On July 2nd, the A-share market opened lower and continued to weaken, with previously popular sectors seeing broad adjustments. The semiconductor and computing hardware sectors led the declines. The Shanghai Composite Index closed down 2.03% at 4028.9 points, the Shenzhen Component Index fell 3.85%, and the ChiNext Index tumbled 5.71%. The CSI 300 index dropped 2.96%, the STAR 50 index plunged 7.7%, and the CSI A500 index declined 3.21%. Total turnover for the A-share market was 3.47 trillion yuan for the day, compared to 3.68 trillion yuan the previous session.
Primary Market Drivers Analyzed
The market was primarily impacted by negative news from overseas tech stocks overnight, which pressured the global technology sector. This was compounded by recent volatility and risk warnings issued by several technology companies, leading to a significant correction in A-share tech stocks today. According to Bloomberg reports, Meta is developing a new cloud business plan aimed at selling computing resources to external clients. This news sparked market concerns about a potential oversupply in computing power and a possible reduction in capital expenditure by major tech firms. Furthermore, on the evening of June 30th, 67 A-share companies issued announcements on abnormal stock trading or risk warnings, covering recent hot themes like memory, semiconductor materials, and AI computing power, which further unsettled market sentiment.
Safe-Haven Assets Buck the Trend
Concurrently, the precious metals sector and high-dividend assets demonstrated strength against the broader market downturn. Dovish remarks from Federal Reserve Governor Waller at the ECB's roundtable forum, combined with marginally weaker-than-expected U.S. employment data, have tempered market expectations for aggressive Fed tightening, fueling a notable rebound in the precious metals sector today. On July 1st, Waller discussed monetary policy and economic conditions alongside central bank governors from the ECB and the Bank of England at the ECB's annual forum, with his overall tone perceived as dovish. Additionally, the U.S. ADP employment report for June showed only 98,000 jobs added, the lowest level since March and significantly below expectations. These combined factors have led to a cooling of expectations for Fed hawkishness.
Style Rotation and Risk Aversion
Signs of market style rebalancing have begun to emerge, coupled with a rise in risk-averse sentiment. High-dividend assets such as coal and banking stocks strengthened against the market trend. The resumption process for coal mines in Shanxi province has stalled or even reversed. Recent safety inspections by central government teams in Shanxi identified persistent issues and hidden dangers in the coal mining sector, with on-site accountability orders issued. The Shanxi provincial government has stated it will conduct in-depth special rectification actions, indicating that high-pressure safety supervision is unlikely to ease, and supply-side tightening may continue to exceed expectations.
Outlook and Strategic Positioning
Looking ahead, as the economy enters a new cycle, a positive medium-term view on the market is maintained. However, given the current extreme divergence in market performance and valuations, and with July marking the start of the earnings verification season, risk-averse investors may consider a cautious short-term stance, awaiting a more balanced market style.
Regarding portfolio positioning, due to the currently extreme market structure and the choppy nature of the economic recovery, a strategy to reduce volatility is advisable. First, while maintaining a long-term bullish view on the AI sector, consider diversifying into leading companies in optical modules, PCBs, servers, and gas turbines, while reducing exposure to high-valuation second and third-tier stocks and patiently waiting for better entry points. Second, against the backdrop of a structural economic recovery where mid-to-upstream manufacturing is entering a new cycle first, sectors like new energy, construction machinery, and chemicals are positioned to benefit from the restoration of manufacturing supply chains. Third, as structured market trends become extreme, incorporating low-valuation factors such as insurance and securities, along with a small allocation to high-dividend stocks, can also help reduce portfolio volatility.
Investment Risk Notice
The views expressed are for reference only and may change due to market factors. They do not constitute investment advice or a commitment. Fund investments carry risks, and caution is advised.
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