On November 12, A-shares experienced an afternoon plunge, with more than 4,600 stocks closing lower.
AI-related content, precious metals, robotics, and consumer electronics equipment sectors fell sharply, while AI chip stocks bucked the trend, and banking and food & beverage sectors helped shore up the market.
Notably, the telecommunications sector surged nearly 3% in the morning session before reversing to drop over 3% in the afternoon, with all three major CPO-related names closing lower.
Market participants said that after the morning rally, substantial capital flowed out of tech stocks, compounded by heavy selling pressure from trapped positions, which constrained any further market rebound.
For the road ahead, three key signals deserve close attention: whether trading volume can remain at a relatively high level; whether semiconductor and computing power-related tech sectors see secondary buying support after their pullback; and whether capital rotation between dividend and growth sectors stabilizes.
AI hardware and tech stocks led the declines, with all major indices closing lower.
The Shanghai Composite fell 0.67% to 3,655.83 points, the ChiNext Index surged then reversed to plummet 2.44% to 2,509.43 points, and the Shenzhen Component Index dropped 1.68%.
The CSI 300 fell 0.78%, the Beijing Stock Exchange 50 dropped 1.65%, and both the SSE 50 and STAR 50 gained no more than 1%.
A-shares saw a dramatic shift in the afternoon, with the wealth-destroying effect evident as 4,635 stocks closed lower, including 5 hitting the daily limit-down; 875 stocks closed higher, with 37 hitting the limit-up.
In terms of trading volume, combined turnover across the Shanghai, Shenzhen, and Beijing markets expanded by 257.1 billion yuan to 1.95 trillion yuan.
On the leverage front, as of November 11, margin financing balances across the three markets edged up to 2.3 trillion yuan.
In terms of sector performance, among the 31 Shenwan first-level industries, only agriculture, forestry & animal husbandry, food & beverage, and banking sectors posted slight gains, while the rest closed lower.
Media, non-ferrous metals, and telecommunications sectors each fell more than 3%, with the telecom sector having risen nearly 3% in early trading.
Additionally, machinery equipment, computer, automotive, power equipment, and basic chemicals sectors also dropped 2% or more.
Liu Youhua, research director at PaiPaiWang Wealth, analyzed the reasons behind the A-share plunge: First, positions in areas like optical communications were overly crowded, with capital concentrated inflows yesterday and no incremental buying support today, causing profit-taking and stop-loss selling to occur simultaneously.
Second, external sentiment disruptions also played a role, as Nvidia-related news cooled global AI supply chain sentiment, weighing on high-valuation growth sectors.
The volume-driven pullback reflects growing market divergence, and with insufficient incremental capital, morning chase buyers faced unrealized losses, prompting some funds to take profits or rotate positions in the afternoon.
Chen Bozhong, a partner at Zhong'an Dingsheng Investment, noted that robotics themes and the AI hardware tech mainline have entered a short-term retreat phase.
Driven by rising rate hike expectations, the dollar and U.S. Treasuries strengthened, tightening liquidity conditions, and with domestic and external markets resonating, A-share capital has become broadly cautious.
However, with turnover expanding to 1.95 trillion yuan and broad-based ETFs seeing net subscriptions, this suggests large-scale chip exchange is occurring at these levels; while capital is rotating toward defensive sectors, high-level volume-driven turnover is also a positive bottom signal.
In the afternoon, tech stocks led by the AI hardware sector plunged sharply.
Long Fang, chief investment officer at Juzhen Capital, analyzed two factors: First, reports that Nvidia's board might oust Jensen Huang sent Nvidia shares plunging 8.61% in after-hours U.S. trading, causing A-share Nvidia supply chain stocks to lead declines; Second, rumors circulated in the afternoon that regulators would require funds to report their holdings of international AI hardware-related stocks, denting market sentiment.
Additionally, after yesterday's tech rally, concentrated selling had already occurred during the morning surge, indicating heavy selling pressure from trapped positions in tech stocks, which constrains further market rebounds.
Regarding the three signals to watch, combined with today's market performance, is A-shares confirming a stabilization and upward trend?
Mo Xiaocheng, general manager of Huanrui Tianze, stated bluntly that today's trading reflects continued significant market divergence with prominent stock-game characteristics, as capital focuses more on finding opportunities in low-position sectors.
Whether A-shares can truly stabilize and recover remains to be seen, as a single rebound or volume expansion alone is insufficient to indicate the market has entered a sustained upward channel.
"A-shares remain in a bottoming-out phase, with signs of stabilization and recovery," said Long Fang.
On medium-term positioning, for the tech sector, he recommends prioritizing the domestic substitution theme, such as digital chips, servers, and switches in the domestic computing power segment.
With the U.S. Congress controlled by Democrats, U.S. export restrictions on AI technology may further escalate, making domestic substitution increasingly urgent.
Beyond that, innovative drugs, CRO, shipbuilding, and power equipment sectors are also worth watching, as these sectors have shown earnings inflection points in Q4 and industry prospects may improve next year.
Liu Youhua believes the market remains in a phase of consolidation, bottoming, and structural rebalancing.
Going forward, three signals deserve close attention: whether trading volume can remain at a relatively high level; whether semiconductor and computing power-related tech sectors see secondary buying support after their pullback; and whether capital rotation between dividend and growth sectors stabilizes.
"Judging from current characteristics of volume-driven chip exchange and net ETF subscriptions, A-shares have preliminarily stabilized, but the expectation for a recovery is not yet clear," said Chen Bozhong.
He suggests investors maintain moderate positions while matching their own risk preferences, waiting for further market repair.
If sector rotation节奏 is difficult to grasp, investing in broad-based index ETFs to await market recovery is an option.
Regarding balanced allocation advice, under the stock-game dynamics, sector rotation and divergence are pronounced, with tech sectors seeing large swings.
How should investors manage their portfolio layout?
"The pace of short-term market repair is easily influenced by news catalysts and shifts in market risk appetite, making upside potential difficult to predict," warned Jinxin Fund.
The current market is in a phase of structural rotation, and sector sustainability needs continued observation, with the difficulty of any single direction sustaining strength increasing, making a balanced allocation approach more worthy of attention.
Positioning one end in dividend directions represented by smart banking, and the other in higher-elasticity tech growth directions, may help reduce the portfolio's dependence on a single market style.
On strategic layout, Liu Youhua suggested maintaining a "barbell" or "defense-and-counterattack" approach.
Keep the base position stable, with defensive assets like banks and high-dividend stocks continuing to be allocated to reduce portfolio volatility.
On the growth side, select directions with earnings support, focusing on semiconductors, domestic computing power, AI applications, and pharmaceuticals—subsectors showing Q3 earnings improvement or sustained prosperity.
At the same time, control positions, avoid chasing highs, as sentiment repair takes time, making it more suitable to buy on dips in batches and wait for volume-shrinking stabilization signals, while avoiding high-position pure theme speculation.
Furong Fund believes A-shares are in a consolidation and repair period characterized by "a solid policy bottom, an earnings bottom being verified, and overseas rate disruptions persisting."
Direction-wise, first, AI computing power is shifting from investment expectations to ROI realization, with domestic computing power, optical interconnect, advanced packaging, and liquid cooling power infrastructure having earnings support, but valuation volatility before overseas rate peaks needs to be guarded against; second, high-dividend banks, utilities, and coal remain as base positions to hedge against the Fed's December meeting and geopolitical uncertainties.
Risk points include the Fed's December rate hike exceeding expectations and questions over AI capital expenditure returns triggering a second global tech pullback.
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