Changpeng Wan
Midday Momentum Ignites Chinese Stocks
The Shanghai and Shenzhen indices accelerated gains on July 22, 2025, during afternoon trading, as state-owned enterprises (SOEs) and financial stocks staged explosive rallies. This surge saw China Communications Construction (中国交建) hit its 10% upside limit within minutes, while brokerage firm Xiangcai Securities (湘财股份) approached涨停 amid broad-based momentum across infrastructure and commodities. The coordinated movements followed critical developments: Coking coal futures spiked 7.98%, polysilicon futures jumped 7.99%, and Beijing signaled pension fund expansion – creating perfect conditions for midday capital rotation into undervalued SOEs.
The State-Owned Enterprises Rally Explained
Infrastructure Stocks Lead Breakout
– China Communications Construction’s (中国交建) vertical 10% surge
– China Energy Engineering (中国能建) and China Power Construction (中国电建) hitting涨停
– China Railway Construction-backed manufacturers surged with IRICO Group (中铁装配) +14%
Coal Sector Parallel Gains
Commodity futures propelled mining shares:
– Luanhuan Energy (潞安环能)涨停
– Jinneng Holding Shanxi Coal Mining (晋控煤业) and Huaibei Mining (淮北矿业) gained over 3%
– China Shenhua Energy (中国神华) rose 5% on thermal coal momentum
Brokerage Stocks: Financial Bellwethers Stir
Securities firms exhibited abnormal liquidity injections at 14:01 HKT:
– ZenithBanc (银之杰) jumped 5%
– CSC Financial (中信建投) and East Money Information (东方财富) tracked momentum
– CICC China International Capital Corporation Limited (中金公司) mirrored gains
This aligns with Ministry of Human Resources’ pension reform signals indicating expanded institutional capital flows.
Supporting Sector Movements
Liquor Stocks Defy Market Norms
– Luzhou Laojiao (泸州老窖) and Shanxi Xinghuacun Fen Wine Factory (山西汾酒) up 4%
– Wuliangye Yibin (五粮液) and Jing Brand Co (今世缘) saw unusual afternoon volume
Policy Catalysts Emerge
Beijing’s dual announcements fueled sentiment:
1. Basic pension fund allocations expanding
2. Commodity volatility (polysilicon 49,105 yuan/ton peak)
Broker/dealer positions in state-owned firms became acute focal points.
Trading Psychology and Market Structure
Algorithmic reactions amplified human tendencies:
– Herd investment in“Zhong Zi Tou”(中字头) SOEs
– Commodity futures triggering sector rotations
– Midday liquidity exploiting thin afternoon order books
Historical parallels show similar SOE surges preceding stimulus packages.
Strategic Takeaways for Investors
Successful navigation requires:
– Monitoring pension reform timelines
– Tracking Shanxi coking coal and Xinjiang polysilicon benchmarks
– Differentiating SOEs with foreign pipelines like CRRC vs domestically-focused players
Position early in infrastructure names pre-policy announcements.
Understanding Regulatory Implications
Expect tighter trading controls:
– CSRC may investigate broker coordination
– Commodity exchanges could widen daily limits
– SOE reforms may accelerate post-rally
Retail traders should reassess position concentration risks.
Broader Context and Forward Outlook
The coordinated surge reflects deepening state-owned enterprises influence across China’s financial markets. Near-term focus shifts to:
– August pension allocation details
– Poly/mono-crystalline silicon margins
– Infrastructure bond issuances
Investors should capitalize on volatility through brokerage warrants and SOE blue-chips while maintaining commodity hedges.
