July 16 A-share market close: RMB 23 billion fled semiconductors, but institutions analyze it this way

Index Performance: Broad Sell-Off, Shanghai Composite Loses the 3900 Level

On July 16, the A-share market drifted lower throughout the session, with all major indices closing in negative territory:

• Shanghai Composite Index: 3882.41 points, –1.85%

• Shenzhen Component Index: 14488.65 points, –1.97%

• ChiNext Index: 3692.46 points, –2.95%

• STAR Composite Index: 2110.36 points, –3.43%

Combined turnover across the three exchanges came in at roughly ¥2.42 trillion, shrinking by about ¥167.6 billion from the prior session. In the broader market, 2,861 stocks declined while 2,499 advanced; 48 stocks hit their daily limit-up, and 38 hit their daily limit-down.

Leading Sectors: Film & Media and Pharma Surge Against the Trend

Film & TV / Media Was the Strongest Theme Today

• The media sector closed up 2.09%, ranking first among all Shenwan Level-1 industries.

• Ruyi Films hit its daily limit-up for a second straight session; Shanghai Film and Huanrui Century also locked in limit-up.

• News catalysts: Total China box office in 2026 (including pre-sales) has already topped ¥19 billion, with the summer season alone surpassing ¥3.3 billion. Over 100 films have locked in summer release slots, led by Kung Fu Women’s Football which has generated more than ¥800 million in ticket sales.

Pharma and Innovative Drugs Remained Highly Active

• Harbin Pharmaceutical (Hayao) surged to its daily limit-up for five consecutive sessions, while Hainan Haiyao did so for two; Borui Pharma jumped over 19%.

• News catalysts: Total out-licensing deal value for Chinese innovative drugs in the first half of the year reached approximately $110 billion, already hitting 80% of the full-year 2025 total—marking a fresh all-time high.

Other Active Sectors

The AI smartphone concept got a lift from news that seven on-device AI large models were officially filed (Green Precision Technology and Furong Technology hit limit-up). Agriculture, forestry, and animal husbandry (Muyuan Foods and Wen’s Foodstuff each rose over 3%) and real estate (Vantone Development limit-up) also edged higher.

Sectors Leading the Decline: Semiconductor & Compute Power Supply Chain Take a Heavy Hit

The Semiconductor Sector Was the Primary Drag Behind Today’s Sell-Off

• The electronics sector plunged -2.97%, the communication sector dropped -3.16%, and building materials took the biggest hit at -4.55%.

• Memory chip leader Demingli hit limit-down for two consecutive days; GigaDevice, JCET, and others also collectively slumped to their limit-down.

• Montage Technology tumbled -16.44%, dragging the STAR 50 Index down by -4.02%.

• Trigger: Demingli’s Q2 net profit attributable to the parent company fell by 5.74%–29.65% quarter-over-quarter. This stoked market fears that the memory chip cycle has peaked, triggering broad-based profit-taking across the semiconductor sector.

Additionally, computing hardware (led by CPO companies), coal, photovoltaics, lithium batteries, consumer electronics, and commercial aerospace were among the biggest decliners.

Core Market Feature: Sharp Style Rotation, Clear Shift "From High to Low"

Today's A-shares displayed a vivid "high-to-low rotation":

1. Tech Outflow: Funds flowed heavily out of high-valuation tech sectors like semiconductors and computing power. The semiconductor sector's turnover hit a staggering ¥605.57 billion, yet net capital outflow was highly evident.

2. Defensive Inflow: Money rotated into defensive, low-lying sectors such as film & media, pharmaceuticals, and consumer stocks.

3. Turnover Leaders: Among the top 10 stocks by turnover, Zhongji Innolight topped the list with ¥34.474 billion, followed by Dongshan Precision, GigaDevice, Montage Technology, and Eoptolink. Aside from optical modules, most tech heavyweights closed lower.

Summary: The market continued its pattern of volatile divergence. Previously strong tech sectors underwent deep corrections as capital sought refuge in low-level defensive plays, leading to a marked intensity in short-term fluctuations.

Tech Sector Performance: Broad-Based Sell-Off, STAR Market Leads Declines

On July 16, the tech sector fell across the board, acting as the main drag on the broader market:

• STAR Composite Index: Closed down -3.43% after pulling back from an intraday surge.

• STAR 50 Index: Plunged -4.02%, briefly turning positive during intraday trading before dropping sharply in the afternoon.

• Semiconductor Sector: Dropped -5.35% with a net institutional outflow of ¥23 billion, the highest among all sectors.

• ETFs: The Semiconductor Equipment ETF plunged 7.60%, leading all ETF declines, while chip-related ETFs collectively fell more than 5%.

Leading Decliners: Storage, Equipment, and OSAT Get Wiped Out

Memory chips were the epicenter of the sell-off:

• Demingli was locked at its daily limit-down from the opening bell for two consecutive trading days (following a surge of over 900% from September 2025 to the end of June 2026).

• GigaDevice hit limit-down, while Montage Technology plummeted -16.44% (despite being the global leader in memory interface chips with a 36.8% market share).

• Huatian Technology was locked at limit-down for two straight sessions.

Semiconductor equipment and materials weakened in tandem:

• Shenghui Integrated locked at limit-down for two straight days.

• Jiangfeng Electronics dropped over 15%, while Shen Gong Co. and Guokewei fell more than 10%.

• The Semiconductor Equipment ETF slid 7.60%, and the STAR Semiconductor ETF lost 7.22%.

Computing hardware plays (CPO, advanced packaging) were heavily battered: Zhongji Innolight fell over 2%, and the communication equipment sector saw a massive net outflow of ¥10.364 billion.

The Trigger: A Triple Whammy of Bearish Catalysts

1. Overseas Spillover: SK Hynix plunged 15% on July 13, triggering liquidations in leveraged products. With South Korea’s KOSPI falling 25% over three weeks, the A-share memory sector came under severe pressure from overseas sentiment.

2. US Section 337 Investigation: The US International Trade Commission decided on July 15 to launch a Section 337 investigation into DRAM equipment and downstream products, covering core patents like TSV. This directly hit the memory and compute-hardware supply chains.

3. Buffett's AI Warning: In a CNBC interview on July 15, Warren Buffett bluntly stated that massive capital investment in AI is a key concern for tech giants, cautioning against speculative frenzy. This turned market sentiment sharply bearish.

Note: On top of these factors, news of a South Korean prosecutorial probe into Montage Technology (on suspicions of price-collusion with Renesas and Rambus over semiconductor components) further intensified the selling pressure.

Local Bright Spots Amid the Downturn

Despite the tech rout, several segments showed resilience:

• On-device AI concept stocks bucked the trend: Zhidu Co. locked in a second consecutive limit-up; Green Precision, Fuzhou Electronics, and Furong Technology all hit limit-up.

• Cloud computing showed isolated strength: Yunsai Zhi Lian and Unisplendour both hit limit-up.

• Printed Circuit Boards (PCBs) flashed pockets of activity: Yihao New Materials surged to its 20% daily limit-up.

• AI applications benefited from multiple catalysts: Apple Intelligence receiving approval for a China release, and rumors of DeepSeek preparing an IPO provided a psychological boost.

The rotation of capital out of AI hardware and into AI applications represents a classic "high-to-low" defensive switch.

Institutional View: Halftime Break, Not the End of the Cycle

• Dongxing Securities: The tech bull market has merely entered a halftime break. There is no systemic bubble in semiconductor chips, equipment, or CPO within the AI supply chain; the medium-to-long term trend remains supported by real industry demand and earnings delivery.

• Bosera Funds: In the short term, the market is navigating a phase of overcrowding digestion and shifting valuations ahead of semi-annual reports. While the Section 337 investigation is temporarily suppressing risk appetite, the long-term expansion of AI computing demand remains intact.

• Huatai Securities: Memory and computing power offer greater elasticity, though equipment orders tend to lag. The main market theme may shift from memory and design to upstream equipment, which is expected to find relative performance support.