Chinese stock markets staged a notable recovery as investors responded positively to robust export data that exceeded expectations. China's exports jumped 27% year-on-year to a record USD 412.4 billion in June, while imports increased 36% to a record USD 286.8 billion, showing that global demand remained strong. The country also posted its second-largest trade surplus ever at USD 125.6 billion, helped by solid demand for AI-related products and higher semiconductor prices. According to Business Standard, investors are now waiting for China's second-quarter GDP data on Wednesday, with growth expected to slow to 4.5% from 5% in the first quarter. Technology stocks led the gains, while energy shares also moved higher, reflecting renewed confidence in export-driven sectors.
The Chinese technology selloff gained momentum from global developments, with major international tech stocks experiencing significant declines. Samsung stock fell as much as 10% in Seoul despite reporting record profits, as investors locked in profits after shares had surged nearly 150% this year. According to Deutsche Bank analysts, "Results were 'only' 6% ahead of estimates, and it seems to have brought in a bout of profit taking." The global semiconductor sector faced pressure, with Micron (MU) sinking more than 4%, while Sandisk (SNDK) and Western Digital (WDC) also fell more than 7%. As reported by Trade Nation, "It seems that investors are concerned that semiconductor and other AI-adjacent stocks may struggle to maintain such high levels of sales and margins going forward."
Despite the severe decline in major indices, market breadth revealed extreme structural divergence within the Chinese equity market. As reported by BigGo Finance, over 3,700 stocks across the market still managed to advance, highlighting that the index decline was primarily driven by deep corrections in heavyweight semiconductor and select tech leaders, while a large number of small- and mid-cap stocks did not follow the selloff. The combined turnover on Shanghai and Shenzhen exchanges reached 3.39 trillion yuan (approximately $500.3 billion), representing a sharp increase of 474.8 billion yuan (approximately $70.1 billion) from the previous trading session, indicating intense tug-of-war between bulls and bears amid the deep correction. Certain sectors displayed strong resilience, with the pharmaceutical sector and commercial aerospace concept rallying strongly, standing out as rare bright spots in the day's trading. Aerospace concept stocks were the most eye-catching, with the majority advancing, and SSE-listed Aerospace Huanyu (688523.SH) and China Satellite (600118.SH) were among several core stocks that firmly hit their daily upper limit, igniting investment enthusiasm across the entire commercial aerospace industry chain.
Market experts are expressing caution about the current volatility, with Verdence chief investment officer Megan Horneman describing the environment as "highly inflationary and highly uncertain." As reported by Verdence, Horneman believes the market environment will remain volatile moving forward given that investors may be "a bit immune" to an "on-again, off-again" dynamic of the conflict. She also noted that equities at current levels may not be pricing in the possibility of at least one rate interest rate hike from the Federal Reserve in the second half of 2026. "This is spilling into an ongoing inflation problem for the remainder of this year," she said, adding that it's "not just the oil prices." While the ongoing investment in artificial intelligence may prove to be disinflationary in the long term, Horneman emphasized that "In the near term, all of this investment, strong [economic] growth, a consumer that keeps spending, this is inflationary."
