On July 21st, the A-share market staged a dramatic deep "V" shaped recovery in the morning session! The three major indices bottomed out and rebounded collectively, closing higher by midday. The Shanghai Composite Index rose 0.62%, the Shenzhen Component Index gained 3.41%, and the ChiNext Index surged 5.20%. Additionally, the Sci-Tech Innovation 50 Index jumped 6.94%.
Overall, more stocks fell than rose, with over 2,800 declining. The combined half-day turnover for the Shanghai, Beijing, and Shenzhen markets reached 2 trillion yuan, an increase of 330.7 billion yuan from the previous day. Mainland institutional funds saw a net outflow of 7.891 billion yuan, and the market's median price change was -0.11%.
Key Market Moves
On the positive side, the semiconductor industry chain, including semiconductor equipment, storage chips, MLCCs, power semiconductors, and advanced packaging, rebounded sharply. Stocks like NAURA Technology Group Co., Ltd. and Zhenbao Technology surged by the daily limit.
The computing hardware sector, encompassing optical chips, optical modules, PCBs, and NVIDIA-related concepts, also strengthened collectively. Han's Laser Technology Industry Group Co., Ltd. and Sunlord Electronics hit the upper limit.
Concepts like zirconia and computing metals gained, with Sinocera Advanced Materials Co., Ltd. and Oriental Zirconic Industry Co., Ltd. also rising to the limit.
Areas Under Pressure
On the downside, the biopharmaceutical sector retreated again. Medical concepts including biopharma, generic drugs, CRO, and traditional Chinese medicine all pulled back.
The oil and gas industry chain declined once more. Pork and chicken concepts continued their downward trend.
Consumer sectors like medical aesthetics, dairy, food & beverage, baijiu, and retail weakened again.
The real estate industry chain also fell, with stocks such as Shenzhen Hualian Holding Co., Ltd. and Yango Group Co., Ltd. dropping over 7%.
Major financial sectors including banks, insurance, and securities collectively moved lower.
Catalysts for the Rebound
Three key positive developments are seen as aiding the A-share rebound:
1. Japanese and South Korean stock markets rallied significantly, with two major memory chip giants leading gains.
2. On July 20th, trillion-yuan level insurance institutions including PICC Group, China Life Insurance Group, Ping An Insurance, China Pacific Insurance, and New China Life Insurance collectively voiced strong support for capital market development and a commitment to actively rewarding investors.
3. On July 20th, numerous A-share listed companies disclosed their 2026 interim performance forecasts, preliminary reports, and semi-annual reports. Many companies that have released interim results show improving profitability, with strong demand materializing in sectors like shipping, semiconductors, chemicals, and environmental protection. Several firms reported year-on-year net profit doubling or more.
Notably, Jihua Group, which released a preliminary report, saw an increase exceeding 12-fold, while Haitong Development, Raytron Technology Co., Ltd., Haozhi Machinery, and Han's Laser fully demonstrated their earnings potential.
Market Outlook
Looking ahead, Huaxi Securities believes that, from the current vantage point, the most intense selling pressure may have passed. The market is likely to enter a new phase of "volatility and gradual recovery." Downside room for indices is limited, but an upward breakthrough would similarly require coordinated support from fundamentals and capital flows.
Focus on Key Sectors
Semiconductor Industry Chain Rebounds Sharply
The semiconductor industry chain, including equipment, storage chips, MLCCs, power semiconductors, and advanced packaging, saw a significant rebound. Stocks like NAURA and Zhenbao Technology hit the limit.
Analysis: The chairman of Adata, Chen Libai, stated that one of the two resources most scarce globally in the next decade will be memory. He forecasts memory prices will continue rising in the second half of the year. As long as product prices increase and there is sufficient supply for sales, there is no reason for related companies' profits to be revised downward, with profit opportunities expected to keep growing in H2.
Computing Hardware Sector Strengthens Collectively
The computing hardware direction, including optical chips, modules, PCBs, and NVIDIA-related concepts, strengthened as a group. Han's Laser and Sunlord Electronics rose by the limit.
Analysis: The computing power sector has received new catalysts. Kimi paused new C-end user subscriptions due to computing power shortages, and Meta plans to lease computing power to Anthropic with a contract cap of $10 billion. The Ministry of Industry and Information Technology stated it will issue guidelines for the construction of a computing power standard system, promoting standards for computing service capability evaluation and market-based pricing of computing power.
Computing Metals Concept Rises
Concepts like zirconia and computing metals gained, with Sinocera Advanced Materials and Oriental Zirconic Industry hitting the limit.
Analysis: Sinocera Advanced Materials announced it has decided to raise the sales price of zirconia powder starting July 27, 2026, with increases ranging from approximately 10% to 40%.
Institutional Perspectives
Huaxi Securities: Long-term Tech Rally Not Over; Current Phase to Feature Rotation and Divergence
Huaxi Securities believes that from the current standpoint, the most intense selling pressure may have passed. The market is likely to enter a new phase of "volatility and gradual recovery." Downside for indices is limited, but an upward breakout requires coordinated support from both fundamentals and capital flows.
On one hand, A-share tech stocks' desensitization to overseas markets needs time. The pace of deleveraging in the South Korean stock market still requires observing a continued decline in forced liquidation scales. Additionally, foreign investors in South Korea have been significant net sellers of Korean stocks for four consecutive months. Until the Korean market desensitizes to leveraged trading, it will still emotionally impact global assets.
On the other hand, driven by industry trends, the tech rally is expected to continue. However, before a new round of strong industry catalysts emerges, it will be difficult to replicate the extreme concentration seen in the first half of the year. Rotation and divergence will be the main themes. One approach is to select high-quality individual stocks with strong fundamental support; the other is to rotate towards domestic supply chains and mid-to-downstream segments.
For sector allocation, focus on growth with strong performance, selecting high-quality stocks with solid fundamentals around the "AI+" related upstream, midstream, and downstream industrial directions. Attention can also be paid to related quality targets in "innovative drugs, Hong Kong-listed internet, media, and gaming."
Caixin Securities: After Significant Adjustment, A-Shares Stabilize, Possessing Oversold Rebound Momentum
Caixin Securities believes that on Monday, the market stabilized, and a short-term rebound is anticipated. Recently, volatility in major global equity markets has intensified. After a significant adjustment, A-shares possess oversold rebound momentum. However, dragged by the continued weakness of the South Korean stock market, the market opened higher but experienced wide fluctuations throughout the day, with the three major indices ultimately showing some stabilization.
In terms of market performance, the hard tech sector remained under pressure without clear signs of stopping the decline, while heavyweight stocks in the cyclical, consumer, and dividend sectors stabilized the indices.
Overall, although the market remains in a weak, volatile trend, a short-term rebound may be approaching, and investors need not be overly pessimistic. On one hand, after consecutive adjustments, market risk has been somewhat released, panic selling has gradually cleared, and some core stocks, deeply adjusted, are again showing investment value, which is conducive to attracting incremental funds.
On the other hand, institutions like the China Securities Regulatory Commission have signaled full efforts to maintain stable market operations, aiding investor confidence recovery. However, before the hard tech sector, a market sentiment barometer, shows no further significant negative feedback, the room for restoring fund confidence is limited, and the market rebound process may maintain a state of high volatility.
From a medium-term perspective, driven by factors such as the completion of semi-annual report disclosures by the end of August and the approaching US mid-term elections in early November, it is expected that from late August to the end of October, the A-share market index may usher in another favorable window for bullish positioning, at which point risk appetite and position sizing could be increased.
Everbright Securities: Cautious Sentiment Persists; Short-term Market May Continue Volatile Bottoming and Structural Rotation
Everbright Securities believes the current market remains in a state of存量博弈 (存量博弈). Cautious sentiment is still strong, significantly constraining a rebound in the main tech theme.
Looking ahead, given the ongoing escalation of US-Iran military confrontation, geopolitical factors repeatedly disturb global risk appetite. Coupled with the fact that valuation adjustment pressure on overseas tech stocks has not been fully released and selling pressure from trapped positions in the previous tech rally remains, cautious market sentiment is difficult to change. The short-term market may still be dominated by volatile bottoming and structural rotation.
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