China's three major stock indices closed lower across the board on Wednesday, with the Shanghai Composite Index falling 1.22%, the Shenzhen Component Index dropping 2.34%, and the ChiNext Index sliding 2.68%. The Beijing Stock Exchange 50 Index declined 1.7%, while the STAR 50 Index fell 2.35%. Total market turnover reached 1.6691 trillion yuan, shrinking by 114 billion yuan from the previous session, with more than 4,300 stocks declining across the market.
On the sector front, wind power equipment, China State Shipbuilding-related stocks, textile manufacturing, education, and coal mining led the gains, while precious metals, electronic components, energy metals, PCB concepts, and CPO sectors suffered the steepest losses.
In trading activity, the wind power equipment sector outperformed, with Luozhou Bearing and Jixin Technology hitting the daily limit up. Weili Transmission, Zhenhong Shares, Tianneng Heavy Industry, and Xihua Technology posted strong gains. The textile manufacturing sector opened higher and continued to climb, with Huamao Shares and Huasheng Shares reaching their daily limit. Caidi Industrial, Jinying Shares, and Huali Group advanced notably. Fujian-based local stocks rallied in late trading, with Strait Innovation, Pingtan Development, Fujian Cement, Zhangzhou Development, and Xiamen Port Logistics hitting the upper limit, while Xiamen Airport, Fujian Jinsen, and Longzhu Technology also moved higher.
Precious metals stocks weakened throughout the session, led by Shandong Gold, Zhongjin Gold, and Chifeng Gold. The PCB concept segment also underperformed, with Success Electronics nearing its downside limit, while Yihao New Materials, Jiangnan New Materials, and Zecheng Electronics fell sharply.
At the index level, the market opened low and kept sliding all day, pressured by an overnight drop in U.S. equities and accompanied by shrinking trading volume. The fact that more than 4,300 stocks turned red fully underscores the subdued sentiment. It should be noted that trading volume will be the primary factor determining the market's near-term direction. To stabilize and push higher, turnover needs to expand and hold around 2.5 trillion yuan consistently; otherwise, upward momentum will remain vulnerable to uncertainty.
Delving further, today's weakness traces back to two negative developments.
First, a stronger-than-expected U.S. PMI reading stoked rate-hike expectations, triggering a global bond sell-off and putting pressure on equities. The U.S. September PMI preliminary figure came in at 58.4, far above the 55.3 expected, marking the highest level since July 2021. Concerns are mounting that the economy is shifting from resilience to overheating, with bets on a Fed rate hike in October surging and sparking large-scale Treasury selling. The 30-year U.S. Treasury yield at one point climbed to 5.415%, the highest since June 2007. Japan's 5-year government bond yield rose to a record 2.365%, while the 10-year yield hit 3.075%, a level not seen since 1996. France's 10-year yield advanced to 4.908%, the highest since July 2008. These rising yields weighed heavily on global markets—the Nasdaq Composite closed down 0.33%, Nasdaq futures slipped 0.8%, and China's three major indices also opened lower under obvious pressure.
Second, Iran's firm rhetoric combined with geopolitical risks pushed oil prices higher, adding to inflation and interest-rate pressures. In a recent address at the United Nations General Assembly, Iran's president stated the country would not surrender to the U.S., expressed willingness to negotiate but rejecting threats from power, and warned against allowing some nations to freely use the Strait of Hormuz while using it to attack Iran. In response, Brent crude settled up 2.48% at $69.31 per barrel. Rising oil prices alongside surging U.S. bond yields further reinforced inflation worries. The average 30-year fixed mortgage rate in the U.S. climbed to 7.12%, the highest since May 2024, posing a meaningful setback to the American housing market.
Together, these two threads point to a common theme: expectations of an overheated economy combined with geopolitical risks are pushing up global interest rates, dragging on stock markets, and intensifying downward pressure on real estate. Beyond these factors, the Mid-Autumn Festival short break starts tomorrow, and the National Day holiday follows in just a few days. Historically, A-shares tend to trade with shrinking volume and consolidation ahead of such extended breaks, primarily due to capital's risk-averse departure. Given uncertainties such as overseas market swings and currency movements during holidays, some leveraged funds and short-term speculative money prefer to stay in cash, causing trading activity to thin and turnover to taper. After the holidays, however, this capital pressure fully releases, and those funds gradually return, forming a recurring pattern of pre-holiday contraction and post-holiday expansion. Therefore, weaker trading enthusiasm this week is arguably reasonable.
Looking ahead, with the holiday approaching and market sentiment dull, the key focus will be monitoring volume dynamics. If turnover stabilizes and expands further, the market retains upward potential. The most significant development on the horizon is the upcoming meeting between Chinese and U.S. leaders, and investors would be wise to watch whether any supportive measures emerge. A major rebound before the National Day break looks unlikely, but post-holiday sentiment may warrant greater optimism.
Medium-term, as domestic pro-stabilization policies continue to take effect, A-shares still have room to repair after digesting external shocks. On the allocation front, the technology sector will remain a medium-term core theme, yet the days of broad-based beta gains are becoming harder to capture. Future returns are more likely to come from internal re-selection within sectors, balancing with cyclical areas that benefit from policy—such as infrastructure, real estate, and domestic consumption. Dividend assets continue to hold steady as a base position. Overall, the medium-term A-share market is in a bottoming phase supported by reasonable valuations and clear policy backstops, with the slow-bull trend expected to persist, though the trajectory's steepness will hinge on how policy implementation and incremental capital inflows align.
Note: Markets carry risk, and investment decisions require caution. Under any circumstances, the information or opinions expressed here are for exchange purposes only and do not constitute investment advice to anyone. Unless otherwise indicated, research data in this article is supported by Tonghuashun iFinD.
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