Multiple securities firms provide urgent "psychological massages" over the weekend: offering emotional value and practical strategies.

On July 17th, the market collectively adjusted, with the Shanghai Composite Index falling by 3.05% below 3800 points, the ChiNext Index falling by 7.15%, the Kechuang 50 Index falling by over 7%, and over 5000 stocks in the entire market declining, with 200 stocks hitting their daily limit. The trading volume surged to 2.67 trillion yuan. This was not an isolated day. If we look back, the Shanghai Composite Index has retraced by over 7% from its peak in late June, while the ChiNext Index and Kechuang 50 Index have retraced by 19% and 16% respectively. From the "structural differentiation" in the first half of the year where the technology bull market stood out, to the current overall market decline and the simultaneous breakdown of safe-haven assets, investors' confidence is undergoing severe erosion. It was found by journalists from Financial Association that many institutions including China Securities Co., Ltd., Huatai, Shenwan Hongyuan Group, Ping An Securities, East Money Information, and Guosen have all issued strategy interpretations and open letters to investors overnight, both dissecting the core causes of this round of adjustment and providing psychological support to the market. From the perspective of securities firms, the core judgment being communicated is that this round of decline is due to external liquidity shocks and the need to clear out overcrowded race tracks. From soothing clients to diagnosing positions, from risk investigation in margin trading to updating allocation recommendations, securities firms are responding with a combination of measures to this rapid decline. Under the consensus that "emotions fall with the decline, while logic remains unchanged", securities firms are giving investors the highly consistent core advice: stay calm, don't panic. The decline is driven by four pressures converging, rather than a deterioration in fundamentals. To reassure clients, it is important to explain why the market is falling. Various securities firms generally attribute it to the convergence of four pressures. The direct trigger came from South Korea. East Money Information Securities pointed out that on July 16th, the Bank of Korea raised interest rates by 25 basis points to 2.75%, the first rate hike in three and a half years. There are a large number of leveraged ETFs linked to individual stocks such as Samsung and SK Hynix in the Korean market, and there is a mechanism for "forced selling after a decline" in place. Recently, over 1.2 million leveraged retail accounts in South Korea triggered margin calls. This sudden deleveraging quickly spread to the entire Asia-Pacific light alloy technology sector. Leveraged funds in the A-share market are also withdrawing consistently. As of July 16th, the margin balance in the two markets was around 2.84 trillion yuan, down by about 160 billion yuan from the peak in early July, decreasing for 11 consecutive trading days. However, according to Financial Association's on-site investigations, there has been an increase in margin calls and proactive deleveraging, but there has not been a significant number of forced liquidations triggered. The deeper reason lies in self-clearing after crowded trading. East Money Information Securities' statistics show that in the first half of the year, the electronic industry rose by as much as 86%, the communication industry by 74%, with funds highly concentrated in the AI sector. When the crowding reaches its peak, any slight movement can trigger concentrated profit-taking. China Securities Co., Ltd. also pointed out that AI financing deleveraging has triggered financial stampedes, with leveraged funds passively reducing positions leading to a negative stampede effect. Moreover, an important realization point is approaching - with the disclosure of quarterly earnings, some funds are choosing to secure profits. Huatai believes that as the window for interim reports approaches, funds are shifting from "anticipated trading" to "earnings verification", with short-term stock price performance in the technology sector needing support from order growth and profit improvement data. The industry logic remains unchanged, with AI development accelerating rather than slowing down. Facing panic, various securities firms have a highly consistent core judgment: emotions are falling, while the logic remains unchanged. Ping An Securities pointed out that the core reason for this round of adjustment is to kill valuation and trading crowding, rather than logic. Just this week, Taiwan Semiconductor Manufacturing Company delivered an almost flawless quarterly report: a 77.4% year-on-year increase in net profit for the second quarter and an upward revision of the full-year revenue growth rate for 2026 to "slightly above 40%". What does this mean? Global AI development is accelerating, not slowing down. The industry logic remains the same, with investors only concerned about the "second derivative" - whether the growth rate is marginally slowing down rather than changing direction. East Money Information Securities verified the sustainability of the AI trend from two perspectives: quarterly performance forecasts show that the performance of the AI industry chain exceeds market expectations, with profits of large-scale industrial enterprises nationwide growing by 18.8% year-on-year from January to May, and profits in high-tech manufacturing seeing a significant increase. The industry trend has moved from "concept speculation" to the "performance verification" stage. China Securities Co., Ltd. Wealth Management emphasized that the industry trend of expanding AI computing power demand remains unchanged, with long-term growth support for science and technology industries still solid. Huatai also pointed out that the long-term growth logic in some technology sectors remains intact. Historical experience: every panic low point has become the starting point of a new market cycle. Many securities firms soothed investor sentiment by citing historical data. Ping An Securities' research shows that in the past 10 years, the annual maximum retracement of the Shanghai Composite Index has remained within 10% in only 2017 and 2025. Even during the "structural market" in 2019 and 2020, the maximum retracement reached -15.35% and -14.62% respectively. Compared to this, the current market volatility is actually the most moderate in history. What's more important is that historically, deep adjustments often follow a three-stage process of "sharp decline shrinking consolidation rapid rebound" - looking back at every panic low point after a single-day drop of over 3% in the past two years, it has always become the starting point of a new market cycle. China Securities Co., Ltd. believes that no market cycle will exhibit straight upward movement, and oscillation, style shifts, and chip cleansing are all normal market phenomena. Guosen also stated directly: "Adjustment is not a bad thing, during every adjustment, there are some stocks with good performance and promising prospects that are unfairly affected." Securities firms' advice: maintain composure, manage positions, focus on main lines with performance. In terms of operational recommendations, various securities firms have given consistent strategic frameworks. Maintain investment composure, not speculative mindset. China Securities Co., Ltd. detailed the difference between speculation and investment in a letter to investors: speculators treat the stock market as a casino, and will ultimately face the consequences of gambling; investors buy stocks as a part of ownership in a company and do not be anxious about short-term fluctuations. "The short-term market is a 'voting machine', while the long-term market is a 'weighing machine', eventually returning to value." Control positions, keep adequate cash reserves. Shenwan Hongyuan Group recommended in their weekly strategy that the market will continue to undergo short-term volatile adjustments, and the process of rebalancing styles will continue. In terms of specific allocation, it is advisable to avoid excessive pursuit of flexibility, focus on mainline targets in the technology sector that have "performance, production capacity, and technology", and also appropriately allocate to low-liquidity sectors. Lastly, it is about controlling positions and keeping adequate cash reserves. Focus on performance validation, avoid pure speculation. Huatai pointed out that it is important to focus on the order situation, product price changes, and earnings expectations of sectors such as semiconductors, artificial intelligence, and high-end manufacturing, rather than purely on short-term stock price fluctuations. Shenwan Hongyuan Group also emphasized the need to avoid pure speculative plays. Short-term volatility does not change the long-term positive trend. Shenwan Hongyuan Group clearly stated, "Be cautious but not pessimistic, the era of big development in equity assets is far from over." China Securities Co., Ltd. Wealth Management emphasized that the core support logic of the domestic market fundamentals and policies has not changed, the trend of economic recovery has not been reversed, and the support factors for the long-term positive trend in A-shares remain solid. Huatai also believes that the sharp market decline is more of a release of short-term risk concentration and repricing of funds. Following the adjustment in trading volume, if the market gradually stabilizes, it could mean that funds are completing a phase of portfolio adjustment. This article is reprinted from "Finance Association", edited by Jiang Yuanhua.