The A-share market staged a powerful V-shaped reversal today, July 9th. By the close, the ChiNext Index had surged 4.49%, the Shenzhen Component Index was up 3.07%, and the Shanghai Composite Index gained 1.65%. The total turnover for the A-share market reached 2.91 trillion yuan. At the sector level, electronics and communications were among the top performers.

Key Market Drivers

Several key factors contributed to today's market performance. First, the market saw a significant rebound with strong volume, led by the technology sector. This was supported by multiple positive developments, including the central bank's reiteration of a loose policy stance in its Q2 monetary policy committee statement, overnight U.S. market news affirming the sustained growth logic for semiconductor chips, the announcement of an imminent domestic memory leader's IPO this month, and a continuous afternoon rally in the South Korean stock market. In specific news, a leading domestic DRAM manufacturer announced its subscription date, marking the imminent start of its IPO process. Separately, a report indicated that Meta has announced plans to build a large data center in Canada, countering previous market concerns about a potential halt in its AI investments.

Second, the semiconductor silicon wafer sector experienced a major rally today. This follows the successful implementation of two rounds of price increases this year by a global silicon wafer leader, signaling the industry's entry into a price uptrend cycle. Concurrently, large-scale capacity expansions by downstream wafer fabs are bolstering rigid demand for domestic silicon wafers. The news backdrop includes synchronized price hike notices issued by several global silicon wafer companies in mid-to-late May, initiating the second round of increases for the year. Prices for standard 12-inch silicon wafers rose 5% to 8%, while high-end wafers tailored for AI/HPC applications saw increases of 18% to 22%. The cumulative increase from both rounds this year exceeds 15%.

Third, the brokerage sector saw a catch-up rally today. This is attributed to marginal improvements in chip structure, the anticipated validation of strong Q2 2026 earnings, and the sector's historically low valuation levels. On the news front, brokerage firms have collectively issued positive interim earnings previews, with leading firms' profits hitting record highs. Recently, four listed brokerages successively disclosed their first-half performance forecasts, all showing substantial year-on-year growth in net profit attributable to shareholders.

Overall Market Outlook

From a broader perspective, the economy is transitioning into a new cycle, and we maintain a positive medium-term outlook on the market. However, considering the extreme divergence in market performance and valuations, and with July marking the beginning of the earnings verification period, it may be prudent to await opportunities for a style rebalancing.

Potential Investment Themes

Regarding potential investment directions, several themes are worth considering. First, within the AI sector, a diversified allocation to leaders in optical modules, PCBs, servers, and gas turbines could be beneficial, while reducing exposure to overvalued second and third-tier players, patiently waiting for better entry points.

Second, against the backdrop of a structural economic recovery where mid-to-upstream manufacturing is leading the way into a new cycle, sectors like new energy, construction machinery, and chemicals are poised to potentially benefit from the restoration of the manufacturing supply chain.

Finally, given the increasingly extreme nature of the market's structural trends, low-valuation factor plays such as insurance and brokerage stocks could be considered.

Risk Advisory

The views expressed are for reference only and may change due to market factors. They do not constitute investment advice or a commitment. Funds carry risks; investment requires caution.