a core anchor for market dynamics. Additionally, the evolving situation in the Middle East and fluctuations in commodity prices remain external uncertainties for the short-term market.
The short-term strategy suggests a balanced allocation. This involves waiting for the mid-year report performance in specialized tech sub-sectors to be realized, positioning in hardcore segments with sustainable earnings capabilities, while also capitalizing on the valuation repair window for undervalued value sectors.
Investment Opportunities: First, the technology sector's growth trajectory remains intact. Next week, the earnings performance and capital expenditure guidance from US tech giants will be a key signal. Focus areas include semiconductors and the supply chain (memory chips, semiconductor equipment and materials, advanced packaging), components, communication equipment, energy storage/power supporting equipment, humanoid robots, and commercial aerospace.
Second, recognize the value of a defensive portfolio base. Monitor sectors like coal, coal chemicals, finance, utilities, and new energy.
Third, resource and cyclical manufacturing sectors are expected to see a rebound. Watch for opportunities in non-ferrous metals, basic chemicals, building materials, and steel.
Risk Warning: Risks include external uncertainties, policy implementation falling short of expectations, unstable market sentiment, and ongoing liquidity adjustment risks.
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