The STAR 50 Index surged by 10.73%, why did the A-share market stage a "V-shaped reversal"?
After multiple consecutive days of pullbacks, the market has ushered in a strong rally.
On the morning of July 21, the A-share market staged a "V-shaped reversal", followed by a rapid rise in multiple indices. By the close, the STAR 50 Index surged by 10.73%, marking its highest single-day gain in nearly a year; all three major stock indices ended in positive territory, with the Shanghai Composite Index up 1.79%, the Shenzhen Component Index up 4.81%, and the ChiNext Index up 7.05%.
The combined trading volume of the three markets reached 2.97 trillion yuan, an increase of 256.1 billion yuan compared with the previous day. In terms of individual stocks, more than 3,100 stocks rose, and over 100 stocks hit the daily limit. As the vanguard of the rebound, the entire semiconductor industry chain exploded, with sectors such as equipment, memory, wafers, and HBM leading the gains; sectors including oil and gas, banking, coal, and motorcycles ranked among the top decliners.
Boosted by the semiconductor sector rally, related thematic ETFs performed strongly, with as many as 73 products posting intraday gains of over 18%. Among them, the STAR Semiconductor Equipment ETF (Penghua), STAR Semiconductor ETF (China Asset Management), STAR Semiconductor Equipment ETF (Huatai-PineBridge), and STAR Market Composite Index ETF (Eastmoney) saw gains exceeding 18%, while the STAR Chip ETFs under GF Fund, Huaan Fund, and ChinaAMC recorded gains of over 15%.
Resonance of Three Major Factors
The strong rebound of A-shares today stems from the resonance of three major factors.
First, multiple types of capital have announced their entry into the market. Since July 19, positive signals on the capital front have emerged frequently, ranging from increased holdings by the "national team" and insurance funds, to share repurchases by listed companies, and self-purchases by public and private equity funds.
Golden Eagle Fund analyzed that the continuous entry of stable capital has effectively boosted market confidence. "During the previous period of sharp and sustained market declines, investors' risk-aversion sentiment was intensively released, and A-share valuations gradually returned to a reasonable range. Meanwhile, mainstream large capital took the opportunity to enter the market to support market liquidity, further laying a solid foundation for the market to stabilize."
Wind data shows that over the last two trading days, several broad-based ETFs have seen significant trading volume expansion. On July 20, broad-based ETFs recorded a total net inflow of 59.061 billion yuan. Among them, the STAR 50 ETF (China Asset Management), CSI 300 ETF (Huatai-PineBridge), and ChiNext ETF (E Fund) recorded net inflows of 13.7 billion yuan, 12.52 billion yuan, and 9.4 billion yuan respectively. On July 21, these three broad-based ETFs remained highly active, with trading volumes reaching 17.322 billion yuan, 15.266 billion yuan, and 12.895 billion yuan respectively.
Second, policy support is in place. On July 20, Wu Qing, Chairman of the China Securities Regulatory Commission, presided over an investor symposium, explicitly stating that the commission will "fully maintain stable market operation". Bosera Fund believes that after the technology sector went through full adjustments in the early stage, valuation pressure was released, and the resonance of policy and capital factors triggered the concentrated rebound of the technology growth sector today.
Third, the stabilization and rebound of overseas markets have provided a favorable external environment for this round of A-share market recovery. Golden Eagle Fund pointed out that global equity markets previously experienced a round of rapid deleveraging and relatively full adjustments, with indices in many regions seeing deep valuation pullbacks, creating the objective foundation for a stabilization and rebound.
Overseas markets represented by the South Korean stock market took the lead in launching a recovery rally. After the Korea Composite Index plummeted by more than 30% from its historical high and risks were largely cleared, it ushered in a stop-the-fall reversal today, with the KOSPI surging 3.56%, led by core South Korean technology leaders.
Golden Eagle Fund said that the collective warming up of the global technology sector provides strong support for the synchronized rebound of the A-share technology sector.
The Most Panicked Phase Has Most Likely Passed
Regarding whether the technology sector has emerged from the haze, institutions have provided analyses from short, medium, and long-term perspectives.
"After the rapid adjustments in the early stage, the overcrowding level of the technology sector has been significantly digested." Bosera Fund believes that after the margin trading balance has declined for consecutive days, the deleveraging process of leveraged capital is nearing its end. The statements of increased holdings by central SOEs and additional positions by insurance funds have released clear signals of long-term capital entering the market, forming support for the valuation bottom of the technology sector.
Golden Eagle Fund said that the current market is still in the final stage of leverage clearing and sentiment bottoming. With the continuous inflow of allocation-oriented capital and the significant clearing of panic-driven selling, investors can pay attention to the excellent investment opportunities in the short-term oversold rebound.
"In the short term, the active release of policy signals has alleviated market liquidity shocks and panic sentiment to a certain extent, and the concentrated deleveraging of leveraged capital has moderated. However, it still takes time for the market to find its bottom. After the index's single-day sharp rise, the volatility of the technology sector remains at a high level, and subsequent efforts are needed to reduce market volatility." China Asset Management suggested that investors should pay attention to the sustainability of national team's increased holdings, the pace of replenishment of margin trading and quantitative capital, as well as performance verification during the intensive disclosure period of interim reports.
"After this round of oversold rebound, the next new round of medium-term market rally will have to wait for new major industrial catalysts. The second-quarter reports of overseas cloud manufacturers in late July are a key node for verifying the return on capital expenditure." Golden Eagle Fund analyzed that in the medium term, clues to the internal differentiation of the AI industry chain will depend on whether sub-segments can maintain the increasing proportion of demand and the continuation of supply bottlenecks. For links where supply bottlenecks may loosen, the valuation center may face downward revisions, and AI technology investment still needs to focus on core links with tight supply and demand.
In the view of Bosera Fund, industrial trends such as the expansion of AI computing power demand and the domestic substitution of semiconductors have not changed due to short-term adjustments, and the growth resilience of technology leaders in the interim report performance has been initially verified. The market may still experience fluctuations in the short term, but the most panicked phase of the technology sector has most likely passed. With the continuous implementation of industrial catalysts, the technology growth direction still has medium and long-term allocation value.
This article is from "Fortune China New Media", written by JIANG Jinli, edited by JIANG Shizhou, and published with authorization from 36Kr.