Chinese Stock Market Wrap: Three Major Variables Converge, Shanghai Index Dips 0.64% on Thin Volume, Brokerages Provide Support

On February 5th, the three major A-share indices trended downwards throughout the trading session. The banking and brokerage sectors staged an afternoon rally to support the market, with Chinalin Securities Co.,Ltd. and Xiamen Bank Co.,Ltd. hitting the daily limit-up; the latter reached a fresh 4.5-year high. At the close, the Shanghai Composite Index fell by 0.64%, the Shenzhen Component Index dropped by 1.44%, and the ChiNext Index declined by 1.55%. The total trading volume for the Shanghai and Shenzhen markets was 2.18 trillion yuan, shrinking by 304.8 billion yuan compared to the previous trading day.

Three major variables are converging. First, despite a strong rebound in A-shares yesterday, the outstanding margin balance decreased by 13.9 billion yuan from the previous day, indicating that "structural de-leveraging" is occurring. Second, the leverage lending index in the US market continued its decline overnight, falling more sharply than in the prior session. This index has been on a downward trajectory since peaking on January 13th, with occasional minor rebounds failing to alter the overall trend. Third, the narrative logic for the technology sector is undergoing significant changes. Oracle's layoffs have made the market aware that AI financing is not proceeding as smoothly as anticipated, while the logic of AI's impact on software companies continues to unfold, putting significant pressure on the valuations of the entire AI sector.

Sector-wise, broad consumption concepts such as film and media, tourism, and food and beverages showed strong gains across the board. Stocks like Guangzhou Jinyi Media Corporation, Xi'An Tourism Co.,Ltd., and Haixin Foods Co.,Ltd. surged by the daily limit. New consumption concepts, including the "grain economy," followed the upward trend. The banking and brokerage sectors rallied in the afternoon, with Chinalin Securities Co.,Ltd. and Xiamen Bank Co.,Ltd. hitting limit-up; the latter reached a new 4.5-year high. AI application concepts, such as AI-managed series, media, and AI companionship, rebounded, with stocks like Tiandi Online and Yaowang Technology rising by the limit. Fujian local and cross-strait concepts also gained, with Pingtan Development and Kuncai Technology hitting limit-up. The real estate concept continued its strength, with Jingtou Development and Huangting International among the stocks that rose by the limit.

On the downside, the non-ferrous metals concept suffered another significant setback, with stocks like Baiyin Nonferrous Group Co.,Ltd., Hegang Resources, and Hunan Silver falling by the daily limit. The entire photovoltaic industry chain experienced a sharp decline, with stocks such as Hainan Drinda New Energy Technology Co.,Ltd. and Shuangliang Energy Saving hitting limit-down. The power concept weakened across the board, with Zhongheng Electric and SF Electric among the stocks that fell by the limit. Computing hardware concepts, including optical modules, continued their descent, with Zhishang Technology and Dekeli dropping over 10%. Pro-cyclical concepts like coal, steel, and chemicals declined again, with Wanfeng Shares hitting limit-down. Hot concepts such as storage chips, humanoid robots, hydrogen energy, space computing, commercial aerospace, and quantum technology were uniformly weak.

Looking ahead, Huatai Securities pointed out that as market volatility begins to amplify, and with the rebound in long-term US Treasury yields and the US dollar index overseas, the allocation value of high-dividend sectors has marginally increased compared to the previous month. Regarding the sell-off in precious metals, Guosen Futures stated that this historic plunge has completely reshaped the short-term landscape of the precious metals market, signaling that the one-way smooth rally may have concluded.

**Hot Sectors Analysis:**

1. **Non-Ferrous Metals and Related Concepts Collective Plunge** Non-ferrous metals, minor metals, gold, and silver concepts experienced another collective sharp decline, with stocks like Baiyin Nonferrous Group Co.,Ltd., Hegang Resources, and Hunan Silver falling by the daily limit. *Commentary: The decline in gold and silver prices persists due to cooling tensions in the Middle East and between the US and China, coupled with resilient US economic data weakening safe-haven demand. XS.com Senior Market Analyst Rania Gule stated in a Tuesday report that she expects gold prices to face some near-term headwinds, although the long-term fundamentals remain solid.*

2. **Broad Consumption Concepts Show Broad Strength** Concepts related to broad consumption, including film and media, tourism, food and beverages, retail, medical aesthetics, and traditional Chinese medicine, showed strong gains across the board. Stocks like Guangzhou Jinyi Media Corporation, Xi'An Tourism Co.,Ltd., and Haixin Foods Co.,Ltd. surged by the daily limit. *Commentary: The Ministry of Commerce and eight other departments issued the "2026 'Happy Shopping for Chinese New Year' Spring Festival Special Activity Plan," which proposes encouraging local governments to increase subsidies for consumer replacements during the Spring Festival and enhance support for offline physical retail. Kaiyuan Securities noted in a research report that the Spring Festival, as a peak season for food consumption, is expected to boost the sector with the release of stocking demand.*

3. **Significant Adjustment in Photovoltaic Industry Chain** The entire photovoltaic industry chain, including space photovoltaics, perovskite batteries, and photovoltaic equipment, experienced a substantial decline, with stocks like Hainan Drinda New Energy Technology Co.,Ltd. and Shuangliang Energy Saving hitting limit-down. *Commentary: Liu Yiyang, Executive Deputy Secretary-General of the China Photovoltaic Industry Association, stated on February 4th to media including Jiemian News that "currently, space photovoltaic technology is still in the early stages of exploration and verification, and it is too early to determine a clear technical direction."*

4. **Domestic Hard Tech Concepts Continue Correction** Computing hardware concepts such as optical fiber cables, optical modules, PCBs, and liquid cooling continued their downward trend, with Zhishang Technology and Dekeli falling over 10%. *Commentary: The US software sector suffered its worst sell-off since 2022 on Wednesday. The sell-off in the tech sector, initially led by software stocks, is spreading, recently causing a "collective stampede" in once-hotly追捧 storage chip manufacturers. Winners from the AI-driven storage demand narrative, like Sandisk, experienced more severe pullbacks.*

**Institutional Perspectives:**

1. **Huatai Securities: High-Dividend Sector Allocation Value Marginally Improves as Volatility Rises** Huatai Securities indicated that as market volatility begins to amplify, and with the rebound in long-term US Treasury yields and the US dollar index overseas, the allocation value of high-dividend sectors has marginally increased compared to the previous month. They suggest focusing on defensive, stable high-dividend stocks and some potential high-dividend varieties in allocations.

2. **Guosen Futures: One-Way Smooth Rally in Precious Metals Market May Be Over** Guosen Futures stated that this historic plunge has completely reshaped the short-term landscape of the precious metals market, signaling that the one-way smooth rally may have concluded. The market has officially entered a new phase dominated by higher uncertainty and normalized volatility. The driving logic has complexified from simple "easing and safe-haven" to intense博弈 between bullish and bearish factors. Structurally, supports like geopolitical risks and central bank gold buying demand under de-dollarization remain in the long term. However, in the short term, policy uncertainty stemming from the leadership change at the Fed will be a core variable driving sharp price fluctuations. The nomination of Wash and his potential policy orientation are forcing the market to reassess previous extreme easing expectations.

3. **Tianfeng Securities: This Year's 'Spring Festival Rally' May Be More Sustained** Tianfeng Securities expressed that factors including policy expectations for the start of the "15th Five-Year Plan" period, the prospect of global liquidity easing, and the trend of residents allocating funds to equity assets may strengthen the pattern of post-holiday market gains, potentially making this year's "Spring Festival rally" more sustained. Additionally, influenced by the "historically ultra-long nine-day Spring Festival holiday" this year, the release of consumer demand is noticeably earlier than in previous years, with travel and consumption scales expected to break records again, potentially stabilizing market expectations for a "strong economic start to the year."