The three major indices jumped initially and then pulled back, closing slightly lower. More than 10 banking stocks, including Industrial and Commercial Bank of China, hit new highs [Stock Market Review]

The market jumped initially and then pulled back throughout the day, with the ChiNext Index leading the decline. The total trading volume on the Shanghai and Shenzhen stock exchanges was 1.58 trillion yuan, a decrease of 19.6 billion yuan compared to the previous trading day. On the futures market, market hot topics were rather scattered, with more stocks declining than rising. Over 3,600 stocks across the market fell. From a sector perspective, military stocks surged at one point, with over 10 stocks, including Wanlima, hitting the daily limit up. Bank stocks defied the market trend and strengthened, with 11 bank stocks, including Industrial and Commercial Bank of China, hitting new all-time highs. Stablecoin and blockchain concept stocks remained active, with stocks like Beijing Kingsoft Cloud Technology hitting the daily limit up. On the downside, innovative drug concept stocks adjusted, with Rongchang Biotech falling over 10%. By the close, the Shanghai Composite Index fell 0.22%, the Shenzhen Component Index fell 0.48%, and the ChiNext Index fell 0.66%.

Sector Perspective

In the sector, military stocks strengthened again, with stocks like China Haixun, Great Wall Military Industry, Construction Industry, and Beifang Navigation hitting the daily limit up. Stocks like Beifang Changlong, Yaxing Anchor Chain, Aerospace Changfeng, and Fenghuo Electronics led the gains.

China Galaxy Securities believes that after about three years of consolidation and adjustment, bearish factors in mainstream military sectors such as military aircraft, engines, missiles/long-range rockets, etc., have gradually been exhausted, and the industry's prosperity is on the verge of a reversal. China Securities stated in a recent research report that the military sector presents three growth curves: domestic demand, military trade demand, and pan-military demand. 1) In terms of domestic demand, low-cost precision-guided munitions and unmanned systems are the main new drivers, and there is still a definite space for scaling up in the construction of informationized and intelligent operational foundations. 2) As global geopolitical turmoil intensifies, military trade is expected to usher in a "Deepseek" moment. 3) For pan-military demand, focus on the four major directions of large aircraft, low-altitude economy, commercial aerospace, and deep-sea technology. Subsequent focus should be on identifying structural opportunities around the above three major directions.

Bank stocks strengthened again, with over 10 stocks, including Industrial and Commercial Bank of China, China Construction Bank, Bank of China, Industrial Bank, and Bank of Beijing, hitting new all-time highs.

CITIC Securities stated in a recent research report that the increase in the proportion of equity asset allocation by insurance funds and the high-quality development of public funds not only bring long-term incremental allocation effects to banks but also solidify the lower limit of sector valuations in the short term. Investment in bank stocks can be centered around the following two major directions: 1) High-value-for-money stocks, selecting banks with expected earnings growth in 2025 higher than comparable peers, superior dividend returns, and valuation space. 2) Medium and long-term configuration-type stocks, selecting banks with unique business models, high ROE, low volatility, and large market expectation gaps.

Stablecoin and blockchain concept stocks remained active, with stocks like Century Safety, Jilin University Zhengyuan Information Technology, Beijing Kingsoft Cloud Technology, Chutianlong, and GEL Software hitting the daily limit up. Stocks like Feitian Trust, Xiongdi Technology, and Hengbao also performed actively.

On the news front, the Hong Kong Special Administrative Region Government today released the "Hong Kong Digital Asset Development Policy Declaration 2.0." Financial Secretary Paul Chan stated that the "Policy Declaration 2.0" demonstrates the SAR government's vision for digital asset development and showcases practical applications of tokenization through implementation, promoting diversification of application scenarios.

However, it should be noted that the stablecoin concept has seen intensified divergence after repeated speculation. Following an afternoon pulse-like rally, short-term profit-taking pressure increased significantly, with mid-to-lower-ranked stocks experiencing varying degrees of pullback. The theme is expected to continue diverging and consolidating tomorrow, with focus remaining on leading core targets.

Stock-wise,

Looking at individual stocks, short-term sentiment cooled today, with both advancing and limit-up stocks declining compared to yesterday, while the consecutive board success rate pulled back to 30%. Negative feedback from high-position stocks increased, as previous market leader Nuode Shares (7 boards yesterday) faced a last-minute sell-off and board break, while another popular high-position stock, Xingye Shares, plunged over 6% in the afternoon. In the internet finance sector, Huijin Shares and Zhisheng Information also ranked among the top decliners. On the other hand, oil and gas stocks saw capital inflows in the afternoon, with Zhunyou Shares hitting the limit-up, while Shandong Molong and Tongyuan Petroleum both rose over 7%. The consumer sector also witnessed partial recovery, with Yinzhuo Shares gaining 3 boards in 4 days, and Nanjing Business Travel, Qujiang Tourism among others reaching limit-ups. Overall, after two days of heavy-volume gains, market chasing willingness weakened, with more funds opting for rotation into lower-position stocks. Hence, beyond focusing on leading core themes, newly emerging low-position catch-up segments also warrant attention.

Market outlook,

The market jumped initially and then pulled back today, with all three major indices closing lower, while trading volume slightly contracted but remained above 150 million yuan. Index-wise, after two consecutive days of heavy-volume gains, short-term consolidation was expected, with the 5-day moving average serving as near-term support. As long as this level holds, the oscillating uptrend may continue. Futures side, today's hot topics revolved around internet finance, defense, solid-state batteries, and digital currency. However, after recent significant gains, these themes' overall positions are no longer low, and short-term profit-taking pressure has accumulated, suggesting potential increased intraday volatility ahead. Strategy-wise, focus should shift to dip-buying opportunities. Additionally, as mid-year earnings forecasts are gradually disclosed, relatively low-position outperforming sectors may also become key focuses.

Market News Highlights

1. Ministry of Commerce Provides Update on Rare Earth Export Approvals to the EU: A Certain Number of Compliant Applications Have Been Approved

The Ministry of Commerce held a regular press conference on the afternoon of June 26th, where a reporter inquired about the approval status of rare earth exports to the EU. He Yadong, spokesperson for the Ministry of Commerce, stated: "China has always attached great importance to maintaining the stability and security of the global industrial and supply chains. We have been continuously accelerating the review of export license applications related to rare earths in accordance with laws and regulations. A certain number of compliant applications have been approved in accordance with the law, and we will continue to strengthen the approval process for compliant applications. China is willing to further enhance communication and dialogue with relevant countries on export controls in this regard and actively promote convenient and compliant trade."

2. Guidelines for the Application and Adjustment of the 2025 Basic Medical Insurance Catalog and Commercial Health Insurance Innovative Drug Catalog Released, with Commercial Health Insurance Innovative Drug Catalog Included for the First Time

The National Healthcare Security Administration recently issued the "Guidelines for the Application and Adjustment of the 2025 Basic Medical Insurance Catalog and Commercial Health Insurance Innovative Drug Catalog," marking the first inclusion of the commercial health insurance innovative drug catalog in the adjustment plan. This signifies that commercial health insurance will play a more important role in the multi-tiered medical security system, and this adjustment also represents an important step in market access for commercial health insurance innovative drugs.