At midday on September 2, China's three major A-share indices opened lower collectively—the Shanghai Composite by 0.42%, the Shenzhen Component by 1.01%, and the ChiNext by 1.35%—and continued to weaken during morning trading. The market displayed a clear divergence: indices fell broadly, most stocks declined, yet defense and power grid sectors rallied against the trend.
By the lunch break, the Shanghai Composite was down 0.82% at 3947.26 points, the Shenzhen Component fell 1.71% to 13635.33 points, and the ChiNext dropped 2.18% to 3319.39 points. In contrast, the Beijing Stock Exchange 50 Index surged 4.55%. Nearly 4,000 stocks on the two main exchanges traded lower. Combined morning turnover reached 1.21 trillion yuan, a decrease of 140.3 billion yuan from the previous session.
Where the money moved
In early trading, main capital flows favored sectors like national defense, building materials, and power grid equipment, while net outflows hit electronics, nonferrous metals, and semiconductors. The electronics sector saw the largest main capital outflow, approximately 11.8 billion yuan. Among individual stocks, Far East Smarter Energy saw main capital net buying exceed 1 billion yuan, leading the market, while Zhongji Innolight faced net selling of over 2.7 billion yuan.
Market overview
Hot topics were scattered. On the upside, defense, power grid equipment, PCB, and coal sectors traded actively against the trend, with optical fiber, fiberglass, and oil & gas also showing strength. On the downside, agriculture, precious metals, and dairy led declines, while semiconductors and computing hardware continued their correction. Overall, escalating US-Iran conflict overnight pushed up international oil prices and US Treasury yields, driving funds out of high-valuation tech sectors into defense, power grid, and coal.
Hot sector 1: Defense stocks rise against the trend
The defense sector strengthened notably, with Inner Mongolia First Machinery hitting its daily limit for a second consecutive session. Construction Industry, and Great Wall Military both reached limit-up, while North Long Dragon, Tianqin Equipment, and Zhongguang Electronics followed with gains.
Analysis: According to CCTV News, on September 1 US Eastern Time, the US military launched a fresh strike on Islamic Revolutionary Guard Corps targets in Iran, with multiple coastal areas in southern Iran hit. Iran retaliated by attacking US bases and shooting down a US MQ-9 drone, intensifying geopolitical tensions.
Hot sector 2: PCB concept rebounds
PCB concepts rebounded in choppy trading, led by PTFE-related names. Wote Advanced Materials extended its streak to five limit-ups in nine sessions, with Kentish Shares, Haohua Technology, Huazheng New Materials, and Wei Gao following suit.
Analysis: Panasonic announced a price hike for copper-clad laminates (CCL) due to rising copper foil and fiberglass costs, effective for shipments from September 1, with some product increases reaching as high as 30%. Previously, Kingboard Laminates announced a unified 10% price increase for FR-4 CCL, with cost-side pressures transmitting through the supply chain.
Hot sector 3: Power grid equipment rebounds
The power grid equipment sector bounced back, with Sun Cable and Shenma Power hitting limit-up, Far East Smarter Energy also locking at limit-up, Yangdian Technology up over 9%, and Han Cable and Yineng Power following.
Analysis: On September 1, the National Energy Administration held a deployment meeting for new-type power grid construction, stating that China's electricity demand will maintain annual growth of around 5% during the 15th Five-Year Plan period. It called for accelerating R&D and application of AI+, flexible grid construction, intelligent dispatch, and long-duration energy storage technologies, while supporting private enterprises in investing in new-type power grid projects.
Hot sector 4: Coal stocks fluctuate actively
Coal stocks remained active, with Zhengzhou Coal Industry briefly touching limit-up (attempting a third consecutive limit) before pulling back, closing the morning up 0.56%. Yunmei Energy hit limit-up, followed by Baotailong, Antai Group, Dayou Energy, and Shaanxi Heimao.
Analysis: Reports indicate that on September 1, coke prices saw a fourth round of increases proposed at 100-110 yuan per ton, effective September 3, with some steel mills already accepting the hike. Rising expectations for coke price increases boosted the sector's activity.
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