On June 23rd, the three major Chinese stock indices closed lower, with most broad-based indexes declining and trading volume shrinking across the two exchanges.
The Shanghai Composite Index fell 1.37% to 4106 points, while the ChiNext Index dropped 3.84%. Hong Kong indices also declined, with the Hang Seng Index down 1.90% by the close of the A-share market. Combined turnover on the two mainland exchanges shrank, hovering around 3.4 trillion yuan.
Data shows most of the 31 primary Shenwan industries closed lower, with stocks falling broadly. Defensive sectors such as pharmaceuticals, banking, textiles & apparel, and transportation performed relatively better, posting gains of 1.33%, 1.15%, 1.04%, and 0.25% respectively. In contrast, sectors like non-ferrous metals, electric power & new energy, defense, and communications saw significant declines. Among over 5,300 stocks in the market, 2,642 fell, indicating a generally weak profit-making effect.
Adjustments in overseas markets led to a rapid decline in sentiment, putting clear pressure on the A-share market today. The technology and growth sectors were at the core of this pullback. The primary trigger was not a sudden deterioration in domestic fundamentals but rather the collective weakness in the global tech market overnight and during the day. Cross-market pessimism spread quickly, compounded by previously excessive trading concentration in A-share tech sectors, which fostered extreme trading behavior. As risk appetite rapidly receded, this significantly amplified stock price volatility.
Overnight, US markets showed clear divergence. The Dow Jones Industrial Average managed a slight gain, supported by traditional value sectors, but the Nasdaq Composite, a bellwether for global growth, fell sharply by 1.32%, indicating weakness in the tech sector. This sentiment shock intensified in Asian markets today. A leading South Korean memory chip manufacturer plunged 12% in a single day. As a core global supplier of HBM and DRAM, its sharp stock price drop directly sparked concerns about the memory cycle and demand for AI hardware. The Korea Composite Stock Price Index plummeted nearly 10% intraday, dragged down by its semiconductor heavyweights, leading to a broad market rout. Foreign capital concentrated on selling tech assets, and panic sentiment quickly spread across Asian equity markets. Under this sentiment transmission, short-term funds used the performance of overseas chip leaders as a valuation anchor for the sector, with the external slump directly lowering onshore risk appetite.
Today, related sectors such as semiconductors, computing power, optical modules, and memory collectively declined. Previously, the AI and semiconductor sectors had sustained strong gains, attracting a large influx of short-term capital, which led to continuously high trading concentration and the accumulation of substantial profit-taking positions. Catalyzed by negative overseas developments, funds formed a consensus to sell. Programmed trading and short-term stop-loss orders concentrated their outflow, giving rise to extreme market movements. Intraday stock volatility significantly amplified, revealing emotional, cost-indiscriminate selling. The short-term market is likely to continue digesting external pessimistic expectations, and volatility in highly valued, crowded tech stocks may persist. Once panic sentiment is fully released, capital is expected to return to sub-sectors with stronger earnings certainty and ample room for import substitution.
Looking ahead, easing geopolitical tensions overseas are boosting global risk appetite, while oil prices have fallen below $80 per barrel, alleviating some inflationary pressure. The June FOMC meeting saw the new Fed Chair's debut, releasing somewhat hawkish signals that also caused some disturbance for risk assets. However, as the US economy is expected to weaken marginally after the World Cup pulse and with US CPI growth slowing year-on-year, easing inflation concerns should later allow the Fed to signal a more dovish stance. Domestically, while the economy faces certain pressures, there are still non-tech sectors with promising mid-year report prospects worthy of attention and exploration. Furthermore, considering recent clear guidance from important official media on boosting consumption and preventing overly rapid AI investment, the Politburo meeting at the end of July remains a key event to watch, focusing on whether there will be policy counter-cyclical deployments beyond tech industry policies. In the short term, the market may continue moving along its current inertia, but from July to August, close attention should be paid to mid-year earnings previews, as sub-sectors with genuine earnings support are more likely to show sustainability.
Regarding focus areas, a balanced allocation is still recommended to navigate market volatility. Medium-term attention should remain on technology industry trends, while also validating new high-growth directions in energy and supply chain security. With the mid-year report earnings verification window approaching, it is crucial to avoid thematic stocks that are highly valued, lack earnings support, and are at elevated levels. On the offensive side, technology and growth remain the medium-term main theme, but the short-term focus should be on areas with orders, earnings realization, and industry trend support, such as computing power, semiconductor equipment, and materials. Against a backdrop where tech sectors are not yet significantly frothy, high-growth directions still possess some capacity to withstand liquidity disturbances. Simultaneously, tightening mineral policies coupled with rising demand from AI servers make strategic minor metals like molybdenum, tantalum, germanium, tungsten, indium, and tin worthy of attention. As energy prices and corporate cost constraints gradually become apparent, directions related to energy security such as computing-power coordination, energy storage, wind power, green power grids, and lithium batteries may emerge as new high-growth branches. Innovative drugs could also serve as a supplementary allocation with an independent industrial logic. On the defensive side, short-term capital rotating from high to low valuations may continue flowing into high-dividend sectors and cyclical sectors benefiting from cross-strait shipping, suggesting attention to areas like non-ferrous metals, chemicals, and coal. Additionally, non-bank financials are another direction showing strong mid-year report performance. Advantages such as high industry prosperity, historically low valuations, and largely cleared institutional holdings may lead the non-bank sector to receive significant attention from capital in the next phase.
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