Changpeng Wan
Morning Trading Session Overview
Chinese markets opened higher on August 12, 2025, with the ChiNext Index leading gains at +0.91% by midday. Trading volume surged to 1.19 trillion yuan across Shanghai and Shenzhen exchanges – a significant 59 billion yuan increase from the previous session. Despite benchmark advances, market breadth remained negative with over 3,300 stocks declining amid rotational sector movements.
Index Performance Breakdown
The Shanghai Composite rose 0.53% while the Shenzhen Component gained 0.34%, reflecting cautious optimism among large-caps. This divergence between index performance and individual stock declines signals concentrated institutional activity in specific sectors.
Sector Rotation Patterns Emerge
Leading Gainers
Today’s standout performers included:
– Brain-computer interface technology firms (e.g., Mailangde +10%)
– Port logistics operators
– Xinjiang regional stocks (Xinjiang Communications Construction Group with third consecutive limit-up)
– Liquid cooling server providers
Notable Decliners
Several sectors faced substantial pressure:
– Lithium mining companies
– Defense stocks (Jieqiang Equipment -5%)
– Rare earth materials producers
– Solar energy manufacturers
AI Hardware Stocks Surge: Drivers and Implications
The AI hardware stocks surge dominated morning trading, with Cambricon soaring over 15% and Shenghong Technology reaching historic highs. This marks the fourth consecutive week of outperformance for semiconductor and server manufacturers catering to artificial intelligence infrastructure demands.
Catalysts Behind the Rally
Three key factors fuel the AI hardware stocks surge:
1. Accelerated domestic AI adoption following China’s National AI Development Plan 2025
2. Global chip shortage easing as TSMC expands mature node capacity
3. Breakthrough orders for next-gen neural processing units
Market analysts at CICC (China International Capital Corporation Limited) note: “The AI hardware stocks surge reflects structural shifts toward China’s technological self-reliance priorities.”
Regional Strengths and Emerging Opportunities
Xinjiang Economic Zone Momentum
Xinjiang-based enterprises extended their winning streak, benefiting from:
– Belt and Road infrastructure projects
– Preferential tax policies for western development
– Cross-border energy partnerships
Brain-Computer Interface Breakthroughs
Neural technology firms gained amid regulatory approval of non-invasive medical devices. The sector’s 12% year-to-date outperformance suggests growing investor confidence in China’s biomedical innovation pipeline.
Market Technicals and Investor Sentiment
Despite the ChiNext’s advance, declining stocks outnumbered gainers 3:1 – signaling potential exhaustion in the current rally. The Shanghai Stock Exchange’s VIX equivalent rose 1.2%, indicating growing hedging activity among institutional traders.
Volume Analysis and Liquidity Shifts
The 5.2% volume increase concentrated in AI and tech sectors suggests:
– Rotation from defensive positions
– Short-term speculative flows
– Foreign capital inflows through Stock Connect programs
Afternoon Trading Strategy Considerations
Investors should monitor these critical levels and catalysts:
Key Technical Levels
– ChiNext resistance at 2,450 points
– Shanghai Composite support at 3,150
– Semiconductor sector RSI approaching overbought territory
Potential Market Movers
– PBOC liquidity operations announcement expected at 2:30 PM
– US chip export restriction updates
– Afternoon session institutional rebalancing
The continued AI hardware stocks surge presents both opportunities and valuation risks. Historical data shows similar sector-specific rallies typically experience 5-8% pullbacks within three trading sessions.
Strategic Positioning for Volatility
Market participants should consider:
1. Profit-taking in extended AI hardware positions
2. Hedging through CSI 500 index futures
3. Scouting undervalued industrial and consumer cyclical stocks
As China Securities Regulatory Commission Chair Yi Huiman emphasized in last week’s policy address: “Healthy markets require balanced sector development and prudent risk management.”
Monitor volume patterns in the final hour as institutional flows often dictate closing prices. Consider trimming positions in companies showing divergence between price and fundamentals. For long-term investors, the AI hardware stocks surge represents a structural growth theme, but entry timing remains critical after recent parabolic moves.
