Preface

China's equity market experienced a pronounced early-session rally on July 31, with thousands of stocks advancing as investors rotated into AI-related and environmental sectors. This article summarizes the market movements, sector leadership, regulatory developments, and company-level performance that shaped the session. It aims to provide a clear, objective account of market dynamics and policy signals — especially the accelerating focus on artificial intelligence deployment and industrial green, low-carbon strategies — and to highlight why a specific subsector in solid-waste management is attracting attention for both earnings growth and relatively low valuations.

Lazy bag

Market breadth was overwhelmingly positive, with more than 4,500 stocks advancing and strong gains in AI application plays and environmental names. The Ministry of Industry and Information Technology's new green development plan and related circular-economy targets reinforced interest in waste-management stocks, where several companies reported significant first-half profit growth while some peers still trade at modest price-to-earnings multiples.

Main Body

The A-share market opened sharply higher on July 31. Trading volume expanded as major indices posted notable gains: the Shanghai Composite rose about 0.76%, the Shenzhen Component climbed roughly 3.16%, and the ChiNext index surged intraday before settling with a strong advance of approximately 5.04%. The STAR 50 index also recorded significant intraday strength, rising near 9% at its peak and closing up nearly 6%. Overall market breadth was robust — more than 4,500 stocks finished higher, with 88 hitting daily trading limits on the upside and none on the downside.

Sector rotation was evident. AI-related themes, especially large-models, optical communications, and AI-compute concepts, experienced substantial rebounds. The electronics sector saw net inflows exceeding CNY 26 billion from major funds, while education, environmental protection, and gaming sectors also ranked among the top gainers. Conversely, previously strong defensive and dividend-oriented sectors such as banks, insurance, coal, and home appliances moderated or pulled back after recent rallies.

Within the AI application cluster, the thematic index tracked by Wind rose over 6%. Several individual names reached their daily limits, including Chinese-language content and marketing-service providers; one marketing-services company drew exceptionally large buy orders exceeding 1.07 million lots to lock the limit-up, with an estimated locked-order value of about CNY 1.543 billion. Other AI-related stocks also showed concentrated buying on large limit-up order volumes.

Hong Kong-listed large-model concepts likewise posted sharp gains. Several model and AI-platform developers rose double digits, reflecting cross-border investor enthusiasm for next-generation models and platform commercialization prospects.

On the policy front, the legislative process for an AI-specific law appears likely to accelerate, signaling the state's intent to balance rapid innovation with safety and management. Officials from the National Development and Reform Commission emphasized a three-pronged approach: speeding up indigenous innovation in foundational model theory, training and inference efficiency, multimodal systems, and agent-like capabilities; prioritizing application deployment by accelerating pilot bases for AI applications nationwide; and strengthening the AI ecosystem by fostering derivative enterprises while maintaining a dynamic balance between development and risk management. This policy trajectory is intended to provide legal and institutional support for long-term, healthy AI industry growth.

Brokerage research highlights strong momentum in domestic model development — from GLM-5.2 to Kimi K3 — with performance gains faster than many anticipated. Analysts note Chinese models are approaching global competitiveness, suggesting a shift away from a solely low-price positioning toward competing on intelligence-to-price ratios in higher-value scenarios. The report remains constructive on the AI sector, expecting that as model intelligence improves and productization and commercialization advance, AI will increasingly penetrate programming, office productivity, AI-driven scientific research, and entertainment.

In parallel, the Ministry of Industry and Information Technology issued a significant planning document on industrial green and low-carbon development for the 14th Five-Year Plan period and beyond. The plan calls for accelerating the construction of a new comprehensive utilization system for emerging solid wastes, focusing on end-of-life power batteries from new energy vehicles, lithium-ion batteries from e-bikes, waste photovoltaic modules, and turbine blades. Key actions include promoting precise disassembly, low-cost reutilization, efficient extraction of valuable elements, drafting and revising utilization standards, implementing industry regulation, and cultivating leading enterprises. The plan also proposes a digital "ID" system for new-energy vehicle power batteries to strengthen oversight across the full lifecycle.

Environmental policies have gained momentum this month. A newly released circular-economy plan sets targets for 2030 that strengthen the full-chain recycling system across production, consumption, collection, and utilization. It aims to raise major resource output rates by roughly 16% relative to 2025, reach an annual comprehensive utilization of around 4.5 billion tonnes of bulk solid waste, and achieve approximately 510 million tonnes of recycled resources used annually. The plan also projects a resource-recycling industry output value near CNY 8 trillion. Complementary waste-management guidance further imposes quantitative targets on hazardous and industrial solid-waste disposal, pushing for reduced landfill shares and comprehensive digital monitoring to eliminate illegal dumping and treatment practices.

These policy tailwinds helped push environmental stocks higher at the open. The industry index rose intraday to nearly 2.94% and closed up roughly 2.16%. Several waste-management and environmental-protection firms posted double-digit gains or limit-up moves. Company-level disclosures show that within the environmental sector, solid-waste treatment subsegments have been particularly strong in the first half of the year.

According to market-data and disclosure aggregation, 32 environmental stocks have announced interim results or profit guidance so far. Of these, 12 reported year-on-year growth in attributable net profit, and four companies forecast a turnaround to profitability. Notably, eight of the 12 profit-growing firms belong to the solid-waste treatment niche. A handful of companies reported particularly large profit increases — in some cases more than doubling — as they deepened operations in urban-mining, hazardous nonferrous metal waste treatment, and recycled-resource commercialization. One recycler cited improved metal prices, faster turnover of recaptured materials, and better realization of resource-based product margins as reasons for a dramatic year-on-year earnings increase.

Equity-research notes on the sector emphasize that domestic waste-incineration and solid-waste processing are reaching maturity; established projects are shifting toward operating-efficiency gains and incremental earnings from complementary services such as district heating and slag/resource recovery. Future growth will likely come from M&A and overseas expansion; leaders with capital, operating expertise, and overseas project pipelines remain best positioned. Importantly, several firms that have reported interim earnings growth still trade at relatively modest trailing price-to-earnings ratios. Among the profit-growing cohort, a number of stocks exhibit rolling P/E ratios below 20x, with some near single-digit multiples — signaling potentially attractive valuations if results are sustained when full interim reports are released.

In closing, the combined impetus from AI-related optimism and industrial green policy clarifications produced one of the market's broadest early-session advances in recent memory. AI application stocks captured investor risk appetite, while policy-driven demand for solid-waste management and resource-recycling names lifted a group of companies showing meaningful first-half profit improvements — some still available at reasonable valuations. As always, the market environment remains dynamic: regulatory developments, model-commercialization progress, commodity-price trends, and official implementation of new planning measures will be key variables to watch going forward.

Key Insights Table

Disclaimer: This article summarizes market events and public disclosures for informational purposes only and does not constitute investment advice. Market risks remain and investors should exercise caution.