In October, A-share market action has almost completely reversed from June, when technology stocks rose alone while banking and other "old guard" sectors kept adjusting and drifting lower. Four months later, strength and weakness have swapped places 鈥?now banks, transportation and other dividend assets lead gains, while AI hardware leads declines. Who exactly is selling tech stocks? That may be the question investors have asked most often recently.
On October 12, the seesaw between technology and dividend plays continued. Industrial and Commercial Bank of China Ltd (601398.SH), China Construction Bank Corp (601939.SH), Bank of China Ltd (601988.SH) and China CITIC Bank Corp Ltd (601998.SH) all hit record highs on the same day, while Chongqing Rural Commercial Bank Co Ltd (601077.SH) rose 4.95%. In the technology camp, AI hardware fell broadly. Copper-clad laminate names Hongchang Electronic (603002.SH), Jin'an Guoji (002636.SZ) and Huazheng New Material (603186.SH) all hit their daily limit down. Optical communications and semiconductors fell in tandem, with Star-Net Ruijie (002396.SZ) limit down, Cambridge Technology (603083.SH) down 8.88% and Zhongji Innolight (300308.SZ) down 6.41%.
By the close, 52 constituents of the Dividend 200 index had hit new 20-day highs, accounting for nearly 30% of the index. Among 1,241 TMT stocks, after 800 hit new 20-day lows on October 9, another 112 closed at fresh stage lows on October 12.
Behind this shift in strength is capital's response to uncertainty during an earnings vacuum. After several rounds of speculation, AI hardware trading had become crowded. Combined with tightening overseas liquidity, absolute-return funds were forced to cut positions under drawdown and risk-control constraints, pushing the tech sector into a negative feedback loop. Dividend assets with stable profits and certain payouts became the first choice for safe-haven money.
Looking ahead, most institutions believe third-quarter earnings delivery will be the key to whether the seesaw converges. If tech leaders can deliver results that meet growth expectations, they may attract fresh capital back.
Extreme divergence between tech and dividends
On October 12, A-shares continued the post-holiday divergence between technology and dividend plays. Banks were one of the few sectors rising against the trend, with almost all stocks gaining. By the close, the SW banking index rose 2.32%, hitting a new high for the year and up 17.7% from its low for the year on July 1. Chongqing Rural Commercial Bank, Shanghai Rural Commercial Bank (601825.SH) and Bank of Nanjing (601009.SH) followed higher, with city commercial banks and joint-stock banks advancing in tandem.
On the other side, AI hardware weakened across the board. In copper-clad laminates, Hongchang Electronic, Jin'an Guoji and Huazheng New Material all hit their limit down. In optical communications, Star-Net Ruijie limit down and Cambridge Technology fell 8.88%, while YOFc, Zhongji Innolight and Eoptolink Technology all dropped more than 6% at the close, with optical chip sub-sectors also falling.
One day's moves are just a snapshot. Over October so far, at the index level, the ChiNext Index has fallen 5.47% and the STAR 50 Index has dropped 6.75%, while the CSI Dividend Index has risen 2.29%. At the sector level, SW banking rose 2.28% in October, while communications and electronics fell 9% and 8.68%, respectively.
Individual stock performance shows even more extreme divergence. Caixin statistics found that nearly 30% of dividend stocks have hit stage highs since October. Wind data shows that as of the October 12 close, 52 constituents of the Dividend 200 index had closing prices at new 20-trading-day highs, accounting for 26%, up 13 from 39 the previous trading day. These 52 stocks are highly concentrated: banks, transportation and utilities/energy together account for 24, or nearly half. The rest come from telecom operations, building materials and media.
Among them, nine bank stocks hit stage highs, including China Construction Bank, China Merchants Bank Co Ltd (600036.SH), Bank of Communications Co Ltd (601328.SH), China CITIC Bank, Industrial Bank Co Ltd (601166.SH) and Shanghai Pudong Development Bank Co Ltd (600000.SH). Nine transportation stocks were included, such as Daqin Railway Co Ltd (601006.SH), China Merchants Expressway Network & Technology Holdings Co Ltd (001965.SZ), Jiangsu Expressway Co Ltd (600377.SH) and Shandong Hi-Speed Co Ltd (600350.SH). Six energy and utility names made the list, including PetroChina Co Ltd (601857.SH), China Shenhua Energy Co Ltd (601088.SH) and Shaanxi Coal Industry Co Ltd (601225.SH).
In contrast, among the 1,241 TMT stocks, 800 closed at new 20-day lows on October 11, accounting for 64.5%. Another 112 stocks extended those lows on October 12, including leaders such as Yuanjie Technology (688498.SH), VeriSilicon Microelectronics (688521.SH) and Lianxun Instruments (688808.SH).
In semiconductors and optical communications specifically, among 224 Yangtze semiconductor constituents, 33 hit new 20-day lows, after 160 had already done so the previous trading day. Among 39 optical communications names, 16 hit stage lows, including popular stocks such as Eoptolink Technology, YOFc and Tongding Interconnection Information Co Ltd.
Most tech stocks that hit stage lows in October are spread across the AI hardware supply chain, from upstream materials to midstream manufacturing and downstream applications 鈥?almost the "core lineup" of this tech rally. In terms of declines, some AI hardware leaders fell in three trading days by as much as traditional industries fall in a month. Since October, Suzhou Dongshan Precision Manufacturing Co Ltd has fallen 18.81%, Yuanjie Technology more than 30% and Suzhou Everbright Photonics Co Ltd more than 28%, with countless stocks down 10% to 20%. Among the biggest decliners by market value were ChangXin Memory Technologies (688825.SH), Foxconn Industrial Internet Co Ltd (601138.SH), Semiconductor Manufacturing International Corp (688981.SH), Zhongji Innolight, Cambricon Technologies Corp Ltd (688256.SH), Hygon Information Technology Co Ltd (688041.SH), Naura Technology Group Co Ltd and Hua Hong Semiconductor Ltd (688347.SH).
In addition, well-known tech leaders that kept hitting stage lows in October included Fenghua Advanced Technology Holding Co Ltd (000636.SZ), which rode this round of MLCC price increases; Inspur Electronic Information Industry Co Ltd (000977.SZ) in AI servers; Shenzhen Demingli in storage modules; Tongfu Microelectronics Co Ltd (002156.SZ) and Tianshui Huatian Technology Co Ltd (002185.SZ) in packaging and testing; and Suzhou Dongshan Precision Manufacturing (002384.SZ) and WUS Printed Circuit Co Ltd in PCB.
Who is selling tech: triple pressure from capital flows, macro factors and the earnings vacuum
As tech stocks keep falling, the most-asked question is "who is selling." Today a widely circulated but unverified rumor said a private fund founder hinted that insurance giants bought heavily at July highs and then sharply cut positions in September to stop losses. As of publication, the parties had not responded. Whether the rumor is true or not, the intense focus on "who is selling tech" is itself a sign of market sentiment.
Several private fund and brokerage sources told reporters that whether stopping out or actively reducing tech exposure, signs of institutional money leaving the tech sector are already fairly clear. "This is not one sub-sector having problems; the entire AI hardware chain is being reduced at the same time. The fact that popular tech leaders have collectively returned to stage lows means earlier gains and crowded trading are being systematically digested. We believe this decline differs from July, which was mainly leveraged funds clearing out plus some quant funds exiting. The tech decline since late September is the result of low market volume, weak confidence and poor sentiment, combined with tightening overseas liquidity and continued geopolitical disturbances. Facing uncertainty, capital is actively choosing to cut positions and wait," an investment head at a private fund told reporters.
In this private fund manager's view, A-shares are in an earnings vacuum with third-quarter reports not yet disclosed. After several rounds of speculation, tech leaders must deliver third-quarter results strong enough to cover market growth expectations 鈥?or even give higher future growth guidance 鈥?to support further valuation gains. "The AI narrative itself has not changed. What the tech sector lacks now is not industrial logic, but earnings and sentiment catalysts 鈥?a reason for the market to keep 'believing.' Judging from the fact that STAR 50 and ChiNext-related ETFs saw large absorption during the decline and turnover fell to stage lows, the most urgent selling has clearly weakened, but fresh capital inflows remain insufficient. Continued loosening of chips due to capital flows has already significantly reduced tech stock crowding. The outlook depends on earnings delivery and fresh capital returning," the private fund manager said.
From the consensus of major brokerage strategies, third-quarter earnings delivery will be the core variable for market pricing in the next stage. How long the seesaw between dividends and tech can last ultimately comes back to earnings. In a recent research note, Zhongtai Securities said A-shares continued to underperform overseas markets in the first two days after the holiday, even though the global AI trend has not weakened. A-shares' relative weakness mainly came from internal capital clearing and rising long-end US Treasury yields. The firm further analyzed that insurance and "fixed income plus" funds significantly increased equity allocations in the second quarter, with a considerable portion of new positions going into tech. Such funds usually focus on absolute returns and drawdown control, bought at relatively high levels, and once tech declines trigger net value, risk-control or redemption constraints, selling becomes passive, continuous and insensitive to price. This can explain why domestic tech kept facing pressure even as overseas tech hit new highs, and why institutional funds maintained large net outflows every day.
Macro factors are another factor weighing on tech valuations. CITIC Securities pointed out that the post-holiday market fell short of expectations for three reasons: first, A-share capital structure is fragile and in the second wave of leverage adjustment; second, overseas liquidity is tightening, bond yields in major global economies keep rising, and the rise in the risk-free rate center suppresses growth sectors through valuation discounts, equity-bond cost-performance and financing costs; third, repeated Middle East conflicts and unstable oil price expectations have heightened global inflation uncertainty.
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