The market delivered a day of widespread gains, with the tech-focused STAR 50 index staging a deep 'V' recovery and traditional players like brokerage stocks rallying strongly. Let's examine the reasons behind the move.
On June 22, the market trended higher throughout the session, with the ChiNext Index hitting a record high. At the close, the Shanghai Composite was up 1.78%, the Shenzhen Component Index rose 2.13%, and the ChiNext Index gained 2.52%. The day's turnover reached 3.76 trillion yuan, ranking as the second-highest in A-share history.
A total of 2,916 stocks advanced, with 151 hitting their upper price limit, while 2,468 stocks declined.
The large financial sector saw a collective surge, with stocks like CITIC Securities, GF Securities, and New China Insurance among those that reached the daily limit-up.
The non-ferrous metals sector maintained its strength, with over ten stocks including Jinduicheng Molybdenum Co., Ltd., Zinc Industry Co., Ltd., and Yuguang Gold and Lead Co., Ltd. hitting the limit-up.
Lab-grown diamond concept stocks were strong all day, with companies like Power Diamond, SF Diamond, and Yellow River Whirlwind rising by the limit.
Catalysts for the Rally
Why did brokerage stocks, often seen as a bellwether for bull markets, surge today? Analysis suggests that buying brokerages is akin to investing in the technology sector.
Firstly, mandatory co-investment rules for brokerages in STAR Market IPOs, and for certain categories on the ChiNext (including unprofitable companies), have generated significant paper profits from these tech-focused investments.
Secondly, the current bull run is being led by AI and technology stocks. Major brokerages serve as key intermediaries for the domestic and overseas listings of these tech firms, acting as facilitators for technological advancement.
Thirdly, in the context of a global tech bull market, A-share brokerages have underperformed, whereas their counterparts in the US, Japan, and South Korea have outpaced their indices, with some Korean brokers surging sixfold amid a doubling of the index.
Fourthly, investing in brokerages now is roughly equivalent to buying a discounted version of tech stocks. Once capital constraints ease, brokerages are expected to follow any significant tech rally. Conversely, if tech stocks fall, brokerages may decline less due to being oversold (trading near the 10th historical percentile). For those experiencing FOMO (fear of missing out) on tech, brokerages present a compelling alternative.