Chinese equity markets staged a powerful reversal on Monday. The three major A-share indices opened higher on July 21st. After an initial sharp decline, the markets experienced a significant surge. Following brief midday volatility, the gains accelerated further in the afternoon session.
Sector performance showed a major rebound in semiconductors and the computing hardware supply chain, with a wave of stocks hitting their daily limit-up. Equipment, wafers, CPO, and memory segments led the gains. Fintech, lithium batteries, robotics, commercial aerospace, and AI application themes were also active. In contrast, power, oil & gas, financials, and baijiu (liquor) sectors saw adjustments.
At the close, the Shanghai Composite Index rose 1.79% to 3,864.37 points. The Shenzhen Component Index jumped 4.81% to 14,264.29 points. The ChiNext Index surged 7.05% to 3,685.97 points.
Wind data shows that 3,101 stocks across the Shanghai, Shenzhen, and Beijing exchanges advanced, while 2,301 declined, with 121 stocks remaining unchanged.
Total trading volume for the Shanghai and Shenzhen markets reached 2,957.1 billion yuan, an increase of 254.9 billion yuan from the previous session's 2,702.2 billion yuan. Specifically, Shanghai's volume was 1,396.5 billion yuan, up 101.8 billion, and Shenzhen's volume was 1,560.6 billion yuan.
According to DZH VIP data, 381 stocks across the two main boards and the Beijing Exchange rose by 9% or more, while 41 stocks fell by 9% or more.
Semiconductors Soar While Oil & Petrochemicals Slide
In terms of sectors, semiconductors surged dramatically. Stocks including GalaxyCore Inc. (SHSE: 688728), Tolans (SZSE: 301583), Zhenbaotech (SHSE: 688797), Joulwatt Technology Inc. (SHSE: 688141), Hua Hong Grace Semiconductor Manufacturing Corporation (SHSE: 688347), and Dongwei Semiconductor (SHSE: 688261) saw over 80 stocks hit limit-up or rise more than 10%. Analysis suggests that with combined policy and capital support, AI large language models continue to enhance robotics, potentially forming a new industry for humanoid robots with a broad future market as they transition from business to consumer applications.
The electronics sector also witnessed a resurgence of limit-up rallies, with stocks like Sanhuan Group (SZSE: 300408), Luwei Photonics (SHSE: 688401), Kingsemi (SHSE: 688037), Ingenic Semiconductor Co., Ltd. (SZSE: 300223), and Topanga (SHSE: 688072) among over 150 stocks hitting limit-up or gaining over 10%.
The machinery and equipment sector, after a deep correction, launched a strong offensive. Stocks such as Ruichen Environmental Protection (SZSE: 301273), Envision Technology (SHSE: 688596), Jingzhida (SHSE: 688627), Jingce Electronic (SZSE: 300567), and Eco Photonics (SHSE: 688610) were among over 50 stocks hitting limit-up or rising more than 10%.
Coal stocks led the declines. Liaoning Energy (SHSE: 600758), Huaibei Mining (SHSE: 600985), Antai Group (SHSE: 600408), Lu'an Chemical Industry Group (SHSE: 601699), Shaanxi Coal Industry (SHSE: 601225), and Pingdingshan Tianan Coal Mining (SHSE: 601666) all fell more than 4%.
Oil and petrochemical stocks declined notably. Tongyuan Petroleum (SZSE: 300164), Potential Energy (SZSE: 300191), ST Intercontinental (SHSE: 600759), and Taishan Oil (SZSE: 000554) dropped over 7%.
Banking stocks, after an initial rise, retreated and were among the laggards. Bank of Ningbo (SZSE: 002142), Bank of China (SHSE: 601988), Industrial and Commercial Bank of China (SHSE: 601398), Agricultural Bank of China (SHSE: 601288), China Construction Bank (SHSE: 601939), and Bank of Communications (SHSE: 601328) all fell more than 2%.
Market Outlook: Consolidation and Sector Rotation Expected
Analysis from Southwest Securities suggests the current market adjustment is more of a normal consolidation following previous gains—a process of risk release and structural optimization—rather than a fundamental reversal of the medium-to-long-term trend. With ongoing policy support, accelerated inflows of incremental funds, and continuous validation of industrial fundamentals, the A-share market possesses strong self-repairing capabilities and medium-to-long-term allocation value. Investors are advised to view short-term volatility rationally and focus more on the long-term investment opportunities arising from China's economic transformation, technological innovation breakthroughs, and capital market reforms.
A China International Capital Corporation (CICC) report notes that since June, as the semiconductor sector began correcting, global markets have entered a period of adjustment following a steep rally. While the broader cycle is not over, the growing contradiction between financing enthusiasm and tight liquidity, coupled with high crowding and leverage, suggests the market will enter a "halftime" phase before liquidity conditions ease. Tactically, the report believes the global market adjustment may continue into the third quarter, with risks stemming from monetary policy uncertainty, rising financing pressure, and the spread of risks from markets like Japan and South Korea. Strategically, it reiterates that the tech rally is likely to resume after the halftime break and remains optimistic about broadly defined safety assets. It notes that post-halftime, the rally may spread within the upper 'K-shape' driven by security and investment themes, potentially extending beyond AI hardware to sectors like AI applications, industrials, and resources.
Huaxi Securities believes that, at the current juncture, the most intense selling pressure may have passed. The market is likely to enter a new phase of "volatility and gradual recovery," with limited downside for indices, while an upward breakthrough would require coordination from both fundamentals and capital flows. On one hand, the desensitization of A-share tech sectors to overseas influences requires time. The deleveraging pace in the South Korean market still needs to show a sustained decline in forced liquidation volumes. Furthermore, with foreign investors in South Korea having been net sellers for four consecutive months, global asset sentiment remains affected until the South Korean market desensitizes from leveraged trading. On the other hand, the tech rally driven by industry trends is expected to continue, but before a new strong industrial catalyst emerges, a repeat of the extreme concentration seen in the first half is unlikely, with rotation and differentiation becoming the main themes. The strategy involves selecting high-quality stocks with strong fundamental support and rotating towards domestic supply chains and mid-to-downstream segments. Sector allocation should focus on high-performing growth, particularly upstream, midstream, and downstream industries related to "AI+," selecting quality stocks with solid fundamentals. Attention can also be paid to related quality targets in "innovative drugs, Hong Kong-listed internet, media, and gaming."
Everbright Securities views the current market as still being in a存量博弈 (stock game) state. Lingering wait-and-see sentiment significantly constrains the rebound of the tech mainline. Looking ahead, given the escalating military confrontation between the US and Iran, geopolitical factors continue to disturb global risk appetite. Combined with the incomplete release of valuation adjustment pressure on overseas tech stocks and persistent selling pressure from previously trapped positions in tech sectors, market caution is hard to change. In the short term, the market is likely to focus on volatile bottoming and structural rotation.
Oriental Securities indicates that the recent correction is partly influenced by declining risk appetite in overseas markets. While the overseas deleveraging process is difficult to predict, the most rapid phase of short-term deleveraging is expected to end by the month's end. Concerns regarding the overseas AI narrative are also likely to be addressed during the upcoming overseas earnings season at month-end. Therefore, the period leading up to the end of the month presents a favorable window for positioning.
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