A-Share Market Rebounds Sharply in Afternoon: STAR 50 Soars Historically as SMIC's Market Cap Briefly Surpasses Kweichow Moutai

China's A-share market delivered a highly dramatic 'V-shaped reversal' on Thursday (9th), transforming investor sentiment from morning gloom to afternoon euphoria—dubbed by traders as moving 'directly from ICU to KTV.' Driven by strong performance in tech-heavy stocks, all three major indices rebounded, with the STAR 50 index soaring 8.41% in a single day, shocking the market with a historically rare surge.

In this tech-led rally, Semiconductor Manufacturing International Corporation (SMIC; 00981-HK) emerged as the undisputed market focal point. Its share price surged over 13% in the afternoon, setting a new all-time high, with its market capitalization briefly climbing to 1.48 trillion RMB. Most notably, SMIC's market cap, calculated using its A-share price, briefly surpassed that of traditional consumer giant Kweichow Moutai (600519-CN) during intraday trading.

This was more than just a single stock's rally—it was widely interpreted as a 'signal of the times,' indicating a structural shift in capital from traditional consumer leaders to high-end manufacturing champions. The entire semiconductor supply chain exploded in value, with multiple stocks such as Zhaoyi Innovation and JCET Group hitting their daily trading limits, reflecting strong investor appetite for 'hard tech' sectors.

By market close, the Shanghai Composite Index rose 1.65% to close above 4,036 points, the Shenzhen Component Index gained 3.07%, and the ChiNext Index surged 4.49%. Total market turnover reached between 2.91 trillion and 2.93 trillion RMB, a significant increase of approximately 350 billion RMB from the previous trading day, signaling the entry of large-scale incremental capital.

Key drivers behind this explosive rally include:

AI demand translating into earnings: AI computing demand has shifted from 'storytelling' to 'delivering results,' with domestic chipmakers possessing production capacity benefiting first.

Policy and liquidity support: The PBOC maintained its accommodative stance, while weaker-than-expected U.S. employment data reduced rate hike expectations, opening room for growth sectors.

Major IPO catalysts: ChangXin Memory Technologies' official launch of its STAR Market IPO, along with SK Hynix's U.S. listing, boosted confidence in the semiconductor sector.

Global investment bank Goldman Sachs recently issued a strong endorsement, explicitly expressing optimism toward China's AI value chain. Goldman stated that Chinese AI companies are significantly undervalued relative to their market potential, leaving ample room for valuation expansion. Moreover, China holds unique competitive advantages in infrastructure, power, and semiconductors within the global AI supply chain, and the current upward trend exhibits structural characteristics.

While tech stocks shone, market divergence reached extremes. Energy metals and traditional consumer sectors remained weak, with lithium mining stocks falling across the board. Rongda Shares and others experienced two consecutive trading limit-downs. The lithium battery sector was pressured by increased lithium carbonate supply and inventory overhang, leading to valuation compression.

Looking ahead, institutions advise investors not to panic excessively and to focus on structural opportunities. Bi Mengshan of GeShang Fund noted that overall market sentiment remains cautious, with strong观望 (wait-and-see) behavior and clear evidence of capital rotating from high-valuation to low-valuation sectors. The market has entered a phase of volatile bottoming—neither a broad-based one-way rally nor an extreme crash is likely. The current environment of sector rotation favors a 'barbell strategy,' balancing exposure between high-growth sectors and undervalued, earnings-recovery candidates.

'Now is the time to increase positions in stocks with strong mid-year earnings expectations on dips, and Q3 remains a window for broadening bullish momentum,' said Liu Yan, Trading Director at Honghan Investment. He added that extreme low volume is a signal that the market is finding its bottom.

Jinxin Fund believes that in the short term, declining risk appetite, rising demand for capital rebalancing, and uncertainty in foreign capital flows are collectively suppressing market performance, leading to amplified volatility. With short-term price movements difficult to predict, investors should avoid chasing rallies or panic selling. In such a volatile environment, a barbell strategy—allocating to both high-growth, high-elasticity sectors and low-valuation, earnings-recovery sectors—is recommended to achieve a balanced risk-return profile.