The trading week just passed (July 13th to 17th) saw the A-share market oscillate at low levels for the first four days, only to break down again in a broad-based decline on Friday.
As a result, most major indices, with the exception of the dividend index, are close to or have already hit new lows for the year.
Whether it's holders of tech stocks who made significant gains in Q2 but have been 'taking a beating' since July, or investors whose positions in low-lying, defensive sectors had seen some recent recovery, Friday likely brought a wave of panic to all.
Has the market correction run its course? How should one respond next week?
Some humorously suggest that during a market downturn, the first priority is managing household relations by 'voluntarily tripling household chores'.
Beyond the jest, this reflects a certain mindset: there are many things in life beyond trading that deserve our attention.
Excessive focus on profits, losses, and daily fluctuations can interfere with formulating and executing the most appropriate trading strategy.
With that in mind, let's take a closer look at the market's performance.
As noted in Friday's review, if one believes a prolonged decline lies ahead, then attempting to 'buy the dip' at this point holds little meaning.
The act of 'bottom-fishing' is inherently based on the prediction of 'an impending rebound', constituting a bullish, long-biased action.
Even if not buying at the absolute low, the bottom-fisher aims to purchase within the 'bottoming range' to capture more excess returns.
Therefore, we need to sift through some data and facts to answer two key questions.
Assessing the Market's Correction
The first question is whether the market has fallen 'enough'.
The chart below shows the performance of major indices this week and this month, along with their maximum drawdowns since peaking in late June.
Reports over the weekend indicated that the Philadelphia Semiconductor Index, closely watched by the global tech sector, has officially entered a technical bear market, having retreated 20% from its late-June all-time high as of this Friday.
Furthermore, as early as last Wednesday (July 10th), the South Korean KOSPI index closed down 5.4%, pushing its cumulative decline from its June peak to 20% and declaring a technical bear market for South Korean stocks.
By this standard, indices such as the STAR 50, ChiNext Index, CSI 2000, and CSI 1000 are also facing a test at the technical bull-bear demarcation line.
Signs of Potential Stabilization and Rebound
The second question is what signs, beyond a significant decline, might indicate a pause in the selling or a potential rebound.
In Friday's review, we looked at historical patterns and noted that sharp single-day declines in the Shanghai Composite Index have often been followed by a high probability of a short-term rebound.
Here, we can also reference the Wind All-A Index.
Friday's 4.75% drop in this index, combined with its actual price level, finds comparable trading days since the 2024 '924' market event mainly in: March 23, 2026; November 21, 2025; and September 4, 2025.
From the perspective of breaking below the annual moving average, the selling pressure is also comparable to that seen on April 7, 2025.
These are the points circled in the chart below.
Looking at the subsequent market performance following these comparable days, the market recovered without exception.
Why not reference earlier market conditions? The view is that the aforementioned reference points all occurred within the current market cycle, with largely similar influencing factors.
A research report from Founder Securities points out three reasons for the market's sharp decline this week, which marked the largest weekly drop since the 2024 '924' event.
First, the unwinding of leveraged tech stock trades has spread globally, centered on the South Korean market, with A-share margin balances continuing to decline, falling over 150 billion yuan cumulatively in July.
Second, investor concerns about capital siphoning ahead of large IPOs have intensified in the current low-volume market environment.
Third, risk appetite has been disturbed by potential fluctuations in China-U.S. relations.
Additionally, recent fund flows within on-market ETF products also suggest an increased probability of an oversold rebound.
It must be noted, however, that a high probability does not guarantee an outcome.
Wind data shows that stock and cross-border ETFs in Shanghai and Shenzhen saw a combined net inflow of 211.321 billion yuan this week, with broad-based index ETFs netting 156.1 billion yuan and sector/thematic ETFs netting 44.4 billion yuan.
Over the 13 trading days in July so far, stock ETFs have seen net inflows for 12 days, totaling over 330 billion yuan, with Friday recording an extreme single-day inflow of 76.349 billion yuan.
On Friday alone, broad-based ETFs saw a combined net inflow of 64.693 billion yuan, with ETFs tracking the CSI 300, CSI A500, ChiNext, and STAR 50 indices leading the inflows.
In terms of specific products, three leading broad-based ETFs – the E Fund ChiNext ETF (159915), the Huatai-PineBridge CSI 300 ETF (510300), and the ChinaAMC STAR 50 ETF (588000) – all saw significant volume spikes, with turnover each surpassing the 14 billion yuan mark.
Analysis suggests that historically, collective spikes in volume for broad-based ETFs during a market downtrend typically point to several possibilities.
It could indicate a short-term bottoming area with institutional funds positioning early; it might be a pause within a downtrend where high volume merely reflects emotional selling with the market stabilizing briefly before seeking new lows; or it could signal a style rotation point where funds shift from high-volatility stocks to broad-based indices.
Another point to note is that during the index rebound starting from March 23rd this year and the eventual formation of a 'double-top' pattern, tech stocks were the primary market driver – a characteristic absent in previous rebound phases.
Therefore, for those anticipating an index recovery, close attention to the performance of tech stocks remains crucial.
The aforementioned Founder Securities report argues that after the emotional sell-off, with year-to-date returns for key broad-based indices turning negative and broad-based ETF volumes surging, the market's valuation appeal has significantly improved.
The report states, "The adjustment in tech stocks is already relatively substantial. Reviewing typical阶段性 drawdowns in A-share industry themes since 2010, a drawdown of around 20% from highs is the most common scenario, with 30%-40% being the extreme range, usually occurring during systemic risk events. Currently, whether for domestic or overseas computing power stocks, the drawdown from highs is around 28%, making an oversold rebound a more likely event."
In summary, the first half of next week will be a critical period for the market to attempt stabilization and recovery.
However, in terms of specific operations, investors with different styles and situations should have different focuses.
For instance, investors holding cash and waiting to buy have more initiative.
They can either 'buy more as the market falls' (i.e., left-side buying) or wait for a turning point to appear on different timeframes before following the trend (i.e., right-side buying).
For investors holding positions waiting to break even, or those with stop-loss needs, the psychological pressure and difficulty of on-the-spot decision-making are higher than for the former group.
Therefore, it can only be said generally that both buying and selling decisions should be executed as calmly and efficiently as possible, avoiding emotional trading.
Another institution suggested that investors should abandon aggressive strategies like going all-in at once and instead adopt a method of buying in batches against the trend, effectively hedging against short-term stock price volatility and emotional swings.
Prioritizing allocation to ETF products can help avoid individual stock 'black swan' events and single-event impacts, while capturing sector valuation reversion opportunities.
Weekend Market Updates and Corporate News
Next, let's briefly review important news over the weekend.
A survey on the market-wide margin trading and securities lending situation indicated that the number of clients triggering forced liquidation is very limited.
First, forced liquidations have been 'more thunder than rain', with brokerage branches largely not executing such operations; the survey showed only one client at a major branch of Broker A triggered liquidation, accounting for less than 0.1%, indicating overall controllable risk.
Second, retail investors have not panicked and fled; instead, they have been net buyers against the market decline, showing market resilience remains, and the 'leverage unwinding stampede' narrative is a misinterpretation under excessive panic.
Third, the margin balance has declined for 11 consecutive sessions by over 170 billion yuan, primarily due to active deleveraging by margin traders, with actual leverage generally not hitting limits and few investors being fully leveraged.
Iran's Deputy Foreign Minister stated that Iran has ceased implementing the Iran-U.S. memorandum of understanding.
Moonshot AI's launch of its Kimi K3 model has stirred attention on Wall Street.
The company stated its new Kimi K3 model can rival the strongest products from OpenAI and Anthropic – which has largely heightened Wall Street's concerns about Silicon Valley's previous excessive spending.
The first national prescription for a brain-computer interface was issued and a successful surgery was performed.
Kweichow Moutai announced a price increase.
Effective from 00:00 on July 18, 2026, the retail price for Feitian Moutai 53% vol 500ml (2026) on the iMoutai platform will be adjusted from 1,539 yuan per bottle to 1,639 yuan per bottle, and the sales contract price will be adjusted from 1,269 yuan per bottle to 1,369 yuan per bottle.
Five ChiNext-listed companies issued earnings forecasts.
Tongfu Microelectronics expects first-half net profit to increase by up to 45%.
Silan Microelectronics forecasts first-half net profit to increase approximately sixfold.
Easpring Material Technology anticipates first-half net profit growth exceeding 70%.
Lizhong Group projects first-half net profit growth over 30%.
Thundersoft expects first-half net profit growth between 50% and 55%.
Key Events for the Coming Week
Finally, here are the major events scheduled for next week.
On Monday, July 20th, the World Artificial Intelligence Conference concludes.
It is also the payment date for ChangXin Technology's IPO lottery winners.
On Tuesday, July 21st, the 2026 China Auto Forum takes place in Shanghai from the 21st to the 23rd.
On Wednesday, July 22nd, the new Loan Prime Rate is announced.
Tesla is expected to release its Q2 earnings report on U.S. Eastern Time, July 22nd.
The 2026 International Low-Altitude Economy Expo is held in Shanghai from the 22nd to the 25th.
The Shanghai Nuclear Energy Sustainable Development Conference & Shanghai International Nuclear Energy Industry Expo runs from the 22nd to the 24th.
On Thursday, July 23rd, Intel is expected to release its Q2 earnings report after U.S. market close on July 23rd.
On Friday, July 24th, the National Bureau of Statistics releases data on price changes for important means of production in the circulation sector.
Additionally, some listed companies are scheduled to disclose their financial reports next week.
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