On July 29, China's three major A-share stock indexes closed lower in the morning session. By midday, the Shanghai Composite Index fell 0.53%, the Shenzhen Component Index dropped 0.43%, and the ChiNext Index declined 0.47%, which briefly fell over 2% during the session. Additionally, the STAR 50 Index plunged 4.22%. Despite the losses, the number of advancing stocks outnumbered declining ones, with over 3,400 stocks rising. The morning trading volume across Shanghai, Shenzhen, and Beijing markets reached 1.48 trillion yuan, a significant increase of 151.6 billion yuan compared to the previous session. Domestic main funds saw a net outflow of 27.33 billion yuan, and the median price change for all stocks was 0.67%.
On the sector front, consumer staples such as dairy, food and beverages, baijiu, and retail continued to strengthen, with stocks like Huanlejia Co Ltd (Shenzhen: 300997) and Sunshine Dairy Co Ltd (Shenzhen: 001318) hitting their daily price limits. Battery-related concepts, including electrolyte VC, lithium iron phosphate, and lithium resources, rebounded, with stocks like Lingpai Technology Co Ltd (Shenzhen: 300530) and Xianfeng Holdings Co Ltd (Shenzhen: 002141) also hitting their daily limits. Large financial sectors like brokerages, banks, and internet finance rallied to support the market. Conversely, memory chip concepts continued to suffer heavy losses, with stocks such as GigaDevice Semiconductor Inc (Shanghai: 603986) and Yake Technology Co Ltd (Shenzhen: 002409) hitting their daily limits. The semiconductor supply chain saw a sustained sell-off, with stocks like Youyan Silicon Co Ltd (Shanghai: 688432) and Yonggui Electronics Co Ltd (Shanghai: 688800) falling over 10%. PCB upstream concepts, including electronic cloth, copper clad laminates, copper foil, and glass substrates, continued to decline, with stocks like Honghe Technology Co Ltd (Shenzhen: 002109) and Ping An Electric Co Ltd (Shenzhen: 002359) nearing their daily limits. Computing hardware concepts like optical modules, PCBs, optical fiber cables, and liquid cooling also continued to plummet, with stocks like Suqian Liansheng Co Ltd (Shanghai: 603065) and Fujing Technology Co Ltd (Shenzhen: 002222) hitting their daily limits. Computing power leasing and domestic computing concepts also trended lower, with Hongjing Technology Co Ltd (Shenzhen: 300669) falling over 10%.
A comprehensive analysis of market factors suggests several events may influence the A-share market: 1. U.S. stocks showed divergent trends on Tuesday, with funds continuing to exit chip and AI-related stocks, rotating into traditional sectors like healthcare and finance. 2. This morning, Japanese and South Korean stock markets opened higher and fluctuated. South Korea's KOSPI index briefly rose over 3% before retreating. Major chip stocks experienced significant volatility, with SK Hynix briefly surging over 4% before turning negative, and Samsung Electronics initially rising nearly 6% before paring gains. 3. Changxin Technology has topped the A-share market capitalization ranking and will be included in the MSCI China All Shares Index. Since the MSCI China Index is nested within the MSCI Global Standard Index series, this inclusion implies more passive fund tracking and allocation. 4. On the evening of July 28, A-share companies released a flurry of positive signals. Several companies released their first-half 2026 performance forecasts, reports, or preliminary results, with many in AI, energy storage, healthcare, and chip sectors showing significant profit growth. Simultaneously, many companies announced large share buyback and increase plans, demonstrating confidence in long-term development with tangible capital. Looking ahead, Caitong Securities believes that overseas tech assets have not yet stabilized, and increased volatility may be the norm in the short term, significantly impacting the A-share tech innovation sector. In the near term, the market is likely to continue its volatile and bottoming-out pattern.
Hot Sectors
1. Consumer Staples Sector Shows Strength
Dairy, food and beverages, baijiu, and retail consumer staples continued to strengthen, with stocks like Huanlejia Co Ltd (Shenzhen: 300997) and Sunshine Dairy Co Ltd (Shenzhen: 001318) hitting their daily limits. Analysts note that on the news front, a research report from CITIC Securities indicates that the dairy cow inventory in June was 5.772 million head, a month-on-month decrease of 22,000 head, maintaining a relatively fast reduction rate. Recent price increases for bulk milk in multiple regions, along with a meat-milk price resonance, are driving a positive cycle in raw milk, benefiting the improvement of competitive dynamics for leading liquid milk companies.
2. Lithium Battery Concepts Rebound
Concepts including electrolyte VC, lithium iron phosphate, and lithium resources rebounded, with stocks like Lingpai Technology Co Ltd (Shenzhen: 300530) and Xianfeng Holdings Co Ltd (Shenzhen: 002141) hitting their daily limits. This is attributed to news that on July 21, 2026, the Guoxuan Holding Group's annual 20,000-ton solid-state battery key material project officially launched in Anqing, Anhui. This project is the industry's first 10,000-ton high-purity lithium sulfide mass production line, with plans to complete pilot construction by December 2026 and achieve full production by 2027.
3. Large Financial Concepts Rally to Support the Market
Brokerages, banks, and internet finance concepts rallied to support the market. A research report from Dongwu Securities suggests that current valuations of Chinese brokerages are at a reasonably low level. Tech investment plus international business is expected to drive an upward shift in the industry's ROE, with significant upside potential. Given the positive policy environment for industry development and a trend towards increased concentration, large brokerages still hold significant advantages.
Institutional Views
Caitong Securities: Overseas Tech Assets Not Yet Stabilized, Increased Volatility Likely the Norm in the Short Term
Caitong Securities believes that overseas tech assets have not yet stabilized, and increased volatility may be a short-term norm, significantly impacting the A-share tech innovation sector. This impact is evident in two aspects: first, lowering overall risk appetite and delaying the entry of incremental funds; second, suppressing the rebound height of A-share hard-tech stocks, causing many trapped positions in the tech innovation sector to be difficult to unwind in the short term, thereby not releasing the liquidity of these funds. Both factors contribute to a downward shift in the current trading volume center. Therefore, in the short term, the market is likely to continue its volatile and bottoming-out pattern, with a strategy focused on controlling positions, balanced allocation, and grasping rotation rhythms, waiting for the market to gradually increase volume or for a leading direction to emerge before increasing investments.
CITIC Securities: AI Drives Upward Semiconductor Capital Expenditure, Equipment Sector Enters New Growth Cycle
CITIC Securities believes that AI is becoming the core driver of the current global semiconductor cycle, ushering in a new upward cycle for global wafer fab capital expenditure. Advanced logic and advanced memory are forming a resonance in expansion, and the semiconductor equipment industry's prosperity is transitioning from a cyclical recovery to a structural growth phase. It is estimated that the global semiconductor equipment market size will exceed $290 billion by 2028. Meanwhile, the prosperity of China's semiconductor industry will benefit from the dual catalysts of AI and domestic substitution. The Chinese semiconductor equipment market size is expected to approach $100 billion by 2028. In this context, the advisory firm recommends focusing on two main investment themes: 1) Domestic equipment leaders with global competitiveness, continuously benefiting from advanced process and advanced packaging expansion; 2) Domestic component companies with ongoing domestic substitution progress, improving product matrices, and continuous breakthroughs in advanced process verification.
China Merchants Securities: South Korean Stock Market Leverage Reduction Continues, A-Share Policy Bottom Has Appeared
China Merchants Securities notes that externally, the deleveraging process in the South Korean stock market is ongoing, transmitting sentiment to the A-share market. However, recent signals of market stabilization have been intensively released, indicating that the A-share policy bottom has been reached. On one hand, the China Securities Regulatory Commission is firmly committed to maintaining the stable and healthy operation of the capital market. On the other hand, multiple central state-owned enterprises and listed companies, including Beijing State-owned Capital Operation and Management Center and Beijing Enterprises Holdings, have collectively expressed their stance, disclosing arrangements for share buybacks, increases, and higher dividends, demonstrating confidence in the market's development. Regarding ETF net inflows, broad-based ETFs saw significant net inflows last week, with a cumulative weekly net inflow exceeding 500 billion yuan. Looking ahead, with the market stabilization symposium held, regulators are expected to increase their market stabilization efforts. If the market declines more than expected, market stabilization measures may be benchmarked against the intensity seen in April of last year, further supporting the capital market and enhancing investor confidence through fund support, central enterprise buybacks, and financial institution share increases.