A-share Closing Review | Three Major Indices Closed Lower Collectively, Defense Industry Surged Against the Trend, Agricultural Sector Suffered Heavy Losses

On September 2, all three major indices in the A-share market closed lower, with weak fluctuations throughout the day, while the military industry sector rose against the trend. By the end of the trading session, the Shanghai Composite Index fell 0.97% to 3941.39 points, the Shenzhen Component Index dropped 1.88% to 13611.55 points, the ChiNext fell 2.39% to 3312.24 points, and the STAR 50 declined 1.82% to 1617.60 points. The BSE 50, however, rose 2.50% to 1106.57 points. The total trading volume of the Shanghai and Shenzhen exchanges was 1.791178 trillion yuan, down approximately 242.2 billion yuan from the previous trading day. In total, 1541 stocks rose while 3901 stocks fell, with only 55 stocks hitting the daily limit up and 9 stocks hitting the limit down, and the number of advancing stocks accounted for less than 30% of the total. On the market, sectors such as ground armaments, aerospace equipment, glass fibers, education, tourism and scenic spots, and large state-owned banks showed the most significant gains; while sectors including planting, coke, energy metals, fisheries, Shenzhen Agricultural Power Group processing, film and television chains, and minor metals experienced the most significant losses. Driving Factors On this day, all three major indices closed lower, with only the BSE 50 rising against the trend by 2.50%: the Shanghai Composite Index, Shenzhen Component Index, ChiNext, and STAR 50 fell by 0.97%, 1.88%, 2.39%, and 1.82%, respectively. More than 3900 stocks in the market declined, with the ratio of rising stocks being less than 30%. The trading volume of the two exchanges was 1.791178 trillion yuan, down approximately 242.2 billion yuan from the previous trading day. The BSE 50's rise against the trend celebrated the fifth anniversary of its establishment on September 2. The military industry sector saw a surge against the trend, with ground armaments II rising 6.48%, ranking first among the Shenwan secondary sectors. In terms of news, the escalation of geopolitical conflicts in the Middle East occurred on September 1, when the U.S. military launched a new round of strikes against Iran, which retaliated by claiming to have shot down a U.S. MQ-9 drone. Bank stocks experienced widespread strength, with Industrial and Commercial Bank of China and China Construction Bank Corporation reaching new historical highs in their adjusted prices. According to a recent research report from AVIC Securities, traditional military industrial stocks have been quiet for a long time, but with expectations for the "14th Five-Year Plan" increasing in the second half of the year and the centenary of the military approaching in 2027, main manufacturers and core supply chains are expected to see a new wave of inventory buildup and order releases. Popular Sectors 1. Military/ Ground Armaments: The military sector saw a surge against the trend and was the strongest theme for the day. Anhui Greatwall Military Industry, Jianshe Industry Group, and Inner Mongolia First Machinery Group (which experienced two consecutive limit ups) hit the daily limit, while North Long Dragon New Materials Tech rose over 13%. Far East Smarter Energy, Shenzhen Sunxing Light Alloys Materials, and HuNan Boyun New Materials also reached limit up. The catalyst was the escalation of geopolitical conflicts in the Middle East, highlighted by the U.S. military's strikes against Iran on September 1, with Iran claiming to have shot down a U.S. MQ-9 drone, increasing market attention toward sub-sectors such as drones, anti-drone technology, air defense and missile defense, and electronic countermeasures. 2. Power Grid Equipment: This sector experienced a slight overall decline, but individual stocks performed well against the trend, with Fujian Nanping Sun Cable and Jiangsu Shemar Electric hitting the limit up. The optical fiber concept saw an intraday surge, with Hangzhou Cable reaching its daily limit; the PCB concept was active, with Shenzhen WOTE Advanced Materials achieving four limit up days in the past five days. 3. Banking/ Large Financial Institutions: The large state-owned bank sector exhibited strength against the trend, with Industrial and Commercial Bank of China and China Construction Bank Corporation again reaching historical highs in their adjusted prices. Postal Savings Bank of China, Bank of Beijing, and BANKCOMM also saw significant gains, with the large state-owned bank II sector rising 0.57% on the day. Adjusting Sectors Sectors such as planting, coke, energy metals, fisheries, Shenzhen Agricultural Power Group processing, film and television chains, and minor metals experienced significant declines. Among them, planting fell 5.93%, coke dropped 3.71%, energy metals decreased 3.44%, fisheries fell 3.29%, Shenzhen Agricultural Power Group processing dropped 3.16%, film and television chains decreased 3.10%, and minor metals fell 3.07%. Stocks in the agriculture sector broadly declined, with Gansu Dunhuang Seed Group and SDIC Fengle Seed both hitting the limit down, while Hainan Shennong Seed Industry Technology, Jiangsu Chinagreen Biological Technology Group, and China Agriculture Development Seed Group saw significant drops. The previously strong agriculture sector underwent a notable pullback, with the market showing clear sector rotation.