Core Summary
In July, the A-share market experienced a stark contrast: technology stocks, which had seen rapid gains earlier on, tumbled collectively due to excessive institutional concentration; in contrast, long-neglected consumer and dividend-oriented assets saw a rebound because their shares were relatively undistributed and offered high returns. Institutions generally believe that the market style will fluctuate in the short term, but technology will remain the main trend in the medium to long term. The consumer sector's rebound is more of a temporary adjustment, and a complete shift in market focus will depend on improvements in the consumer fundamentals and policy signals.
1. Technology Stocks “Cool Down”: Excessive Concentration Leads to Panic Selling
Just how severely did technology stocks perform in July? The Sci-Tech 50 index fell by nearly 26% in a single month, with sectors such as optical modules and memory chips contracting by more than 40% from their June highs. Funds that had doubled in value in the first half of the year (e.g., Founder Fubang Core Advantage A) lost 46% in July alone.
The main reason for this sharp decline is excessive institutional holdings. The second-quarter reports show that actively managed funds held a significant portion of their portfolios in the electronics industry (43.4%) and the communications sector (16.9%). Together with media and technology, the entire TMT sector accounted for over 60% of their investments, nearly double the level seen during the peak of the internet boom in 2015. It’s like everyone cramming into a bus; once someone shouts “Get off,” everyone follows, leading to a chain reaction of selling.
2. Consumer Sector Rebounds: Not Due to Fundamental Improvements, but Because of Reduced Supply
The liquor and food and beverage sectors rose by more than 10% in July, but this is not because people suddenly started liking liquor or snacking more. Instead, it’s because the supply of shares in these sectors has decreased significantly: By the end of the second quarter, funds held only 1.5% of their portfolios in the food and beverage sector (the lowest level since 2012), and almost no funds were invested in liquor stocks.
In simple terms, those who wanted to sell their consumer stocks had already done so; the remaining shares are held by investors who are reluctant to part with them. With just a little new capital entering the market, stock prices can rise—similar to an empty room that seems full when a few toys are added. Therefore, this rebound in the consumer sector is more about capital looking for new investment opportunities rather than a real improvement in the industry itself.
3. Dividend-Oriented Assets Become Highly Attractive: Better Returns than Government Bonds
In addition to the consumer sector, dividend-oriented assets (such as stocks from traditional industries with high dividends) are also attracting funds. Why? The yield on the CSI Dividend Index (the annual dividend payout as a percentage of stock price) is 4.14%, compared to just 1.71% for ten-year government bonds. Investing in dividend stocks yields more than twice the return of buying government bonds annually.
Institutions suggest that dividend-oriented assets offer good value for money and are likely to continue to perform well in the short term. However, it’s important to note that this is a defensive strategy, not a long-term investment focus.
4. Will the Market Style Completely Change?
Many people wonder if we should stop investing in technology and switch to consumer stocks. Institutions respond that there will be short-term fluctuations, but technology will remain the main trend in the medium to long term.
There are three key reasons for this: First, AI models are constantly being upgraded (e.g., GPT-4 and domestic large-scale models); second, overseas cloud service providers (such as Amazon and Microsoft) are still investing heavily in computing infrastructure; third, there are increasingly many applications for AI (e.g., office software and intelligent customer services). All these factors support the long-term potential of the technology sector.
The consumer sector’s rebound is temporary. For a complete shift in market focus, we need to see real improvements in the consumer economy or significant policy changes. Moreover, fund reallocations are like a large ship turning around; it takes time for funds to shift from technology to consumer stocks, and there may be back-and-forth movements in between—technology stocks might experience a rebound, causing funds to flow back into them, which could lead to a decline in the consumer sector.
5. New Developments in the AI Industry: Super Node Clusters Become Critical
Changes are also occurring within the technology sector. Previously, the focus was on who had the most powerful AI models; now, the focus has shifted to whether these models can generate profits. Another emerging trend is super node clusters, which involve connecting multiple high-performance chips to create supercomputing centers that overcome the limitations of individual chips and enable AI to handle more complex tasks (e.g., training large models). Institutions believe that the progress of these super node clusters is crucial for the development of domestic computing power.
Final Reminder
For individual investors, don’t chase short-term market trends. Technology stocks may rebound after a significant drop, but be prepared for volatility. You can allocate a small portion of your portfolio to consumer and dividend-oriented assets as a defensive strategy, but don’t expect them to experience the same sharp gains as technology stocks. The key is to understand your risk tolerance and avoid letting short-term price movements dictate your investment decisions.