On July 13th, the three major A-share indices closed lower, with sectors like defense and military industry and building materials leading the declines. Trading volume contracted compared to the previous session.
The market pullback is the result of multiple converging factors. Geopolitically, escalating US-Iran conflict and the closure of the Strait of Hormuz have pushed up international oil prices, dampening global risk appetite. Domestically, the previously high-flying and crowded technology and growth sectors are facing pressure, compounded by expectations that large-scale IPOs will divert funds from the existing market. In the short term, the current adjustment is more a combination of a clearing of crowded trades and a shift in pricing focus towards interim earnings reports; it does not yet constitute a disproof of the underlying industrial logic.
The latter half of July will see a concentrated period of interim report disclosures, shifting the market's focus towards fundamental verification. During this phase, dividend-paying assets characterized by stable cash flows are gaining favor due to their defensive attributes, while sectors that saw significant gains earlier need to await earnings confirmation. Looking ahead, we believe the long-term trend of expanding AI computing power demand within the tech sector remains unchanged, but the market is likely to continue its volatile consolidation pattern in the near term. As interim earnings become clearer and the impact of large IPOs settles, the market is expected to gradually accumulate momentum for a new upward move amidst the fluctuations. Portfolio allocation should balance defense with verification of sector prosperity, patiently awaiting clearer signs of market stabilization.
Key Developments
The Ministry of Commerce and the General Administration of Customs have announced a temporary ban on the export of helium, effective immediately. Helium, known as the "golden gas," is widely used in high-tech fields such as semiconductor manufacturing and rocket fuel pressurization for aerospace and defense.
This temporary export ban on helium, a critical raw material for high-end manufacturing in semiconductors, optical fibers, and aerospace, underscores the state's control over strategic resources. The industrial gases sector has reacted positively to this policy today. Domestically, helium producers and companies with alternative gas technology reserves may benefit from shifts in supply and demand. However, downstream industries like semiconductors and panel manufacturing that rely on imported helium may face short-term cost pressures. This policy continues the recent trend of managing exports of key resources.
US-Iran military conflict continues to escalate, marking the fourth round of strikes within a week. On the morning of July 12th local time in Iran, the US launched its third military strike against Iran this week in response to an Iranian attack on a container ship in the Strait of Hormuz. The US military command stated that approximately 140 Iranian military targets were hit. Iran subsequently announced a series of strikes against US military targets in the Middle East and declared the immediate closure of the Strait of Hormuz. At 5 PM Eastern Time on July 12th, the US launched another new round of strikes, the fourth such action against Iran within the week.
With four rounds of mutual strikes in just one week and the closure of the Strait of Hormuz directly impacting global energy transportation, geopolitical risks have intensified sharply. International oil prices face upward pressure, and global capital markets are seeing a rise in risk-averse sentiment. For the A-share market, declining risk appetite may pressure more volatile sectors like technology and growth. If the conflict persists, vigilance is warranted regarding potential disruptions to domestic monetary policy from imported inflationary pressures and potential impacts on manufacturing from global supply chain interruptions.
The State Council has approved in principle the "15th Five-Year Plan for the Revitalization and Development of Traditional Chinese Medicine." The plan's implementation requires upholding the equal importance of traditional Chinese and Western medicine, adhering to integrity and innovation, following the laws and characteristics of TCM, improving the mechanism for its inheritance and innovative development, accelerating its modernization, and promoting its global reach. Provincial, regional, and municipal governments are to treat TCM revitalization as a key task for economic and social development during the 15th Five-Year Plan period.
The formal elevation of TCM revitalization to a national special plan for the 15th Five-Year Plan period signifies high policy priority and broad coverage. The plan's emphasis on "upholding the equal importance of traditional Chinese and Western medicine" and "accelerating the modernization of TCM" suggests TCM's position within the healthcare system will be further solidified. All segments of the industrial chain, including TCM herb cultivation, innovative TCM drug R&D, TCM medical services, and TCM internationalization, are expected to receive systematic policy support. For A-shares, the TCM sector, as a distinctive segment within healthcare with clear Chinese characteristics and policy certainty, may see medium- to long-term valuation support. However, it's important to note that major projects and key initiatives outlined in the plan require approval through proper procedures, meaning the release of policy benefits will be a gradual process.
Market Recap
On July 13th, the three major A-share indices declined. At the close, the Shanghai Composite Index was at 3913.79 points, down 2.06%; the Shenzhen Component Index was at 14522.85 points, down 3.48%; the ChiNext Index was at 3723.52 points, down 3.10%; and the STAR 100 Index was at 2061.08 points, down 5.72%. Among primary Shenwan industries, banking, coal, and diversified financials led gains, rising 1.71%, 0.65%, and 0.26% respectively. Defense and military industry, building materials, and machinery equipment led losses, falling 6.77%, 6.00%, and 5.89% respectively. 797 stocks advanced, while 4683 declined.
Capital Flows
Market turnover was 2,813.978 billion yuan, down from the previous trading day. The balance of margin trading and securities lending closed at 2,944.774 billion yuan last Friday, also down from the prior day.
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