On July 3rd, the three major A-share indices experienced a volatile morning session with an upward trend, as the ChiNext Index opened lower but climbed, briefly gaining over 2%. By the midday close, the Shanghai Composite Index was up 0.69%, the Shenzhen Component Index rose 1.39%, and the ChiNext Index advanced 1.58%. Gainers outnumbered losers across the market, with over 3,500 stocks rising. The combined turnover for the Shanghai, Beijing, and Shenzhen markets in the morning session was 2.06 trillion yuan, a decrease of 182.3 billion yuan from the previous day.
Key Sector Performances
The memory chip sector saw a volatile recovery, with Tianshan Electronics hitting the 20% daily limit. Stocks like Hangzhou Kelin, Xice Testing, Beijing Junzheng, Purun Shares, and Demingli also surged.
The PCB (printed circuit board) concept gained strength, with Shennan Circuits reaching the daily limit. Shares of Huadian Co., Ltd., Shengyi Technology, Pengding Holdings, and Guanghe Technology followed higher.
The precious metals sector continued its strong performance. Zhaojin Mining and Chifeng Gold secured their second consecutive daily limit-up, while Shanjin International also hit the limit. Xiaocheng Technology, Sichuan Gold, Zhongjin Gold, and Western Gold were among the top gainers.
The humanoid robot concept continued its upward trajectory, with Wolong Electric Drive and Estun Automation reaching the daily limit. Earlier, stocks like Rifa Precision Machinery, Leisai Intelligent, Jintuo Shares, and Landai Technology had also hit their limits.
On the downside, the semiconductor materials sector continued to adjust, and the AI application sector also saw corrections. Sectors including pork, e-commerce, agriculture, airport and shipping, and pharmaceuticals weakened.
Market Catalysts
Three significant positive developments are aiding the market rebound. Firstly, the weaker-than-expected US June non-farm payrolls report has led markets to believe the Federal Reserve may pause its rate hikes. Secondly, following the global tech sell-off triggered by Meta's business model adjustments, renowned semiconductor research firm SemiAnalysis released a report arguing the market misinterpreted Meta's move to 'rent computing power' as a cost-cutting measure. The firm stated on July 3rd that it believes Meta's data center and computing power procurement will accelerate, not slow down, with capital expenditure in 2027 expected to be surprisingly high. Thirdly, on the evening of July 2nd, numerous companies announced share buyback or increased holdings plans to bolster market confidence, including Dazhong Mining, Tianshan Aluminum, Chint Power Systems, Sany Renewable Energy, Wangfujing Group, and Haier Biomedical. Among them, Dazhong Mining plans to repurchase shares worth 400 million to 800 million yuan. Additionally, several listed companies issued positive profit forecasts, involving Guanggang Gas, Salt Lake Co., Ltd., Alpha Group, Yonghe Co., Ltd., Huafon Chemical, Taotao Vehicles, and Furong Technology.
Outlook and Institutional Views
Everbright Securities suggests that given the ongoing valuation reset in overseas tech sectors, continued uncertainty around Federal Reserve monetary policy, and the start of the mid-year earnings reporting season in July, profit-taking pressure in high-valuation sectors is becoming evident, and market caution is unlikely to dissipate. In the short term, the market may continue to experience weak, low-volume volatility with structural divergence. Rising risk aversion is driving a rotation from high to low positions, with defensive low-valuation sectors like precious metals, AI applications, livestock farming, innovative drugs, non-ferrous metals, and daily consumer goods, along with stocks with solid earnings visibility, showing resilience. Meanwhile, previously high-flying tech themes like CPO/optical communication, semiconductor equipment, memory chips, and AI computing hardware are collectively adjusting. As profit-taking in tech sectors continues and overseas liquidity pressures persist, market focus may repeatedly shift between low-valuation defensive sectors and high-valuation tech themes.
CSC Financial notes in a research report that market sentiment is currently at a relatively low level within a bull market context. In early June, sentiment continued its decline from the previous month due to hawkish Fed signals and profit-taking in the tech sector. After the sentiment index dropped to around 55 on June 8th, the market began a rebound from lows, consistent with the historical pattern of rebounds occurring when the sentiment index falls to the 50-55 range in a bull market. Sentiment then fluctuated significantly, hitting a low below 44 on June 11th before rebounding sharply to above 73 by June 23rd. Subsequently, as market divergence intensified, the sentiment index retreated again, approaching 55 once more on June 26th and triggering another rebound. Overall, current market sentiment is at a low level within the bull market, and indicators reflecting market strength/weakness are also at low levels, suggesting strong short-term rebound potential, particularly for previously oversold sectors which may see rotational rebounds, aiding sentiment recovery.
Wang Fang, Co-Director of the Research Institute at Zhongtai Securities, stated that AI innovation is permeating from the cloud to the edge and device layers, continuously driving the semiconductor industry upward. The sector's performance is supported by solid fundamentals, not mere speculation. The industry experienced a slight recovery in 2024, with a significant pickup expected in 2025. In Q1 2026, the electronics sector's revenue grew 29% year-on-year, with profit growth reaching 71%, significantly outpacing revenue growth. Most sub-sectors, including semiconductors, consumer electronics, PCBs, and passive components, achieved both revenue and net profit growth, indicating sustained improvement in industry fundamentals. Concurrently, inventory levels are within a safe range, laying a solid foundation for future development. In contrast, traditional downstream demand from smartphones, laptops, and automotive electronics continues to weaken, further highlighting the core driving role of the AI sector.
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