Analysis of market conditions suggests that the adjustment period for the A-share market has not yet been sufficient, and pressures related to equity and debt financing for A-shares require more time to ease. In terms of adjustment scope, three key risks—the US dollar, inflation, and micro-level market crowding—have not been fully absorbed. Since mid-June, ongoing analysis has indicated that global equity markets in July will continue to experience high volatility, essentially using time to trade for space in which to release these risks. Looking ahead, the diffusion of the AI thematic rally will focus on core, high-quality assets, including the central AI theme itself, resources, energy, outbound industrial supply chains, and brokerages with significant AI exposure.
The pressure from forced liquidations has receded from its June peak but remains above normal levels. As of July 6th, the ratio of unpaid forced liquidations stood at 3.5%, which is higher than the 2.5% level representing the 95th percentile since November 2023.
On the spot market side, standby cash (investor margin deposits/Repo cash) is rapidly exiting, while derivative-side betting/hedging is increasing.
The cash buffer against leverage is thinning: the margin loan balance relative to investor margin deposits has rebounded to 33.6%, placing it near the 91st percentile for the past year.
Foreign capital continues to see outflows, while retail investors persist in buying leveraged ETFs.
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