Major Chinese stock indices experienced significant declines in trading on June 26.
The Shanghai Composite Index fell by more than 2%, the Shenzhen Component Index dropped over 3%, and the ChiNext Index was down more than 4%.
Market Analysis
The three major A-share indices adjusted downward across the board today, with the ChiNext Index leading the losses with a decline exceeding 4%. The US PCE price index for May rose 4.1% year-on-year, while the core PCE increased 3.4% year-on-year, both reaching their highest levels since the second half of 2023. Persistently high inflation data, combined with the latest Federal Reserve dot plot indicating that about half of the officials still expect at least one more rate hike this year, has fueled market expectations for further monetary tightening by the Fed. This is systematically pressuring valuations for global growth stocks.
Simultaneously, Apple and Microsoft announced significant price increases for multiple hardware products and game consoles on the same day. This has sparked market concerns that the AI computing power race is passing costs on to consumers, potentially fueling broader inflation. This development, coupled with the substantial prior gains and high trading concentration in the technology sector, triggered a concentrated release of profit-taking sentiment.
Implications of the Price Hikes
The synchronized price increases by Apple and Microsoft reveal that the cost transmission from AI industry chain expansion to end-consumer prices is accelerating, creating both an emotional and logical impact on the A-share technology sector. From an industrial logic perspective, the rapid expansion of AI data centers has caused an extraordinary surge in demand for storage and memory. For A-shares, this on one hand confirms the continued high prosperity of the AI industry chain, with order visibility remaining high for upstream segments like memory chips and advanced packaging.
On the other hand, price increases may also suppress end-demand, prompting the market to reassess the pace of AI application commercialization. Furthermore, fears that inflation could spread to broader areas through consumer electronics price hikes have further dampened overall market risk appetite.
Outlook and Strategy
Looking ahead, the medium-term direction of the AI industry trend has not reversed, and the technology rally may not be over. However, short-term volatility is likely to increase significantly. Fundamentally, global AI infrastructure construction remains in a capital expenditure expansion cycle. The tight supply-demand dynamic for core components like memory chips may be difficult to alleviate in the short term, and order visibility across the industry chain remains relatively high.
Nevertheless, against the backdrop of persistently stronger-than-expected overseas inflation data and rising expectations for Fed rate hikes, the sensitivity of high-valuation growth sectors to interest rate changes is also amplifying significantly. Strategically, it is advisable to maintain focus on the technology theme while moderately controlling position size. Investors should concentrate on sub-sectors with proven earnings capabilities and relatively reasonable valuations to navigate the potentially sustained high-volatility environment in the near term.
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