What Triggered the A-Share Market’s Dramatic Reversal After a Global Sell-Off?

Table of Contents

• You might want to know


• Main Topic


• Key Insights Table


• Afterwards...

You might want to know

• Why did Chinese mainland stocks swing from steep morning losses to a powerful afternoon rebound?


• Does the recovery signal that the technology sell-off has ended, or was it a short-term response to company news and market support?

Main Topic

Chinese mainland equities staged a dramatic reversal on October 23 after opening lower and extending their declines through the morning. The Shanghai Composite Index briefly fell below the psychologically important 3600-point level, reaching an intraday low of 3574.27, its lowest point in nearly a year. The ChiNext Index, which is heavily influenced by growth and technology shares, at one point dropped more than 3.2%. In the afternoon, the direction changed abruptly: the ChiNext Index rallied from a deep loss into positive territory in just over ten minutes and ended the session up more than 4%. The Shanghai Composite also recovered, gaining 0.89% to close at 3690.48.

The reversal followed a period of intense selling across global markets. Investors had been reducing exposure to risk amid concerns about inflation, geopolitical tensions, interest rates and the outlook for artificial intelligence-related businesses. Technology, AI and semiconductor companies were among the hardest-hit areas. The comparison with October 22 was especially striking: the Philadelphia Semiconductor Index, often treated as a barometer of global technology shares, fell 6.72% in one session, significantly more than the Nasdaq Composite’s 2.6% decline. Major companies, including Nvidia and Meta, were also caught in the sell-off.

Pressure was pronounced across Asia. On the same day, the Shanghai Composite fell 1.48%, the ChiNext Index dropped 4.37%, and Hong Kong’s Hang Seng Tech Index lost 5% at its intraday low. Japanese and South Korean markets fell nearly 3% and 4%, respectively. The breadth of the declines suggested that investors were reacting not just to news about one company or one market, but to a combination of global concerns affecting risk appetite and valuations.

Some market movements also departed from familiar expectations about safe-haven assets. On October 22, spot gold in London fell 2.79% to 4024.33 US dollars per ounce, while Brent crude oil surged 4.0% to 113.17 US dollars per barrel. Gold had retreated nearly 30% from its January peak. These moves showed that, during a period of rapidly shifting expectations, assets do not always behave according to simple assumptions about what investors should buy when markets become unsettled.

Several sources of anxiety were overlapping. The source account cited persistent US inflation above expectations, intensifying geopolitical tensions in the Middle East, renewed energy-related tensions between Russia and Ukraine, and a sudden credit crisis in the AI cloud-computing sector. Taken together, these pressures contributed to a broad reassessment of risk. Higher interest rates can weigh on the present value investors assign to future corporate earnings, while geopolitical events and energy-price swings can complicate expectations for inflation, economic growth and central-bank policy.

The technology pullback was also linked to expectations that had become demanding after strong share-price gains. Some technology stocks had risen substantially in the first half of the year, and trading had become crowded. When investors have accumulated large gains in popular shares, even a modest change in the outlook can prompt profit-taking. That selling can intensify when many market participants hold similar positions or respond to the same news at once.

Yang Delong, chief economist and fund manager at Qianhai Open Source Fund, described the market as being in a complicated phase in which domestic structural adjustments intersect with changes in the external environment. In his assessment, greater short-term volatility is part of the process through which risks are released. He pointed to profit-taking in technology shares that had already advanced substantially, as well as the influence of initial public offerings, refinancing and share disposals by some shareholders on market funding conditions. Changes in expectations for Federal Reserve policy, US Treasury yields and global capital flows, together with volatility in overseas markets, also affected sentiment toward A-shares.

The afternoon recovery had a more direct catalyst: a set of company announcements from major technology and optical-communications businesses. At midday, Eoptolink Technology (新易盛), Zhongji Innolight (中际旭创), TFC Communication (天孚通信), Accelink Technologies (光迅科技), Yuanjie Semiconductor (源杰科技) and CIG (联讯仪器) issued updates. Zhongji Innolight said customer orders were strong, extending to 2027, with some customers providing guidance for 2028. TFC Communication, Accelink Technologies, Yuanjie Semiconductor and CIG said their operations and orders were normal. Yuanjie Semiconductor forecast that its third-quarter net profit would increase by 578.85%–659.70% year on year. Eoptolink also announced a share buyback plan worth 800 million to 1 billion yuan.

These announcements offered investors company-specific information at a moment when fears about the technology industry had become acute. Statements about order visibility and normal operations helped counter concerns that the underlying business outlook was deteriorating as sharply as share prices suggested. Yuanjie Semiconductor’s profit forecast added a concrete growth indicator, while Eoptolink’s buyback plan represented a capital-allocation decision that investors could assess alongside the other disclosures.

The announcements helped restore confidence, but a rapid rebound does not by itself establish that the broader correction is over. After the updates, several technology leaders, including Zhongji Innolight, Eoptolink and TFC Communication, rallied from their intraday lows and moved into positive territory. Their gains helped the ChiNext Index and the STAR 50 Index sharply reduce their losses. Technology shares consequently became the leading force behind the wider market’s change in direction.

Trading in exchange-traded funds (ETFs) offered another notable signal. Broad-market ETFs saw heavy activity, which the source account described as evidence that support-oriented capital may have been entering the market through these products. During trading on October 23, the total turnover of equity ETFs in the A-share market exceeded 200 billion yuan, surpassing the previous day’s full-session total and reaching its highest level since August 19 of that year. Broad-based ETFs accounted for 124.2 billion yuan in turnover, their highest level since July 21 of that year. High turnover alone does not prove who was buying or whether the buying will continue, but it does indicate that ETF trading was unusually active.

Investors are left with a central question: when will the adjustment end? Yang Delong characterized the pullback as a process of removing excess valuation rather than the end of the AI technology revolution or a longer-running gradual bull market. He argued that leading technology companies still had growing businesses. In his view, market sentiment had shifted from exuberance to pessimism, and lower trading volume and subdued sentiment could be signs that the adjustment was approaching its later stages. These are assessments, not guarantees about the timing or direction of future prices.

China Europe Fund emphasized the need to distinguish between pressures on valuations and liquidity, and changes in the underlying industry outlook. High global long-term interest rates, oil-price movements, geopolitical risks and portfolio rebalancing can create sharp, nonlinear declines, particularly when investors are already reducing risk. At the same time, the fund said that overseas AI capital expenditure was still increasing and that tight supply in memory and computing capacity had not been disproven. From this perspective, the sell-off reflected crowded positioning and reduced expectations more than a confirmed reversal in the technology sector’s growth trend.

Invesco Great Wall also argued that A-share valuations offered relatively attractive value. As of October 22, the price-to-earnings ratios for the Wind All A Index and the ChiNext Index were 20 times and 30 times, respectively. Those readings stood at the 63rd and 8th percentiles of their ranges since 2010. The figures suggest that the two indexes were positioned differently relative to their own historical valuation distributions: the ChiNext Index was at a much lower percentile, while the Wind All A Index remained closer to the middle of its historical range.

Even with those valuation observations, the near-term outlook remained uncertain. Invesco Great Wall noted that short-term valuation gains might face constraints, while maintaining a positive view of medium-term market performance and recommending patience for signs of stabilization. More broadly, market participants will have to weigh company earnings and orders against interest rates, global liquidity, energy prices, geopolitical developments and investor positioning. A single day’s rebound can be important evidence about market behavior, but it cannot settle all of these questions.

This article is for information only and does not constitute investment advice.

Key Insights Table

Afterwards...

The episode highlights how quickly market narratives can shift when global risk concerns, crowded positions and company-level information converge. Further analysis would benefit from closer examination of how AI-related capital spending translates into revenue, cash flow and sustainable profits across hardware, cloud computing and semiconductor supply chains. Investors and researchers can also track order visibility, capacity constraints and the difference between near-term demand and long-term investment plans.

Another area worth exploring is the interaction between interest rates, ETF flows and market liquidity. More detailed, transparent data could help distinguish between passive rebalancing, strategic purchases and short-term trading, without treating turnover as proof of a particular investor’s intentions. Continued monitoring of inflation, government-bond yields, oil prices and geopolitical risks will also be essential to understanding how external conditions affect valuations in China and other markets.

For now, the most useful approach is to separate short-term price movements from evidence about company fundamentals and broader economic conditions. A durable assessment of the market will depend on whether order growth, earnings and investment trends remain resilient, and whether volatility and trading activity begin to stabilize over time.

Source note: Adapted from “One Negative Catalyst Sparks a Global ‘Black Thursday,’” China Fund News, October 22, 2026; reporter Yu Shengmei; editor Yu Yuan.