To The Moon

On July 7th, the three major A-share indices experienced a collective decline, with the Shanghai Composite Index closing below the 4000-point mark. Sectors such as Conglomerates and Pharmaceuticals & Biotechnology led the losses, while trading volume continued to shrink.

Key Market Observations

In the short term, market adjustment pressure primarily stems from persistently high trading concentration in the technology sector and fundamental scrutiny during the interim report earnings verification window. The elevated trading concentration in tech has resulted in a loose shareholding structure, making it less responsive to positive news while more sensitive to negative developments. As the market enters the intensive disclosure period for interim reports, the pricing logic is shifting from sentiment-driven to earnings-driven. Prior gains have already partially priced in optimistic expectations, making the certainty of high growth realization the current market focus. Regarding asset allocation, a balanced approach is advisable. Leading companies in specific segments with genuine earnings delivery capabilities and stronger visibility of business prosperity still hold value. Meanwhile, low-valuation, high-dividend sectors possess defensive characteristics during this phase of style rebalancing.

Key Developments

The annual net investment quota for Bond Connect's Southbound Trading has been increased to 800 billion yuan. On July 7th, the Governor of the People's Bank of China stated at the Hong Kong Fixed Income & Currency Summit and Bond Connect Forum that the scale and scope of Bond Connect's Southbound Trading will be expanded. The annual net investment quota for Southbound Trading will be raised to 800 billion yuan. Bonds eligible for Southbound Trading will be included in the scope of repurchase support, and the product range will be extended to include Hong Kong dollar bonds and Renminbi bond-related products. The official also stated continued support for more high-quality enterprises to list and issue bonds in Hong Kong, along with ongoing optimization and expansion of cross-border connectivity between the mainland and Hong Kong in areas such as stocks, bonds, wealth management, and interest rate swaps.

The third batch of special ultra-long-term treasury bonds for "major projects and major tasks" has been allocated, completing the full 800 billion yuan project list for the year. According to the National Development and Reform Commission, the third batch of "major projects and major tasks" construction projects for 2026 has recently been allocated, involving 193.5 billion yuan in special ultra-long-term treasury bond funds. This marks the completion of the entire project list for the year. Since the beginning of the year, the NDRC, in conjunction with relevant industry authorities, has allocated a total of 800 billion yuan to support 1,417 major projects. These cover key areas including technological innovation, ecological protection and restoration of the Yangtze River Basin, major transportation infrastructure, urban underground pipe networks, major water conservancy projects, the New Western Land-Sea Corridor, quality upgrading of higher education, and the "Three-North" Shelterbelt Program.

Major OPEC+ producers have decided to continue increasing production in August, marking the fifth consecutive month of output expansion. According to Xinhua News Agency, the Organization of the Petroleum Exporting Countries (OPEC) issued a statement on July 5th stating that seven major OPEC+ producing countries have decided to increase crude oil production by 188,000 barrels per day in August, reiterating their commitment to maintaining market stability. This marks the fifth consecutive month that major producers have announced production increases.

Market Performance Recap

On July 7th, the three major A-share indices closed lower. At the close, the Shanghai Composite Index was at 3990.24 points, down 1.26%. The Shenzhen Component Index was at 15225.11 points, down 1.24%. The ChiNext Index was at 3911.91 points, down 0.94%. The STAR 100 Index was at 2180.11 points, down 0.60%. Among Shenwan primary industry sectors, only Banking rose, gaining 0.20%. Conglomerates, Pharmaceuticals & Biotechnology, and Building Materials were among the biggest decliners, falling 3.80%, 3.71%, and 3.51% respectively. A total of 639 stocks advanced, while 4,535 stocks declined.

Capital Flow Tracking

The total market turnover was 25,811.57 billion yuan, decreasing from the previous trading session. The balance of margin trading and securities lending stood at 29,926.14 billion yuan as of the last close, also down from the previous day.