2026 H1 Trend Summary: Structural Divergence Is Brutal—How Should We Respond Next?

Last week, there were four consecutive days of severe differentiation and decline in individual stocks, especially on Friday when stocks fell sharply along with the index. The number of declining stocks was close to 4,700, with nearly 1,000 stocks falling by more than 5%, and 44 stocks hitting the daily limit down. [Tao Gu Ba]
The current market is not just a structured market; there are also many zombie stocks with low trading volume. For example, in the Beijing Stock Exchange, stocks such as Huilong Piston, Leite Technology, Shichang Shares, Yongshun Bio, Fangda New Materials, Hongzhi Technology, Guanghuan Energy, Datang Pharmaceutical, and Aishelun have daily trading volumes of only 3-5 million yuan. Without volume, their stock prices continue to hit new historical lows.
Many stocks have not just halved from their highs but have dropped by about 70%. For example, Seres, etc. The bull market is only a tech bull market. For many old-economy sectors and stocks, the market is extremely brutal, with a severity comparable to the losses experienced during the bear market from 2022 to 2024.
Currently, there are about 100 stocks with daily trading volumes below 10 million yuan, over 600 with daily volumes below 30 million, over 1,300 below 50 million, and over 2,000 below 80 million, accounting for almost half of the market.
The main reason for the low daily trading volume of individual stocks is the siphon effect of tech stocks, causing many stocks to continue falling sharply.
In the 114 trading days of this year, the Shanghai Composite Index has only risen by 1.47% overall. Within the year, there are 98 stocks with declines of over 50%, 347 with declines over 40%, 1,168 with declines over 30%, 2,337 with declines over 20%, and 3,256 with declines over 10%, far exceeding the median decline.
Stocks with large declines this year are not limited to micro-cap stocks; some stocks with market capitalizations above 9.24M yuan have also suffered severely. Changshan Pharmaceutical fell over 63%, Zhejiang Dongri fell over 56%, Seres fell 50.23%, and stocks like Zhongchong Shares, Hainan Airport, Putian Technology, Hongyuan Green Energy, Haixia Shares, Keboda, Jianghuai Automobile, Dongpeng Beverage, and Chunzhong Technology are all nearly halved.
The stock decline has also caused significant losses for big players in private placements. This month, retail investor Zhang Jianping reduced his holdings in Jianghuai Automobile by 9.235 million shares over 9 trading days, cashing out about 290 million yuan. Since the private placement in February, he has lost 450 million yuan out of 1 billion yuan.
As of now, the dynamic P/E ratios of Shenwan secondary industries include 130x for electronic chemicals, 129x for glass and fiberglass, 100x for electronic components, 97.4x for communications, and 102x for non-metallic materials, many of which are at the 100th percentile. Semiconductors are at 141x, optical electronics at 65.9x, while lagging sectors like traditional Chinese medicine at 17.9x, precious metals at 18.1x, insurance at 6.35x, marine equipment at 28x, hotel and catering at 21x, gaming at 18x, securities at 15.3x, and industrial metals at 14x. These sectors are at historical percentiles below 10%.
In terms of sector gains and losses, building materials, which involve electronic fiberglass, copper-clad laminate substrates, PPE resins, and upstream materials for AI server high-frequency PCBs, have seen demand surges and price spikes, with the sector up 148%. The communications sector, involving optical modules, CPO, high-speed optical chips, and optical fibers, has risen over 75%. The electronics sector, involving PCB substrates, memory chips, optical electronics, consumer electronics, AIPC, and the entire computing hardware chain, has risen over 60%. Other relatively well-performing sectors include machinery and equipment up 21.6%, non-ferrous metals up 19.3%, power equipment, basic chemicals, coal, and national defense and military. The worst performers include transportation, down nearly 30%, commercial retail, agriculture, forestry, animal husbandry and fishery, beauty and personal care, food and beverage, non-bank finance, real estate, home appliances, and banking.
Hot concepts include electronic chemicals, PCB concept, components, memory chips, CPO, advanced packaging, optical fibers, semiconductor equipment, lithography machines, lab-grown diamonds, copper foil, glass substrates, photoresists, high-speed copper connections, silicon carbide, indium phosphide, etc. Sectors not in these hot spots are likely to suffer significant losses.
From a technical perspective, recently, both the daily and weekly lines of the Shanghai Composite Index have broken the support of the Bollinger Band middle line. The 60-minute and 30-minute lines are running along the lower band. The MACD green bars have not shortened, indicating the possibility of continued adjustment. The daily moving averages have crossed downward through multiple lines, breaking all moving averages except the annual line. The weekly line has broken the 30-week line with a bearish candle on increased volume. From a technical standpoint, the market trend is relatively weak and dangerous. The market may oscillate mainly in the 3800-4200 point range.
Corresponding trading should be cautious, waiting for market repair. Do not go all-in aggressively, and do not chase high-level targets. In fact, a better trading method this year is to focus on tech stocks and do wave trading following tech trends: reduce positions when they rise, and add when they pull back, repeating this operation.
The focus should remain on those hot directions, but before the semi-annual report period, volatility may be high, with valuations fluctuating. It is also unwise to go into old-economy stocks with extremely low daily trading volume, as they have no capital participation, large declines, and are full of trapped positions. Better to look for opportunities in tech switch sub-directions like Changxin, semiconductor equipment, and glass substrates.
Important weekend news:
The "national subsidy" continues! The third batch of 62.5 billion yuan in funds has been allocated. Since the beginning of this year, the National Development and Reform Commission, together with the Ministry of Finance and other departments, has been disbursing ultra-long-term special treasury bond funds in quarterly batches to support the replacement of old consumer goods with new ones, making the work pace smoother, fund use more balanced and orderly, and policy effects continuing to manifest.
Media reports say Apple is lobbying the Trump administration for permission to buy memory chips from Changxin Memory, which is on the Pentagon's blacklist. Apple announced on Thursday that it will raise prices for iPads and MacBooks, saying it can no longer shield customers from the soaring costs of memory and storage chips driven by AI industry data center construction.
From January to May, the profit situation of major industries: Electronic special material manufacturing profit growth 665.4%, optoelectronic device manufacturing 53.8%, semiconductor discrete device manufacturing 40.6%, electronic circuit manufacturing 19.7%. Non-ferrous metal smelting and rolling processing industry profit increased 117.1% year-on-year, computer, communication and other electronic equipment manufacturing increased 103.9%, chemical raw materials and chemical products manufacturing increased 71.6%, coal mining and washing increased 33.5%, oil and gas extraction increased 17.2%, textile industry increased 11.7%, general equipment manufacturing decreased 0.2%, electric power and heat production and supply decreased 4.1%, special equipment manufacturing decreased 5.5%, agricultural and sideline food processing decreased 13.3%, electrical machinery and equipment manufacturing decreased 13.7%, automobile manufacturing decreased 19.8%, ferrous metal smelting and rolling processing decreased 37.4%, non-metallic mineral products decreased 48.9%, petroleum, coal and other fuel processing turned from loss to profit.
The three major US stock indexes closed lower on June 26. At the close, the Dow Jones Industrial Average fell 44.51 points from the previous trading day to 51,876.11 points, a decline of 0.09%; the S&P 500 fell 3.47 points to 7,354.02 points, a decline of 0.05%; the Nasdaq Composite fell 60.98 points to 25,297.62 points, a decline of 0.24%. For the week, the Dow accumulated a gain of 0.60%, the Nasdaq accumulated a decline of 4.60%, and the S&P 500 accumulated a decline of 1.95%.
On June 1, the first batch of 12 fund companies and 195 funds officially adopted adjusted performance benchmarks. From the market operation in the past month, the first batch of benchmark adjustments have been smoothly implemented, and the reform effects have initially emerged. On the evening of June 26, nearly a hundred public funds collectively announced that their multiple funds would adjust performance benchmarks and revise fund contracts and other legal documents, involving a total of thousands of fund products. This marks the start of the second batch of public fund benchmark adjustments, indicating that the public fund benchmark reform has moved from "pilot exploration" to "full rollout."
South Korea's birth rate continues to rise. The latest data shows that the number of newborns in April increased by 18% year-on-year, the highest level since 2019. The main reasons for the rebound include an increase in marriage registrations. Some commentators say that the sustained bull market in stocks has brought a wealth effect, releasing demand for marriage and childbirth. When people's wallets are full and they have confidence, those with needs naturally dare to consume and have children. China's total newborns plummeted from 9.54 million in 2024 to 7.92 million last year, the lowest birth rate since records began in 1949. During the same period, deaths increased from 10.93 million in 2024 to 11.31 million. The annual population death rate was 8.04‰, and the natural population growth rate was -2.41‰.
Ningquan Asset and Banxia Investment warn that the global AI stock market has formed a "super bubble," with the risk of bursting approaching. Ningquan points out that China's AI bubble is concentrated in infrastructure, where related companies lack long-term moats and valuations are severely detached from fundamentals. Banxia believes that US AI company Anthropic faces revenue pressure, rising token costs, and increased competition, posing downside risks. Both funds stated they will no longer participate in the current AI frenzy and urged investors to be cautious about chasing highs.
DeepSeek released the V4 version of its AI model update, introducing the speculative decoding framework DSpark, with inference speed increased by up to 85%. This update focuses on engineering optimization rather than model architecture iteration, and simultaneously open-sources the full-stack tool DeepSpec to lower deployment barriers. DSpark improves efficiency by using a lightweight draft model to pre-generate content, which is then verified by the main model, reducing computational waste. In real user traffic tests, user generation speed increased by 60% to 85% under the same throughput. Chinese AI models, with high cost-effectiveness, are driving up global usage rates, now accounting for over 60%, challenging the dominance of US companies.
On the 28th, according to the latest news, the US government is about to allow Anthropic to restore access to its latest large model, Fable 5. Previously, on June 12, the US government, citing national security, issued an emergency export control directive to AI company Anthropic, requiring it to immediately prohibit foreign entities from accessing its latest large models Fable 5 and Mythos 5. The news once sparked widespread concern about AI and computing concept stocks.
Gold has fallen for four consecutive weeks. Over the past month, gold prices have fallen more than 10%. The CME Group's FedWatch tool shows that traders currently expect about a 59% probability of a Fed rate hike in September, down from 64% earlier. Since gold is a non-yielding asset, cooling rate hike expectations are usually favorable for gold, but market sentiment remains cautious. The narrative around gold prices has changed. Previously, when US-Iran conflicts escalated, gold rose and oil fell, showing a clear negative correlation. But now, the price trends of these two assets may converge, both falling. CPM Group analysts predict in a report that the downward trend in gold prices will continue in the coming weeks. Analysts say the decline is because investors are selling. Recent pressure on gold prices has come from several factors, including strong global stock markets, bond market volatility, the resumption of crude oil transport through the Strait of Hormuz driving oil prices down, recent hawkish comments from Fed Chairman Warsh, and economic data consistently exceeding expectations.
Important breakthrough in superconducting magnets for nuclear fusion reactors: On the 27th, the largest superconducting component of the national major scientific and technological infrastructure "Comprehensive Research Facility for Fusion Reactor Key Systems" – the toroidal field magnet – completed its final preparation process and passed expert acceptance. At the same time, the high-temperature superconducting central solenoid coil magnet also completed full-condition parameter testing, with core performance reaching international leading levels.