Preface

The Chinese A-share market is witnessing a notable shift in dynamics. On the morning of October 14, the startup boards, namely the ChiNext and the STAR Market, initially surged but then receded. In contrast, traditional "steadies" like the Agricultural Bank of China provided significant support to the Shanghai Composite Index, signaling a potential defensive market attitude. Additionally, on the geopolitical front, the China Semiconductor Industry Association voiced its concern over international regulatory practices. This piece delves into these recent developments and their implications for market trends.

Lazy bag

Market styles have shifted. Traditional stocks provide support amid fluctuating trends. Meanwhile, the China Semiconductor Association criticizes international bias—impacting global cooperation.

Main Body

On October 10, a significant adjustment occurred within the ChiNext and STAR Markets, with the latter becoming the main force behind market stability by October 13. However, October 14 saw both these boards driving declines again, reflecting a volatile investment atmosphere. As early trading progressed, these two sectors experienced an initial spike followed by a sharp decline post 10 AM, culminating in the STAR Market’s nearly 3% drop by midday. The Hang Seng Tech Index mirrored these fluctuations with a 1% reduction, while notable semiconductor firms witnessed drops as well — Hua Hong Semiconductor fell close to 7%, and Semiconductor Manufacturing International Corporation (SMIC) slipped by 3.6%.

In a geoeconomic twist, the China Semiconductor Industry Association released a statement of concern. Recent actions against Wingtech Technology's Dutch subsidiary, Nexperia, have drawn industry attention, triggering a defense of members' legitimate interests. The Association condemns the misuse of "national security" to unfairly restrict Chinese enterprises abroad, arguing such actions undermine the global semiconductor ecosystem's openness and cooperation.

As these developments unfold, traditional 'blue-chip' stocks have emerged as stalwarts. Shares such as Agricultural Bank of China, China Mobile, and China Life Insurance provided the main support for the Shanghai Composite Index. This shift towards traditional stocks could indicate continuing defensive strategies in the market.

Interestingly, government bonds did not perform robustly, with the 30-year major contract experiencing an early drop exceeding 0.6%.

Reflecting on this, Guosen Securities' chief economist Xun Yugen draws parallels between the current market scenario beginning in late 2021 and China's 1999 tech bull market. He suggests the present market dynamics remain in their second phase, pivoting from recovery to valuation. While technology remains a focal narrative, market structural realignment may favor sectors previously lagging in gains.

Additionally, the Huaxin Securities report hints at rising foreign investment marginally and pressure on China’s domestic lending capacity, thus favoring high-dividend stocks. They recommend a large-cap white-horse style allocation to mitigate market fluctuation and fund repatriation pressures.

Mu Yiling from Guojin Securities suggests that although the current valuation doesn’t indicate panic or greed, it calls for caution against past over-inflated values influenced by overseas tech stocks. He proposes opportunities may be found through domestic policy leniencies and internal demand stabilization, suggesting sustained interest in domestic sectors like food and beverage, aviation, and real estate. Non-bank finance might also see benefits from a broader social return on capital improvement. In the mid-term, enhanced manufacturing and accelerated investment remain core themes.

Key Insights Table

Aspect	Description
Market Shift	Traditional sectors showing strength amid tech volatility.
Policy Concerns	China critiques selective international regulatory practices.

Last edited at：2025/10/14