When the optimistic sentiment accumulated during the National Day holiday was rapidly digested in the October 8th spike-and-fade, the A-share market immediately entered a period of intense volatility.
From the broad decline of over 3,700 individual stocks on October 8th, to the panic spreading on the morning of October 9th when the ChiNext Index briefly fell below the 3,000-point mark, and then to the strong "V-shaped" reversal created in the afternoon as funds aggressively entered through broad-based ETFs (Exchange-Traded Funds), the market experienced an extremely dramatic exchange of chips within just 48 hours.
Are chips loosening?
On October 8th, total A-share trading volume reached 1.68 trillion yuan, surging by more than 240 billion yuan compared to the previous trading day. Beneath this massive trading data lurked a severe loosening of chips in the technology-weighted sectors. By the close that day, the Shanghai Composite Index edged down slightly, but the Shenzhen Component Index and the ChiNext Index fell by 2.07% and 3.15% respectively. On the morning of October 9th, panic sentiment spread further, with the ChiNext Index briefly breaking through the 3,000-point psychological defense line, and more than 4,300 individual stocks across the market turning red.
As the absolute mainline of the previous market, the technology sector became the hardest-hit area in this round of selling. The two core directions of "optical" and "chip" suffered heavy losses, with hardware computing power segments such as CPO (Co-Packaged Optics) concepts, MLCC (Multi-Layer Ceramic Capacitors), and PCB (Printed Circuit Boards) even experiencing a wave of limit-downs. Former popular targets like Changguang Huaxin, Yuanjie Technology, and Dongshan Precision were successively locked at limit-down.
This panic was not without trace. At the market level, a rumor about 1.6T supporting optical chips facing pricing pressure quickly fermented within the industry chain, becoming the trigger that crushed short-term sentiment. Several listed companies including Changguang Huaxin, Yongding Co., and Shijia Photons stated they "had not learned of any news regarding optical chip price reductions." While denying the price reduction rumor, Shijia Photons provided a more rational perspective, suggesting that this round of sector adjustment may have stemmed from the disturbance caused by a research report on U.S. Federal Communications Commission (FCC) policy published by Morgan Stanley on October 1st.
While the technology sector was under pressure, the market's risk-aversion sentiment and pursuit of certainty prompted funds to quickly flow back into dividend assets and strong cyclical sectors. On October 8th, Bank of China, Industrial and Commercial Bank of China, and Bank of Hangzhou hit historic highs amid the volatility. Multiple institutional research analysts pointed out in interviews that the high growth in the banking sector's scale in the first half of the year and the improvement in the cost-to-income ratio formed the main positive contributions, while the narrowing year-on-year decline in net interest margin and its quarter-on-quarter stabilization and rebound created room for increased dividends this year and next. Against the backdrop of loosening in the technology mainline consensus and a phased decline in market risk appetite, the defensive value of high-dividend assets regained attention from funds.
A driving force emerges
When the market fell into irrational panic selling on the morning of October 9th, another powerful upward force changed the originally one-sided downward trajectory. As the "ballast stone" of A-shares and a core barometer for observing institutional fund flows, broad-based ETFs displayed trading characteristics different from the past. From the market action, unlike previous rounds where broad-based ETFs concentrated "surprise volume surges" in the final half hour of trading, this round saw large funds enter at a significantly earlier time. After the open on October 9th, core broad-based ETFs continuously saw large block trades. As of the morning close on October 9th, China AMC STAR 50 ETF, despite falling 3.58%, recorded a turnover of 6.835 billion yuan, with intense on-exchange chip exchanges. In the afternoon, China AMC STAR 50 ETF continued to see increased volume, with a full-day turnover of 10.766 billion yuan and a gain of 0.26%. As of the midday close, E Fund ChiNext ETF followed China AMC STAR 50 ETF with a turnover of 5.336 billion yuan, its half-day figure already approaching its previous trading day's full-day scale of 5.548 billion yuan. Ultimately, E Fund ChiNext ETF closed with a turnover of 8.211 billion yuan.
Even more striking was the simultaneous movement in small and mid-cap broad-based ETFs. Southern CSI 1000 ETF recorded a full-day turnover of 6.044 billion yuan; Huatai-PineBridge A500 ETF and Southern A500 ETF also both exceeded 4 billion yuan in full-day turnover. This buying force spreading from large-cap blue chips to small and mid-caps ultimately formed a powerful bullish synergy in the afternoon. Major stock indices rapidly narrowed their declines after the afternoon open and collectively turned positive after 2 PM, leaving a highly symbolic long lower shadow of a "V-shaped" reversal on the daily chart, with full-day turnover across both markets locked at 1.9 trillion yuan.
After the afternoon market confirmed that "support funds had entered," the offensive direction of funds chose sectors with more topicality and short-term catalysts. The film and media sector may have fully erupted due to the scheduled release of China's first AI hyper-realistic theatrical film "Sanxingdui: Future Past," with Chinese Online hitting a 20% limit-up; the agricultural sector collectively rose on the World Meteorological Organization's warning that a "super El Niño event has formed," with expectations of global crop supply contraction bringing the food security theme back into view. Additionally, with the disclosure of impressive first-half performance in the non-bank financial sector, the securities sector also gained momentum in the afternoon, combined with the positive news of three major international rating agencies upgrading Chinese brokerage ratings, together forming important factors in the afternoon reversal.
However, regarding the core mainline that truly determines the market's medium-term direction, institutional investors showed a relatively rigorous and cautious attitude. A Huaxi Securities research report provided a clear response logic: "The allocation approach adopts a barbell-type portfolio: gradually build positions in the technology direction on dips, grasping the industrial prosperity mainline; hold dividend assets long-term to obtain stable dividend income." It is worth noting that in the specific selection of the technology sector, Huaxi Securities provided strict screening criteria, recommending prioritizing targets with verifiable orders and cash flow, and avoiding pure-theme, overvalued varieties. CITIC Securities believes that the transmission of "CapEx (Capital Expenditure) → ROIC (Return on Invested Capital) → EPS (Earnings Per Share)" in the computing power industry has been preliminarily verified, and capital expenditure growth will form solid support for subsequent technology market trends. But the next round of technology market momentum will likely start in the fourth quarter of 2026, requiring attention to the extension from infrastructure investment to model capabilities and personal intelligent agent monetization.
Regarding the technology sector that recently experienced severe shocks, the Southern Fund research team maintained a relatively objective long-term perspective. Southern Fund believes that short-term fluctuations do not change the long-term trend of the AI industry, and liquidity shocks may bring oversold opportunities in targets with strong fundamentals; at the same time, it noted that active market trading has a positive transmission to the securities sector, but in the short term, close attention must be paid to whether third-quarter reports can deliver on earnings expectations.