Summary of Key Points
In the first half of 2026, the A-share market experienced a peculiar phenomenon known as a "bear market with bull-like characteristics": trading volumes soared (an average of 2.74 trillion yuan per day, 1.5 times that of 2025), yet most stocks declined (the median market performance was -15.4%), with only the semiconductor and optical module sector experiencing explosive growth. This contrast can be attributed to two factors that exceeded expectations: significant reductions in holdings by large institutions and the influence of the U.S. tech cycle. Investors have begun to adapt their strategies after suffering losses: some continue to hold onto low-valued consumer stocks without chasing higher prices, while others simply copy the moves of the U.S. market. The potential future trends point towards innovative drugs and "physical AI" (such as autonomous driving and humanoid robots).
I. The Peculiar Bull Market: Plenty of Money, but Most People Didn't Profit
The A-share market in the first half of 2026 was a true paradox:
- High trading volumes: With an average daily turnover of 2.74 trillion yuan, which is nearly 60% higher than the entire year's volume in 2025, one would expect a widespread increase in stock prices based on past trends. However, the opposite occurred.
- Most stocks fell: Out of the 5,526 listed companies, the median decline was -15.4%, indicating that more than half of the stocks lost more than 15% in value. Even the traditionally strong securities sector declined by 7.8%, let alone consumer and dividend stocks, which performed even worse than during a bear market.
- Only the semiconductor and optical module sector thrived: All other sectors stagnated or declined, with no signs of rotation or change in market trends. As a result, despite the high trading volumes, most investors felt disappointed and lost money.
II. Why Did This Happen? Two Major Factors Were at Work
The contrast in the market was mainly due to two unexpected factors:
- Large-scale reductions in institutional holdings: A typical example is the Huatai-PineBridge CSI 300 ETF, which had a maximum of 100 billion shares in 2024 but dropped to less than 20 billion shares by June 2026, representing a reduction of about 1 trillion yuan. With such a significant withdrawal of funds, the market lost its momentum, and without the support of major institutions, other sectors struggled.
- The influence of the U.S. tech cycle: The U.S. semiconductor sector saw a sharp rise (the Philadelphia Semiconductor Index increased by 101%), especially in memory chips. As Sun Ge mentioned, the demand for AI computing power could double in 3-6 months, but chip production capacity expansion takes 2-3 years, leading to a significant price increase for memory chips. The A-share market followed this trend, with all funds flowing into the semiconductor and optical module sector, causing other sectors to suffer, including the dividend index, which fell by 12% in June.
III. Investors' Adaptation: From Reflection to Copying Market Movements
Investors who experienced losses have started to adjust their strategies:
- Holding onto low-valued consumer stocks: Those who invested in consumer and new energy sectors during 2020-2021 have learned their lesson. Even if semiconductors are performing exceptionally well, they avoid chasing higher prices. Their rationale is simple: companies like Moutai (with a P/E ratio of 18) and Fenjiu (with a P/E ratio of 12) have very low valuations, and someone will eventually buy them. At worst, their losses can be limited.
- Directly copying the U.S. market: The A-share market lacks its own independent momentum. Investors no longer debate company performance; instead, they simply follow the trends of the U.S. market. For example, if U.S. semiconductors are rising, they buy A-share semiconductor stocks; if U.S. innovative drugs reach new highs, they focus on A-share innovative drug companies. Complex fundamental analysis is deemed less useful compared to monitoring indicators like the Philadelphia Semiconductor Index or Tesla's stock price.
IV. Future Trends: Innovative Drugs and "Physical AI" May Be the Next Drivers
Where are the opportunities for the second half of the year? The answer lies in observing the trends in the U.S. market:
- Innovative drugs: The U.S. innovative drug index has reached new highs, while the A-share innovative drug index is still 50% below its 2020 peak. Technology-driven sectors within the pharmaceutical industry could become the next hot topic, potentially resonating with the U.S. market.
- Physical AI: The story of virtual AI (such as AI infrastructure and storage) has reached a stalemate due to a lack of clear business models. Sun Ge predicts that the next three years will be dominated by "physical AI" (autonomous driving and humanoid robots). To identify these trends, watch Tesla's stock price: if it breaks through previous resistance levels, it indicates market interest in physical AI, and investors can invest in related sectors; otherwise, they should continue to focus on virtual AI.
In summary, the A-share market in the first half of 2026 was a "bull market for a few." To make profits in the future, investors should either wait for sectors with low valuations to rotate or follow the technological trends of the U.S. market—after all, "we will profit wherever the winners are."