Changpeng Wan
Market Rollercoaster: Early Gains Evaporate in Final Hours
The Chinese stock market experienced dramatic swings on July 23, 2025, with early bullish momentum collapsing in afternoon trading. The Shanghai Composite Index climbed above the psychologically significant 3600-mark during midday trading before losing all gains to close at near-flat levels (+0.01%). Meanwhile, the Shenzhen Component dropped 0.37%, and the ChiNext Index essentially flatlined (-0.01%). Failure to hold the 3600 level signals weakening institutional conviction despite substantial trading volumes hitting ¥1.86 trillion—slightly below the previous session’s activity.
Key distress signals emerged across boards:
- 4000+ stocks closed in negative territory despite initial apparent strength
- Market breadth deteriorated throughout afternoon trading
- Nearly 50% of early gainers surrendered their intraday advances amid volatility
Sector Fragmentation Reveals Divergent Sentiment
Green Energy Leadership Divide Deepens
Super Hydropower stocks exemplified contrasting investor attitudes toward renewable energy plays. While China Power Construction surged to limit-up alongside select peers, sector-wide momentum fractured dramatically:
- Early rallies dissolved with significant afternoon drops
- Fractured commitment revealed fundamental vulnerability
The sector’s unpredictable intraday reversal signals caution despite government renewable energy commitments.
Emerging Opportunities Amid Chaos
Cosmetics stocks—including standout performer Runben Shares—significantly outperformed major indices:
- Beauty sector climbed steadily throughout trading
- High-margin personal care stocks attracting defensive positioning
Financial bellwethers buttressed indexes:
- Insurance providers maintained steady gains
- Security brokers delivered consistent returns
Strategic Weaknesses Exposed
Defense contractors led major declines:
- Great Wall Military Industrial dropped over 5%
- Broader navy/aerospace weakness highlighted transitional rotation
Struggling sectors faced mounting pressures:
- Hainan free-trade plays extended losing streaks
- Infrastructure specialists faced UHV transmission/cosmetic setbacks
Technical Breakdown: Anatomy of a Retreat
The Symbolic Battle at 3600
The Shanghai Composite’s repeated failures at the 3600 benchmark spotlight accumulation challenges:
- Psychological barrier intensifies profit-taking tendencies
- Thin trade settlement suggests limited institutional commitment
Historical chart technicals reveal:
- 3600 represented 2023 trading range ceiling
- Failure to hold creates overhead resistance confirmation
Trading Psychology Implications
Recurring intraday volatility exposes troubling signs:
- Tightening credit conditions limit upside penetration
- Retail participation cools despite headline volume figures
The Shanghai Composite’s 3600-point resistance now stands as critical psychological benchmark requiring fundamental catalysts rather than speculative fervor.
Strategic Portfolio Adjustments Recommended
Targeted sector rotation proves critical:
- Prioritize defensive healthcare/consumer non-cyclicals
- Diversify financial exposure via brokerage/insurance hybrids
Avoid crowded trades:
- Tactically reduce commodity-linked positions
- Monitor oversold infrastructure opportunities
Forward Outlook: Regulatory Signals Matter Most
Market trajectory hinges on dual catalysts:
- Monetary policy guidance from PBOC Governor Pan Gongsheng (潘功胜)
- Implementation timelines for pending renewable subsidies
The Shanghai Composite’s 3600-point resistance breakdown requires reconciliation through price consolidation or government-backed institutional support.
Actionable Investor Guidance
Tactical moves for volatile conditions:
- Reallocate profits from volatile green energy positions
- Scale into steady consumer staples/DJI constituents
Immediate portfolio priorities:
- Review exposure to speculative sectors like crypto-related equities
- Verify cash reserves for strategic bargain acquisitions
- Prepare protective hedging positions ahead of earnings turbulence
The Shanghai Composite’s 3600-point resistance became temporary battleground where institutional hesitation ultimately prevailed against speculative optimism. Patient positioning trumps reactive trading until clearer directional conviction emerges through either earnings revelations or regulatory signaling. Monitor PBOC liquidity measures for potential market resuscitation below resistance thresholds and recalibrate exposure toward defensive outperformers as sector rotations intensify.
