To The Moon

Global hard technology stocks experienced a "Black Tuesday." On July 28, the A-share market saw a sharp decline with reduced volume. The Shanghai Composite Index fell over 1% to barely hold the 3800-point mark, while the ChiNext Index suffered a heavy 7.35% drop. The number of declining stocks far exceeded gainers, and total market turnover further contracted to 2.03 trillion yuan. AI hardware stocks plunged significantly, with the Sci-Tech Chip ETF (589190), which has nearly half its weight in storage and a low management fee, seeing its price drop over 7%. In contrast, Hong Kong-listed chip stocks were relatively resilient, with the largest and most liquid Hong Kong Stock Connect Information Technology ETF (159131) falling over 4%. The ChiNext AI ETF (159363), which heavily weights optical module leaders, closed down 9.43%, but attracted net subscriptions of 112 million units as investors bought the dip. A clear shift in market style occurred, with banks rising against the trend. China Construction Bank surged over 3% to hit a new all-time high. The popular, large-scale Bank ETF (512800) rose another 1.61% for its fifth consecutive gain, reaching a new high in this rebound cycle.

Since July, the banking sector has turned upward, with the CSI Bank Index rising 10.37% during the period, outperforming the ChiNext Index by over 33 percentage points. Historically, the correlation between banks and technology is among the lowest of all sectors. In the context of high volatility in technology, the "hedging" value of banks may be worth significant attention. Defensive sectors like real estate and food & beverage also showed strength, with the Food & Beverage ETF (515710) managing a 1.83% gain. Analysts believe that from a trading perspective, the food & beverage sector is at a historical low in institutional holdings, valuations have fallen to a bottom range, and market pessimism has been fully priced in. With these three bottom signals coinciding, the sector may have entered a strategic accumulation zone.

Regarding the reasons for today's sharp technology correction, several factors are at play. First, there was spillover from external markets, with US chip stocks plummeting overnight, followed by sharp declines in Japan and South Korea. Second, rising expectations of a Fed rate hike put pressure on high-valuation tech stocks. Third, computing hardware had accumulated significant gains in the first half of the year, and when the rebound hit resistance levels, it triggered a concentrated release of selling pressure. In terms of strategy, Kaiyuan Securities suggests focusing in the short term on the allocation recovery driven by a style rotation towards banks, as well as low-position sectors like non-ferrous metals, non-bank financials, and healthcare, which show signs of improving profitability. In the medium term, the technology theme is not over, and attention should be on segments of the AI hardware chain with genuine orders and profit delivery, such as computing power, semiconductors, and PCB.

Defensive Strength Max! Bank Stocks Hit New Highs Against the Trend. What's the Signal?

Against the backdrop of a broad decline in major A-share indices, the banking sector staged a strong rally. The popular Bank ETF (512800) opened higher and climbed, defying the market downturn to close up 1.61%, marking its fifth consecutive gain and a new high since this rebound cycle began. State-owned banks were particularly strong, with Agricultural Bank and Industrial and Commercial Bank both rising over 3%, and China Construction Bank hitting a new all-time high during the session. Other gainers included Bank of Shanghai, Bank of Chongqing, and Postal Savings Bank, which rose over 2%, while Bank of China, China Merchants Bank, and Industrial Bank all followed suit. Since July, banks have staged a sharp V-shaped recovery, frequently rallying against the trend. As of today, the CSI Bank Index has accumulated a gain of 10.37% during the period, outperforming the ChiNext Index by over 33 percentage points (the ChiNext Index fell 23.39% in the same period).

Analysts suggest that the banking sector's strength against the trend may be related to multiple catalysts, including market style shifts, improved fund flows, and stable business expectations. Fundamentally, banks are operating steadily with resilient profitability. It is expected that their revenue and profit growth rates in the second quarter could continue to improve, maintaining a stable and positive trajectory. In terms of fund flows, the sector's dividend yield is approximately 4.27%, and its price-to-book ratio (PB, LF) is 0.67 times, still indicating a high cost-performance range. In a market stabilization context, fund flows into the sector remain positive, and its high-certainty value solidifies long-term absolute return potential. From a market style perspective, the recent increase in divergence within the technology sector, a marginal decline in market risk appetite, and rising demand for defensive allocations are leading to a style rebalancing. As a representative of stable, dividend-paying assets, banks are benefiting significantly. Notably, among all sectors, banks have the lowest correlation with technology. The daily return correlation coefficient between the Bank Index (Shenwan Primary Industry) and the Wande Technology Broad Index (888012.WI) is only -0.26, 0.08, and 0.20 over the past 1, 3, and 5 years respectively (as of July 16, 2026). This makes them an important direction for balanced portfolio allocation in the current market environment.

Furthermore, CICC data shows that the fund position in bank stocks was 1.26% in the second quarter of 2026, a record low. Compared to the benchmark index, banks were underweight by funds by 8 percentage points. The potential for increased allocation during the style rebalancing is worth noting. Multiple institutions express optimism for the banking sector's performance in the second half of the year. BOCOM International notes that banks, as the "ballast stone" of the large financial sector, have the most prominent defensive attributes in a volatile capital market environment and can serve as a core holding for a "stable and progressive" allocation. With improvements in the external environment and banks' own operational optimization, the sector's fundamentals are showing a clear recovery trend. The downward process of net interest margins has largely concluded. Combined with stable asset quality and significant room for provision release, banks' profitability is beginning to recover, and their operational resilience is further strengthening. Bank ETF (512800) and its linked funds (A: 240019; C: 006697) passively track the CSI Bank Index, comprising 42 listed A-share banks, making it an efficient tool for tracking the overall banking sector. The fund's scale exceeds 10 billion yuan, and its average daily turnover since the start of 2025 has been over 700 million yuan, making it the largest and most liquid among the 10 banking ETFs in the A-share market.

Hard Tech Hit by Sudden Earthquake! The Largest Hong Kong Stock Connect Information Technology ETF (159131) Falls Over 4% Losing the 250-Day MA. What's the Outlook for AI Hardware?

The A and H-share technology sectors suffered a heavy blow. The largest and most liquid Hong Kong Stock Connect Information Technology ETF (159131) weakened after an early sell-off, closing down 4.29% with a single-day turnover exceeding 2 billion yuan. Notably, during the recent period of volatile consolidation, funds continued to pour in, with net inflows exceeding 650 million yuan over the past 10 days. Among its constituent stocks, 13 gained and 47 fell. Stocks like Zhipu, GigaDevice, K Building Materials, Victory Giant Technology, and ASMPT fell sharply by over 10%. Hua Hong Semiconductor fell over 6%, and SMIC fell over 2%. Among the top ten holdings, only Xiaomi Group and SenseTime managed to stay in positive territory. Galaxy Securities points out that Google and Intel have successively raised their 2026 capital expenditure budgets to $200 billion and $20 billion respectively, focusing on AI infrastructure investment, which is driving demand surges in areas like CPUs, optical modules, and IDCs. China Merchants Securities further explains that the AI industry exhibits a typical J-curve characteristic. The industry experiences a prolonged period of negative or low returns during the investment phase, followed by a rapid reversal and high-growth phase as business models mature, economies of scale form, and profitability is released. AI is now accelerating its integration into various fields, but most industries have not yet entered the large-scale deployment phase. Once the application side achieves volume scaling, the AI industry will form a closed business logic loop.

Looking ahead, Soochow Securities believes that with the marginal improvement in fund flow contradictions, the upstream hardware direction may see opportunities for differentiated recovery in the second half of the year. The preference is for directions with a volume-driven logic and segments with high supply barriers and difficult-to-find alternative technology routes. Some parts of the "price increase" theme may have overestimated long-term supply-demand imbalances, requiring lowered expectations and a focus on distinguishing the real from the fake. Hong Kong Stock Connect Information Technology ETF (159131) is the first and largest of its kind in the market, offering T+0 trading. The underlying index, Hong Kong Stock Connect Information Technology, is composed of "85% hardware + 15% software," heavily weighting Hong Kong-listed "semiconductors + electronics + computer software." It covers 60 Hong Kong-listed hard tech companies, with SMIC and Hua Hong Semiconductor together accounting for over 26% of the weight. The domestic AI PC leader Lenovo Group holds over 10%, and PCB leaders Kingboard Group and K Building Materials together have over 11% weight—all are the highest concentrations among index tracking products in the market. Additionally, the index added several new Hong Kong-listed hard tech players like Zhipu, Victory Giant Technology, Tianshu Zhixin, and Biren Technology on June 15. It does not contain large-cap internet companies like Alibaba, Tencent, or Meituan, offering higher "sharpness" and making it easier to capture Hong Kong-listed AI hard tech trends.

Is AI Faith Still Alive? Optical Module Trio Plunges. What's the Reason? Institutions: It's a Digestion of Positions, Not a Trend Reversal! High-'Light' ETF (159363) Attracts Over 100 Million Units

Global AI computing hardware corrected in unison, with A-share optical module CPO stocks suffering a broad sell-off. Eoptolink Technology plunged over 17%, losing its 250-day moving average, Zhongji Innolight fell over 15%, and Tianfu Communication dropped over 13%, retreating to its 200-day moving average. Among the popular ETFs, the ChiNext AI ETF (159363), which heavily weights optical module leaders, fell sharply during the session, closing down 9.43% and hitting a new low for this adjustment cycle. Despite the decline, the fund attracted net subscriptions of 112 million units in a single day. According to market information, the broad sell-off in AI computing hardware stocks may be attributed to multiple factors. The trigger appears to be news that Nvidia plans to provide a $250 billion guarantee for OpenAI, raising concerns about artificially inflated AI demand. External factors included a global sell-off in tech stocks, including Nvidia, Korean memory giants, and the Nikkei index, which directly transmitted to A-shares. With market sentiment already tense ahead of tech giant earnings and the Fed's interest rate meeting, any negative news easily triggered panic selling. For optical modules specifically, the ChiNext AI Index has already corrected over 28% from its previous high on June 25, hitting a new low for this adjustment cycle.

Regarding this round of adjustment, institutions believe the recent pullback in the optical communication sector is a natural correction after an over-concentration of positions, not a reversal of the industry trend. The flip side of concentrated positions is concentrated industrial logic. Optical communication, as a core link in computing interconnection, holds a leading advantage in the AI computing infrastructure's prosperity, order certainty, and earnings visibility. The scarcity of its industrial logic is precisely the fundamental reason for the concentrated allocation of funds. High-quality tracks inevitably attract capital; concentrated positions are a result of focused industrial logic, not simple track speculation. Guosheng Securities believes that positions will ultimately yield to fundamentals. Looking back at January 2026, the sector also experienced a position digestion process before returning to industrial logic. As short-term floating chips are gradually digested and positions are exchanged, the prosperity of the optical communication track remains certain. They recommend continuing to focus on optical module leaders and related optical component companies, with subsequent catalysts including mid-year report season and progress in the overseas computing power industry chain. ChiNext AI ETF (159363) and its linked funds (A: 023407, C: 023408) focus on optical module CPO leaders, with the underlying index's weight in Zhongji Innolight, Eoptolink, and Tianfu Communication being approximately 40%, making it a key flag bearer for AI computing power. The fund's latest scale exceeds 7.2 billion yuan, and its average daily turnover over the past six months has been over 1 billion yuan, leading its 8 ETFs tracking the same index in both scale and liquidity.