The sell-off in technology stocks that began last Friday, triggering a stampede, was met with weekend announcements of active market stabilization measures by state funds. Today, the China Securities Regulatory Commission (CSRC) also convened a symposium on stabilizing the market. However, technology stocks opened higher today only to retreat, plunging again in the afternoon session, with semiconductors and upstream PCB materials leading a wave of limit-down losses.
Beyond the fundamental factors I mentioned last Friday, negative feedback from capital flows is a key driver of this sharp tech decline. It is evident that a liquidity crisis, characterized by forced selling and a stampede, emerged last Friday, with quantitative trading being a core catalyst. For instance, today, domestic supply chain leader Cambricon Technologies and overseas chain favorite Yizhongtian rose, while the major losers were second and third-tier stocks, which are typically heavily weighted in quantitative strategies.
Given this is a liquidity crisis, the most critical factor for a short-term halt in the tech stock decline is the clearing of positions. The medium-term outlook depends on whether industry expectations improve. Two positive signals are emerging. First, state funds are providing liquidity support by purchasing ETFs. Previously, their interventions focused on large-cap ETFs like the SSE 50 and CSI 300. Today, the focus shifted to small and mid-cap ETFs such as the STAR 50, ChiNext Index, and CSI 1000, representing a targeted approach. The market's recovery from the afternoon plunge was precisely due to this large-capital support at the close.
Second, last Friday saw a net sell-off of 79.881 billion yuan via margin financing in a single day, with total deleveraging in this round exceeding 240 billion yuan. Both the daily and cumulative figures have reached relatively extreme levels. With most tech stocks locked at their limit-down prices last Friday, many retail investors finally grasped the severity of the liquidity crisis over the weekend. Those wishing to exit likely did so during today's high open, significantly releasing selling pressure again.
I believe the emotional sell-off in tech stocks is nearing its end, and a rebound may be imminent. However, a halt in the decline does not equate to a reversal. A true reversal still depends on whether North American CSP earnings reports at the end of the month can convince the market.
Major News Highlights
CSRC Party Committee Secretary and Chairman Wu Qing conducted research at a securities brokerage in Beijing on the morning of July 20 and chaired an investor symposium. He held face-to-face discussions with eight representatives from various investor types, including large, medium, and small retail investors, to solicit opinions and suggestions on promoting the stable and healthy development of the capital market.
Citigroup downgraded South Korean equities in its emerging markets asset allocation while upgrading Chinese equities. The rationale cited was market turbulence in South Korea, while China's market may benefit as the rally, previously dominated by a few AI winners this year, is expected to broaden to a wider range of sectors.
It was reported that on the evening of July 19, Google was confirmed as an anchor investor and off-taker for a 1.9 GWh (with a total of 2.9 GWh for the project's third phase) U.S.-based grid-side solar-plus-storage project. This marks the first landmark case following the recent FERC policy allowing joint studies of data center loads with new power generation.
Reports indicate that since mid-July, spot prices for server DRAM have surged significantly. Unlike regular DRAM products, server DRAM spot prices are not tracked by platforms like DRAMeXchange. This is primarily due to sharply increased demand from sovereign AI projects (including Saudi Arabia's) and testing needs for newly built AI data centers. Supply has become extremely tight, with reports that suppliers are struggling to gather enough units even for customer samples. Institutions believe the current situation resembles what happened earlier this year. In January, a wave of urgent orders from the server market drove spot prices sharply higher. However, memory stocks remained range-bound as the market awaited end-of-month earnings from hyperscale cloud providers. They subsequently rebounded from February as contract prices began to rise.
Kweichow Moutai announced that effective from 00:00 on July 18, 2026, the i-Moutai platform retail price for Feitian Moutai 53% vol 500ml (2026) will be adjusted from 1,539 yuan per bottle to 1,639 yuan per bottle, and the sales contract price from 1,269 yuan per bottle to 1,369 yuan per bottle. The baijiu sector strengthened significantly, with Gujinggong Jiu hitting the limit-up, Luzhou Laojiao surging 6.33%, and Kweichow Moutai rising nearly 6%.
Capital rotated defensively into lower-valuation sectors, causing a surge in coal, power, and related sectors. Huaibei Mining, Yankuang Energy, Dayou Energy, Datang Power Generation, Jingneng Power, and others hit the limit-up.
Market Close Summary
At the close, the Shanghai Composite Index gained 0.85%, and the ChiNext Index rose 0.42%. Market turnover expanded slightly to 2.71 trillion yuan. Over 3,700 stocks declined, with 238 hitting the daily limit-down. In Hong Kong, the Hang Seng Index rose 2.36%, and the Hang Seng Tech Index gained 2.79%.
By sector, coal, petroleum & petrochemicals, utilities, food & beverage, and non-bank financials led the gains. Conglomerates, building materials, electronics, and machinery & equipment were among the biggest decliners.
Risk Warning: The stock market carries risks; investment requires caution. This article does not constitute investment advice. Readers must make independent judgments.
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