This week's key developments (July 13th - July 19th) are as follows.
First, on July 15th, the People's Bank of China released financial data for June 2026. The stock of aggregate financing to the real economy grew by 7.4% year-on-year, a deceleration of 0.3 percentage points from the previous month, indicating a slowdown in overall growth but an improvement in financing structure. Demand for loans from households and enterprises remains relatively weak. However, direct financing continues to play a compensatory role, with net corporate bond financing in June increasing by 159 billion yuan more than the same period last year. The growth rates for both M1 and M2 declined synchronously, and the gap between M2 and M1 growth widened to 4 percentage points, reflecting a marginal weakening in the activation of funds. It should be noted that a single month's data may be influenced by a high base effect and quarter-end factors, making it insufficient to conclude that the previous improvement trend has reversed. The M2-M1 growth gap generally narrowed from February to May; the widening in June could be viewed as a temporary fluctuation, and subsequent trends require continued observation.
Second, global technology sector adjustments were pronounced this week, warranting caution regarding technology-related risks. Stock market performances were mixed, with markets having higher technology weightings experiencing significant pullbacks. Semiconductor and AI-related assets were the primary drags. The Philadelphia Semiconductor Index fell 9.97% for the week, South Korea's KOSPI dropped 8.77%, and Japan's Nikkei 225 declined 6.44%. Hong Kong's stock market performed relatively stably, while major A-share indices saw notable corrections. The Hang Seng Index rose 1.60% weekly, and the Hang Seng China Enterprises Index gained 1.21%, but the Hang Seng Tech Index fell 2.09%. Divergence existed within the Hong Kong market, with the technology sector under pressure. The Hang Seng Semiconductor Industry and Hang Seng Artificial Intelligence thematic indices fell 15.63% and 13.59% respectively this week. In the A-share market, the STAR 50 Index dropped 16.93%, the CSI 1000 fell 12.57%, the CSI 300 declined 5.26%, and the SSE 50 Index decreased 4.33%. In the bond market, inflation concerns stemming from rising oil prices and safe-haven demand triggered by risk asset corrections offset each other, leading to overall high-level volatility in US Treasury yields. The yield on the UK 10-year government bond rose 10 basis points weekly due to inflation and interest rate hike expectations, while Chinese government bond yields remained stable. Among commodities, crude oil rebounded sharply due to Middle East conflicts and shipping risks. ICE Brent crude futures settled at $88.26 per barrel, up 17.34% for the week. WTI crude futures settled at $82.47 per barrel, up 15.33% weekly. Gold and silver continued to decline, pressured by expectations of high interest rates.
Key Policy Developments in Capital Markets
1. China Reform Holdings Corp., Ltd. and China Chengtong Holdings Group Ltd. recently announced share purchases, firmly committed to maintaining stable and healthy capital market operations. On July 19th, China Reform Holdings Corp., Ltd. announced it had utilized over 50 billion yuan from special relending funds for share repurchases and incremental purchases, along with supporting funds. China Chengtong Holdings Group Ltd. announced it had cumulatively purchased nearly 10 billion yuan worth of Chinese stock assets recently. Currently, the fundamentals of China's technology sector have not undergone significant changes. The recent rapid correction in the A-share technology sector is primarily due to a combination of factors including imported risks from overseas and market sentiment. Against this backdrop, signaling market stability and introducing incremental funds will help repair short-term risk appetite and provide some support for Chinese assets.
2. The first batch of actively managed ETFs is about to be submitted for approval, potentially promoting enhanced investment research capabilities in the public fund industry. On July 16th, it was reported that the first batch of domestic actively managed ETFs would soon be submitted to the China Securities Regulatory Commission (CSRC). Nine products each from the Shanghai and Shenzhen stock exchanges were shortlisted for the initial pilot, involving 18 fund management companies including E Fund Management Co., Ltd., China Asset Management Co., Ltd., China Southern Asset Management Co., Ltd., HT Investment Management Co., Ltd., China Merchants Fund Management Co., Ltd., and Guotai Asset Management Co., Ltd.. Compared to traditional over-the-counter actively managed equity funds, actively managed ETFs enhance product transparency through daily disclosure of creation/redemption basket holdings (PCF). This helps reduce fund style drift, encourages fund managers to strengthen investment research and innovation capabilities, and promotes a shift in the public fund industry from scale expansion towards investment research capability and differentiated competition.
3. South Korea strengthens regulation on single-stock leveraged ETFs to prevent high-leverage products from amplifying market volatility. On July 16th, South Korean regulatory authorities including the Financial Services Commission (FSC), the Ministry of Economy and Finance, and the Bank of Korea held a joint meeting and announced plans to enhance supervision of single-stock leveraged ETFs. In response to the potential impact of such products on financial market stability, regulators intend to raise investment thresholds. This includes increasing the minimum margin requirement from 10 million won to 30 million won, restricting the listing of new single-stock leveraged ETFs, optimizing fund rebalancing trading mechanisms, and enhancing investor education requirements and minimum trading units.
Risk Warnings: 1. Risk of inadequate policy comprehension; 2. Risk of uncertainty from geopolitical conflicts.
Main Content
This Week's Key Focus
June Financial Data: Slower Growth in Financing but Improved Quality; Weakening Fund Activation on the Monetary Side
On July 15th, the People's Bank of China released financial data for June 2026. On the financing side, the stock of aggregate financing grew by 7.4% year-on-year, slowing by 0.3 percentage points from the previous month, showing a pattern of decelerating overall growth but improving financing structure. Demand for loans from households and enterprises remains relatively weak, but direct financing continues to play a compensatory role, with net corporate bond financing in June increasing by 159 billion yuan more year-on-year. On the monetary side, the growth rates of M1 and M2 both declined, and the gap between M2 and M1 growth widened to 4 percentage points, reflecting a marginal weakening in the activation of funds. However, a single month's data may be affected by a high base effect and quarter-end factors. The M2-M1 growth gap had generally narrowed to below 4 percentage points from February to May; the widening in June may be a temporary fluctuation, and the subsequent trend still requires observation.
Financing Side: Household and Corporate Loan Demand Remains Weak, but Corporate Direct Financing Improves
Aggregate financing growth slowed somewhat in June. New aggregate financing to the real economy was 3.36 trillion yuan, 860.6 billion yuan less than the same period last year. The stock of aggregate financing at the end of June was 462.06 trillion yuan, a year-on-year increase of 7.4%, 0.3 percentage points lower than in May. Structurally, RMB loans and government bond financing were the main drags, while corporate bond financing performed relatively well.
First, private sector credit demand has not shown significant improvement. RMB-denominated loans under the aggregate financing measure increased by 1.77 trillion yuan in June, 595 billion yuan less than the same period last year. (1) Household loans were the main weak spot. Household loans increased by 264.6 billion yuan for the month, 333 billion yuan less year-on-year. Within this, short-term loans and medium- to long-term loans decreased by 156 billion yuan and 176.9 billion yuan year-on-year respectively, reflecting continued weakness in consumer financing and home purchase financing demand among households. (2) Corporate loans exhibited a characteristic of "acceptable total volume but weak structure." Loans to enterprises and institutions increased by 1.50 trillion yuan in June, 270 billion yuan less year-on-year. Within this, short-term loans and medium- to long-term loans decreased by 340 billion yuan and 450 billion yuan year-on-year respectively, indicating that corporate demand for working capital loans and investment/expansion financing remains weak. During the same period, bill financing increased by 525.3 billion yuan more year-on-year, providing strong support for corporate loans. However, bills have shorter maturities and may be influenced by factors such as low-cost corporate financing and banks' credit push, meaning the corporate credit structure has not shown significant improvement. Additionally, the recovery in corporate bond financing may also be substituting for some bank loans.
Second, government bonds remain an important stabilizing force for aggregate financing, but June's level was relatively low. In terms of stock, government bonds accounted for 21.9% of the aggregate financing stock at the end of June, up 1.3 percentage points year-on-year. In terms of incremental flow, net government bond financing was 768.3 billion yuan for the month, 582.5 billion yuan less year-on-year, mainly related to a high base in the same period last year, a slower issuance pace, and larger maturities. If the remaining quotas are deployed more rapidly subsequently, government bond financing may pick up in the third quarter.
Third, direct financing showed clear improvement, further diversifying corporate financing channels. Net corporate bond financing and domestic equity financing for non-financial enterprises increased by 159 billion yuan and 42.5 billion yuan more year-on-year respectively in June. In the first half of the year, the combined total increased by 1,039.1 billion yuan more year-on-year. Among these, net corporate bond financing, which increased by 916.7 billion yuan more year-on-year, was the main contributor to the improvement in direct financing. The low-interest-rate environment has reduced corporate bond issuance costs. Coupled with policy support such as technology innovation bonds and risk-sharing tools for private enterprise bonds, the support from corporate bond financing for aggregate financing has significantly strengthened, also diverting some bank credit demand.
Decline in M1 and M2 Growth Rates; Weakening Fund Activation
At the end of June, M1 grew 4.0% year-on-year, a deceleration of 1.5 percentage points from the previous month, mainly affected by a high base in the same period last year. It also reflects a slowdown in the growth of corporate and household demand deposits, indicating a marginal decline in the activation of funds. M2 grew 8.0% year-on-year, slowing by 0.6 percentage points from the previous month, primarily related to the slowdown in credit and aggregate financing expansion and a decline in deposit creation speed. Consequently, the gap between M2 and M1 growth widened to 4.0 percentage points, suggesting a weakening in the efficiency with which funds are converted into corporate operations, household consumption, and investment activities.
However, single-month data is significantly influenced by base and seasonal factors, and one should not conclude that the trend of fund activation has reversed based on this alone. The M2-M1 growth gap generally remained at a low level from February to May and had narrowed somewhat from the beginning of the year. The widening in June is more likely a temporary fluctuation within the previous improvement process.
Global Markets: Significant Correction in Tech-Heavy Markets; Crude Oil Prices Rise Again
In equity markets: (1) Global stock markets showed mixed performance this week, with markets having higher technology weightings experiencing significant corrections. Semiconductor and AI-related assets were the primary drags. In US stocks, the Nasdaq Composite fell 2.90% weekly, the S&P 500 declined 1.55%, and the Dow Jones Industrial Average dropped 0.93%. The Philadelphia Semiconductor Index fell 9.97% weekly, as concerns over valuations of AI hardware-related stocks persisted. In other overseas markets, South Korea's KOSPI fell 8.77% weekly, and Japan's Nikkei 225 declined 6.44%. (2) Hong Kong's stock market performed relatively stably, while major A-share indices saw notable corrections. The Hang Seng Index rose 1.60% weekly, and the Hang Seng China Enterprises Index gained 1.21%, but the Hang Seng Tech Index fell 2.09%. Divergence existed within the Hong Kong market, with the technology sector under pressure. The Hang Seng Semiconductor Industry and Hang Seng Artificial Intelligence thematic indices fell 15.63% and 13.59% respectively this week. In the A-share market, the STAR 50 Index dropped 16.93%, the CSI 1000 fell 12.57%, the CSI 300 declined 5.26%, and the SSE 50 Index decreased 4.33%. Reasons for this round of tech stock adjustment include, in addition to market concerns about the sustainability of AI capital expenditure and the realization of commercial returns, profit-taking after previous gains. As the interim report disclosure window approaches, related stocks face earnings tests, and willingness to shift funds from high-valuation stocks to lower-priced sectors has increased. However, fundamentals of the global technology sector have not changed significantly; the recent adjustment is more likely due to a weakening in global risk appetite and amplified market sentiment.
In bond markets, long-term yields in major economies were mixed this week. The yield on the US 10-year Treasury note edged down 1 basis point to 4.550%, with US Treasuries generally exhibiting high-level volatility throughout the week. Early in the week, escalating Middle East conflicts and a sharp rise in oil prices pushed up inflation concerns, leading to a notable increase in US Treasury yields. Subsequently, weaker-than-expected US inflation data led the market to lower the probability of a near-term Fed rate hike. Combined with safe-haven buying triggered by tech stock corrections and heightened geopolitical risks, US Treasury yields ultimately declined slightly. The yield on the Japanese 10-year government bond fell 6 basis points to 2.70%, possibly related to bond buying after the stock market decline and factors such as the Japanese government's push for pension investment funds to increase allocation to domestic assets. The yield on the UK 10-year government bond rose 10 basis points to 4.973%, mainly due to rising oil prices exacerbating UK inflation concerns, which heightened market expectations that the Bank of England would maintain high interest rates or even raise them further. The yield on China's 10-year government bond remained flat at 1.740%, with the bond market overall maintaining narrow-range fluctuations.
In currency markets: (1) The US dollar index edged lower this week, closing at 100.565 points on July 17th, down 0.245 points from the previous week. The dollar index overall remained volatile. (2) Major currencies showed divergent performance against the US dollar. The USD/KRW fell 1.02% weekly, GBP/USD rose 0.17% (USD/GBP fell 0.17%), USD/CNY fell 0.06%; USD/JPY rose 0.70%. Among these, the Korean won continued to appreciate this week, with USD/KRW closing at 1488.80. The won's appreciation this week was mainly supported by the Bank of Korea's interest rate hike and factors such as the repatriation and conversion of funds raised by SK Hynix's ADR. (3) The Chinese yuan maintained narrow fluctuations this week, with USD/CNY closing at 6.78, essentially unchanged from the previous week.
In commodity markets: (1) Crude oil prices rebounded sharply this week. ICE Brent crude futures settled at $88.26 per barrel, up 17.34% weekly. WTI crude futures settled at $82.47 per barrel, up 15.33% weekly. Brent crude FOB European spot prices rose relatively moderately, closing at $81.23 per barrel on July 16th, up 9.27% weekly. The main reasons for the rise in crude oil are the rekindling of US-Iran conflict, increased risks of disruption to transit through the Strait of Hormuz, and the potential for Houthi forces to interfere with Red Sea shipping, collectively boosting the risk premium for crude oil supply. (2) In precious metals, gold and silver continued to decline this week. Spot gold in London settled at $4018.44 per ounce, down 2.47% weekly. Spot silver in London settled at $55.91 per ounce, down 6.56% weekly. Although geopolitical risks typically favor safe-haven demand for gold, the sharp rise in crude oil prices exacerbated inflation concerns, leading to increased market expectations for globally sustained high interest rates and a temporary strengthening of the US dollar. Ultimately, interest rate factors outweighed safe-haven demand, pushing gold and silver prices lower. (3) Among base metals and other commodities, SHFE nickel rose 0.79% weekly to 128,560 yuan per ton; CBOT soybeans rose 0.54% weekly to 1204.00 cents per bushel. LME copper fell 0.26% weekly to $13,373.50 per ton; LME aluminum fell 0.06% weekly to $3154.00 per ton; SHFE rebar fell 1.88% weekly to 3077.00 yuan per ton; NYMEX natural gas fell 1.09% weekly to $2.92 per million British thermal units.
Important Policy Developments in Capital Markets
1. On July 19th, China Reform Holdings Corp., Ltd. and China Chengtong Holdings Group Ltd. announced share purchases, firmly committed to maintaining stable and healthy capital market operations.
On the evening of July 19th, China Reform Holdings Corp., Ltd. announced it had utilized over 50 billion yuan from special relending funds for share repurchases and incremental purchases, along with supporting funds, for maintaining market stability. On the same day, China Chengtong Holdings Group Ltd. announced it had cumulatively purchased nearly 10 billion yuan worth of Chinese stock assets recently.
Brief Commentary: Currently, the fundamentals of China's technology sector have not undergone significant changes. The recent rapid correction in the A-share technology sector is primarily due to a combination of factors including imported risks from overseas and market sentiment. Against this backdrop, signaling market stability and introducing incremental funds will help repair short-term risk appetite and provide some support for Chinese assets.
2. The first batch of actively managed ETFs is about to be submitted for approval, potentially promoting enhanced investment research capabilities in the public fund industry.
On July 16th, it was reported that the first batch of domestic actively managed ETFs would soon be submitted to the China Securities Regulatory Commission (CSRC). Nine products each from the Shanghai and Shenzhen stock exchanges were shortlisted for the initial pilot, involving 18 fund management companies including E Fund Management Co., Ltd., China Asset Management Co., Ltd., China Southern Asset Management Co., Ltd., HT Investment Management Co., Ltd., China Merchants Fund Management Co., Ltd., and Guotai Asset Management Co., Ltd.. Previously, on June 17th, CSRC Chairman Wu Qing announced at the Lujiazui Forum support for exchanges to launch actively managed ETFs. The Shanghai and Shenzhen stock exchanges subsequently issued relevant business guidelines, setting clear requirements for fund managers' qualifications, investment operation capabilities, and risk management systems.
Brief Commentary: Actively managed ETFs combine the stock selection capabilities of actively managed funds with the trading convenience of ETFs, providing investors with an asset allocation tool that offers potential for excess returns, high liquidity, and low cost. Compared to traditional over-the-counter actively managed equity funds, actively managed ETFs enhance product transparency through daily disclosure of creation/redemption basket holdings (PCF). This helps reduce fund style drift, encourages fund managers to strengthen investment research and innovation capabilities, and promotes a shift in the public fund industry from scale expansion towards investment research capability and differentiated competition. In the short term, actively managed ETFs will benefit leading public fund institutions with both active investment research capabilities and ETF operational experience, as well as leading securities firms with ETF liquidity service capabilities and wealth management advantages. In the medium to long term, the launch of actively managed ETFs enriches the equity market investment tool system, is expected to attract long-term funds such as pensions and insurance capital, and promote the flow of household wealth into the equity market.
3. The State Administration of Foreign Exchange plans to accelerate the issuance of a new round of QDII quotas, continuously expanding cross-border investment channels.
On July 17th, Xiao Sheng, Director of the Capital Account Management Department of the State Administration of Foreign Exchange (SAFE), stated at a press conference of the State Council Information Office that SAFE is advancing related preparatory work and striving to issue a new round of Qualified Domestic Institutional Investor (QDII) quotas as soon as possible, to better support and serve the genuine and compliant overseas securities investment needs of domestic residents. In the next step, SAFE will better coordinate development and security, steadily and orderly promote two-way opening of financial markets, regularly issue QDII quotas, and support market institutions with strong investment management capabilities, high product recognition, and strong compliance awareness and management levels to play a better role in QDII business. At the same time, it will further tilt towards public fund products to improve the inclusiveness of QDII business.
Brief Commentary: Regulators support genuine and compliant cross-border investment needs and steadily promote the two-way opening of capital markets. On one hand, the expansion of QDII quotas helps alleviate the current shortage of cross-border investment product supply and meets residents' genuine and compliant needs for overseas asset allocation. In recent years, some popular cross-border ETFs and QDII funds have been under long-term purchase restrictions due to quota constraints, leading to phenomena such as insufficient product supply and high premiums. The release of QDII quotas, especially tilting towards asset management institutions like public funds, helps increase the supply of cross-border investment products and curb irrational premiums. On the other hand, the improvement of the QDII system helps enhance financial institutions' global asset allocation capabilities, supports funds, securities firms, insurance asset managers, and other institutions in enriching their global asset allocation product systems, and improves international investment research and risk management capabilities.
4. South Korea strengthens regulation on single-stock leveraged ETFs to prevent high-leverage products from amplifying market volatility.
On July 16th, South Korean regulatory authorities including the Financial Services Commission (FSC), the Ministry of Economy and Finance, and the Bank of Korea held a joint meeting and announced plans to enhance supervision of single-stock leveraged ETFs. In response to the potential impact of such products on financial market stability, regulators intend to raise investment thresholds. This includes increasing the minimum margin requirement from 10 million won to 30 million won, restricting the listing of new single-stock leveraged ETFs, optimizing fund rebalancing trading mechanisms, and enhancing investor education duration and minimum trading units.
Brief Commentary: Recent volatility in the South Korean stock market and single-stock leveraged ETFs, combined with the Bank of Korea's first interest rate hike in three and a half years leading to a tightening of market liquidity conditions, has further revealed risk resonance between leveraged funds and market volatility. Investors are advised to be cautious of related market risks.
Risk Warnings
Risk of inadequate policy comprehension; Risk of uncertainty from geopolitical conflicts.
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