A-share midday report | Duolihao helps A-share counterattack! The Shanghai Composite Index and the Growth Enterprise Market Index both rose more than 1% in the first half of the day, and defensive sectors are heating up.

On July 20, the A-share market opened high and fluctuated in the morning, with the three major indexes collectively rebounding. By the noon close, the Shanghai Composite Index rose by 1.18%, the Shenzhen Component Index rose by 0.21%, and the ChiNext Index rose by 1.13%. Most stocks in the market rose more than fell, with nearly 3000 stocks rising, and the total turnover in the market reached 1.67 trillion yuan in the first half of the day, an increase of 68.1 billion yuan from the previous day, with net selling of 12.85 billion yuan by domestic main funds. In terms of the market, defensive sectors rebounded, power stocks fluctuated higher, with DaTang HuaYin Electric Power, Chongqing Fuling Electric Power Industrial, etc., hitting the daily limit; the coal sector fluctuated and rebounded, with Henan Dayou Energy, Zhengzhou Coal Industry & Electric Power, Liaoning Energy Industry hitting the daily limit, and China Coal Energy, Beijing Haohua Energy Resource, Yankuang Energy Group following suit; Baijiu stocks surged against the trend, with Anhui Gujing Distillery hitting the daily limit; the innovative pharmaceutical sector partially rebounded, with Zhejiang Hisun Pharmaceutical hitting the daily limit, and Yifang BioTech rising over 13%. In terms of declines, the mining hardware sector opened high and fell, PCBs, and copper foil concepts fluctuated and fell, with many stocks like Anhui Tongguan Copper Foil Group, Nanya New Material Technology hitting the daily limit; the optical module concept weakened, with Cig Shanghai, Yuanjie Semiconductor Technology hitting the daily limit or falling by more than 10%; the storage chip concept continued to be weak, with several stocks like Shenzhen Techwinsemi Technology, Beijing New Space Technology hitting the daily limit; the lithium battery industry chain continued to decline, with Tianqi Lithium Corporation hitting the daily limit; the industrial gas concept fluctuated lower, with Peric Special Gases, Guangzhou Sanfu New Materials Technology hitting the daily limit. In addition, the AI phone, fluorine chemical, and photovoltaic equipment sectors performed poorly. Market analysis believes that the strong performance of the indices is mainly related to the following factors: 1. The "national team" took the lead in stabilizing the market, with the stabilization mechanism continuously supporting A-shares. China Guoxin announced on the 19th that it has used over 50 billion yuan in stock repurchase funds and supporting funds to increase its holdings of central enterprise stocks, and on the same day, China Chentong also announced that it has completed nearly 10 billion yuan in increased holdings. 2. Rare pre-market announcements! Five central enterprises, China Shenhua Energy, CRRC Corporation, Aluminum Corporation Of China, NARI Technology, and China Coal Energy, have released a series of announcements through asset injections, shareholder increase, stock repurchases, dividends, etc., collectively signaling to the market. 3. The China Securities Regulatory Commission will hold a symposium on listed companies, securities companies, and fund institutions on July 20 to hear their suggestions and views on promoting the stable and healthy development of the capital market. 4. On the night of July 19, several A-share listed companies released share repurchase-related announcements, sparking market discussions. Many multi-billion-dollar private equity firms, such as Lingjun Investment, and Pingfang Investment, also announced share repurchases. 5. The "second brother" in the optical module, Eoptolink Technology Inc., announced that its net profit in the first half of the year is expected to increase by 78% to 103% year-on-year, benefiting from the continuous growth in investment in artificial intelligence-related computing power and product structure optimization. Looking ahead, CITIC SEC believes that the index market is in a consolidation phase in the middle of a medium-term market and is preparing for a new market trend, with the short-term liquidation phase coming to an end. Hot sectors: 1. Power stocks fluctuated higher, with DaTang HuaYin Electric Power, Chongqing Fuling Electric Power Industrial, hitting the daily limit. Comment: According to the news, the highest power load of Jiangsu Power Grid reached 157.59 million kilowatts, once again breaking historical records. This is the first time Jiangsu Power Grid's highest power load has exceeded 100 million kilowatts since 2016, reaching the "hundred million level" for the tenth consecutive year. 2. The coal sector fluctuated and rebounded, with Henan Dayou Energy, Zhengzhou Coal Industry & Electric Power, Liaoning Energy Industry hitting the daily limit, and China Coal Energy, Beijing Haohua Energy Resource, Yankuang Energy Group following suit. Comment: Data shows that as of July 17, the price of Qinhuangdao power coal rose to 821 yuan per ton, an increase of 29 yuan per ton month-on-month. This week, the coal index rose by 2.79%. In June, the country's raw coal production dropped by 9.7% year-on-year, the largest decline in nearly ten years. Production at major coal mines in Shanxi, Shaanxi, and Inner Mongolia also fell by 4.4% year-on-year. Southern power plants' daily consumption surged to 6.12 million tons/day, with usable inventory days dropping to 19.6 days, indicating the release of restocking demand. 3. The Baijiu sector fluctuated higher, with Anhui Gujing Distillery hitting the daily limit, and Kweichow Moutai, Jinhui Liquor, Gansu Huangtai Wine-Marketing Industry, Luzhou Laojiao following suit. Comment: According to the announcement by Kweichow Moutai, starting from 00:00 on July 18, 2026, the retail price of the 500ml Kweichow Moutai liquor (2026) on the Feitian platform will be adjusted from 1539 yuan/bottle to 1639 yuan/bottle, and the contract price will be adjusted from 1269 yuan/bottle to 1369 yuan/bottle. 4. The innovative pharmaceutical sector rebounded, with Zhejiang Hisun Pharmaceutical hitting the daily limit, and Yi Fang BioTech rising by over 13%, along with REMEGEN, Shanghai InnoStar Bio-tech, Wuhan Hiteck Biological Pharma, InnoCare Pharma, and WuXi AppTec. Comment: According to the latest data released by the National Medical Products Administration, there were a total of 81 cooperation agreements reached on innovative drugs from January to June this year, with a total transaction amount of around 110 billion US dollars, accounting for 80% of the total for the whole of 2025, reaching a new high. Institutional views: CITIC SEC: The index market is in a consolidation phase in the middle of a medium-term market and is preparing for a new market trend. CITIC SEC's research report points out that there are four current judgments. First, the index market is in a consolidation phase in the middle of a medium-term market (characterized by the correction of the technology sector) and is preparing for a new market trend (requiring new sectors with valuation improvement potential to lead), and the short-term liquidation phase is nearing its end. Second, the North American AI chain may be a haven within the technology sector in the short term, and around the guidance of North American CSP at the end of July, a wave of recovery may be ushered in, but to reach a new level, a new round of AI model/product capability upgrade and commercial realization space expansion is needed, with the key being to break the valuation framework of hardware companies and achieve a new round of system-level elevation of hardware and applications. Third, the domestic AI chain is highly dependent on catalytic and trend funds intensity, with the main catalytic factors having been gradually realized, while the trend funds intensity is unlikely to return quickly after experiencing a sharp retreat, the relatively healthy financing interest in the domestic market means there is currently no point of concentration for chip clearing, and the convergence of valuations between domestic and North American markets is a more likely direction. Fourth, the non-AI chain exhibits a pattern of alternating recoveries, starting from innovative drugs and non-banking sectors, transitioning to the industrial chains of non-ferrous metals, chemicals, and lithium batteries, with the trading being accompanied by policy expectations in the domestic demand chain. Huaan: Emotional sharp declines will not continue, confident in a recovery market trend Last week, the market exhibited a clear and irrational downward trend. When reviewing past similar situations, short-term oversold conditions have been clearly observed, and the probability of further large declines is low. With the continued confirmation of high prosperity in the technology sector and the landing of large IPOs, the market is expected to see a rebound. The main trend of the market still needs to focus on the midstream to upstream sections of the AI industry, and this structural trend is expected to continue until the end of the year. The investment strategy should focus on industries with strong cyclical performance and weak economic cycles, and the logic of capitalizing on current opportunities in the growth industry remains clear. The second phase of the earnings-driven market trend has not ended, and since the end of June, there has been a significant correction in the growth technology sector, providing more room for upward movement in the short term. Therefore, it is still advisable to closely focus on the trends in the AI industry and increase positions, where the power center and supporting hardware in the midstream to upstream sections are the most indispensable directions, with a sufficient length of the industry chain and investment absorption capacity, currently at a stage of large-scale institutional consolidation. Although there may be short-term overheating in some segments, with the broad and competitive race, there is the capability to "change horses while riding" and the mid-term uptrend remains unchanged, so investors should be willing to position themselves when trading cools down and turnover rates are low. Sinolink: The adjustment is nearing the end, and market structural adjustment has been completed, ushering in a structural rebound. The core contradiction in the current market may not be the shift in the main theme, but rather the final interpretation path of the AI hardware market trend. Sinolink believes there are three possible scenarios for the market in the future: First, concerns about the industrial chain are refuted, and a non-linear technological miracle occurs again, then this correction is simply deleveraging, and may even breakthrough the previous high; Second, concerns about the industrial chain are confirmed, leading to a long period of fundamental adjustment after deleveraging; Third, and the most likely scenario in our view, the total investment related to AI has not slowed down yet, there is insufficient indication of a reversal in fundamentals, the market's trading structure adjustment has been completed, ushering in a structural rebound. This article was originally published on Tencent Self-selected Stocks, GMTEight Editor: Wang Qiujia.