The market jumped initially and then pulled back in the afternoon! The Shenzhen Component Index and the ChiNext Index both closed lower, while banking stocks remained active throughout the day [Stock Market Review].

The market jumped initially and then pulled back throughout the day, with the three major indices showing mixed changes. The Shanghai Composite Index once rose by over 1%, approaching 3,500 points. The total trading volume on the Shanghai and Shenzhen stock exchanges reached 1.43 trillion yuan, an increase of 118.8 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 4,100 stocks across the market fell. From a sector perspective, bank stocks strengthened again, with multiple stocks including SPD Bank setting new all-time highs. Stablecoin concept stocks rebounded amid volatility, with Beijing Kingsoft Cloud Technology and others hitting the daily limit up. Power stocks remained active, with Huayin Power and others hitting the daily limit up. On the downside, solid-state battery concept stocks adjusted, with Shenzhen Sinyu Technology falling by over 10%. By the close, the Shanghai Composite Index rose by 0.32%, the Shenzhen Component Index fell by 0.25%, and the ChiNext Index fell by 0.36%.

Sector Perspective

In the sector, bank stocks strengthened again, with nearly 10 stocks, including SPD Bank, Bank of Jiangsu, Industrial and Commercial Bank of China, and China CITIC Bank, setting new all-time highs.

In a recent research report, Donghai Securities stated that as the risk-free interest rate continues to decline, the advantage of dividend yields remains attractive to medium and long-term funds such as insurance, social security funds, index funds, and dividend-focused low-volatility public funds. Looking ahead, stable profit and dividend levels are expected to continue to provide explicit support for the banking sector in a low-interest-rate environment.

Additionally, from a fundamental perspective, the continuous strengthening of macro policies may generate expectations for marginal improvements, especially as the recovery in consumption and investment will alleviate pain points such as rising personal risks in the banking sector and the intensification of deposit termization, potentially providing underlying support for the market. The current valuation of the banking sector is close to the central level of the past decade. It is recommended to adopt a "core + satellite" allocation strategy for subsequent investments, balancing the layout: construct a core portfolio with state-owned major banks with high dividend yields, while pairing it with leading small and medium-sized banks with cyclical elasticity as a satellite portfolio.

Power stocks also performed actively, with Shaoneng Group, Xinzhonggang, Shennan Electric A, and Huayin Power hitting the daily limit up. Langfang Development, Xichang Electric Power, Hangzhou Thermal Power, and other stocks led in gains.

In terms of news, Huayin Power announced last night that it expects a net profit attributable to shareholders of 180 million to 220 million yuan for the first half of the year, an increase of 175 million to 215 million yuan compared to the same period last year. Based on this calculation, the company's net profit for the first half of the year increased by 3,604%-4,426% YoY. Additionally, as power enters the peak summer demand season, State Grid Corporation of China stated that as of June 30, all 140 key projects for peak summer demand in its operating area have been completed and put into operation this year, which will strongly ensure the safe operation of the power grid and reliable power supply this summer.

China Securities believes that factors such as tight regional power supply and demand, a favorable regional competitive landscape, and fewer potential new entrants support electricity prices. Related power generation companies may better enjoy an increase in gross profit margins during the decline in coal prices.

Individual Stocks

From an individual stock perspective, short-term sentiment was rather low, with over 4,100 stocks closing in the red across the market. The number of limit-up and consecutive board stocks decreased compared to yesterday. The market height once again dropped to four boards; among the 14 consecutive board stocks from yesterday, only Liugang Co., Ltd., Sailing Medical, and Yama Tun advanced. Chengbang Co., Ltd. saw its limit-up broken at the end of the session, while Xuedilong and Jixin Technology both hit the lower limit. The current market style leans more towards institutional funds' trend-following clustering, with the enthusiasm for emotional speculation around consecutive board heights still relatively low.

The stablecoin concept also showed some recovery today, with Jingbei Fang hitting the limit-up, and Changliang Technology and Tianyang Technology rising by over 10%. Other popular stocks such as Sifang Jingchuang, Zhongke Jincai, and Xiaoshangpin City followed suit. However, overall, the recovery strength of this theme was relatively weak. Apart from a small number of limit-ups, most stocks experienced a jump initially and then pulled back in the afternoon due to the influence of the index. Combined with the solid-state battery concept, which first rebounded in the afternoon yesterday but saw another divergence and consolidation today, it is evident that the short-term market remains characterized by rotation, making it difficult to sustain continuous trends. In response, engaging in short-term arbitrage through buying on dips may offer a relatively higher success rate.

Market Outlook

Today, the market experienced significant intraday volatility. In the afternoon, driven by large financials and semiconductor chips, the indices surged rapidly but soon pulled back due to insufficient follow-up buying, resulting in mixed performance among the three major indices, with the Shenzhen Component Index and the ChiNext Index closing slightly down. Since the start of this round of rebound, the Shanghai Composite has approached the 3,500-point mark, accumulating a substantial amount of profit-taking positions during this period. Therefore, it is reasonable for some funds to choose to cash out after the index's surge. It is too early to conclude that the afternoon's pullback signals a short-term peak. Next week's market feedback will be more critical. If the three major indices can maintain their upward oscillation along the 5-day moving average and reclaim today's intraday high, it can be considered a regular turnover in the uptrend. Conversely, if the adjustment continues with increased volume, the probability of a return to consolidation will rise, necessitating greater attention to risk control.

Additionally, the recent differentiation between large and small caps has become increasingly apparent. On one hand, the index steadily rises, led by banks and other heavyweights. On the other hand, the rapid rotation of various hot topics keeps short-term sentiment weak. Against this backdrop, there are two key points to watch in the future: 1) After the recent acceleration of fund clustering in areas like banks, computing power hardware, and innovative drugs, there is a need to be wary of potential corrections due to short-term overheating; 2) For the market to regain strength, besides maintaining an upward structure, it must also develop a core theme with strong continuity to initiate a new cycle of profitability.

Market Highlights

1. Domestic mobile phone shipments reached 23.716 million units in May, down 21.8% YoY

Data released by the China Academy of Information and Communications Technology (CAICT) showed that in May 2025, domestic mobile phone shipments reached 23.716 million units, down 21.8% YoY. Among them, 5G mobile phone shipments reached 21.190 million units, down 17.0% YoY, accounting for 89.3% of total mobile phone shipments during the same period. In May 2025, domestic brand mobile phone shipments reached 19.177 million units, down 24.2% YoY, accounting for 80.9% of total mobile phone shipments during the same period. Domestic brands launched 36 new mobile phone models, down 25.0% YoY, accounting for 92.3% of the total number of new mobile phone models launched during the same period. In May 2025, smartphone shipments reached 22.526 million units, down 21.2% YoY, accounting for 95.0% of total mobile phone shipments during the same period. Smartphone manufacturers launched 27 new models, down 30.8% YoY, accounting for 69.2% of the total number of new mobile phone models launched during the same period.

2. Ministry of Commerce: Anti-dumping duties to be imposed on imported brandy originating from the EU for a period of five years starting from July 5

In accordance with Article 38 of the Anti-dumping Regulations, the Ministry of Commerce (MOFCOM) submitted a proposal to the Customs Tariff Commission of the State Council to impose anti-dumping duties. Based on MOFCOM's proposal, the Customs Tariff Commission of the State Council decided to impose anti-dumping duties on imported brandy originating from the EU starting from July 5, 2025. Starting from July 5, 2025, import operators shall pay corresponding anti-dumping duties to the Customs of the People's Republic of China when importing brandy originating from the EU. Anti-dumping duties shall be levied ad valorem based on the customs value of the imported goods determined by the customs, calculated using the following formula: Anti-dumping duty amount = customs value of the imported goods determined by the customs × anti-dumping duty rate. Anti-dumping duties will not be retroactively imposed on brandy originating from the EU imported between October 11, 2024, and July 4, 2025 (inclusive). The customs shall refund the deposits or release the guarantees provided by the relevant import operators to the Customs of the People's Republic of China in accordance with the provisions, based on MOFCOM's Announcement No. 42 of 2024 and Announcement No. 50 of 2024. Anti-dumping duties will not be retroactively imposed on brandy originating from the EU imported before the implementation of provisional anti-dumping measures. The implementation period for imposing anti-dumping duties and price undertakings on imported brandy originating from the EU is five years starting from July 5, 2025.