A-Share Style Rotation: AI and Semiconductors Surge, ChiNext Up 4.2%, Big Banks Slump
Early trading saw a marked style rotation in A-shares, with the ChiNext Index up more than 4.2% and AI, semiconductor and component stocks leading gains. The four major banks fell more than 3%, while telecom equipment, components and semiconductors drew RMB 13.16 billion, RMB 8.28 billion and RMB 33.48 billion in net inflows, respectively. Active funds cut bank holdings 20.1% quarter-on-quarter in Q2 2026 following July's 15% bank rally. With US cloud vendors raising 2026 capex guidance, AI momentum has shifted toward fundamentals.
Early trading today saw a clear style rotation in the A-share market, with technology growth and high-dividend sectors moving in opposite directions. As of 11am, the ChiNext Index was up more than 4.2%, with AI computing power, semiconductor and component sectors broadly stronger. Banks, coal and other previously favored defensive assets declined, with the four major banks down more than 3% on average. Market data showed funds flowing mainly into technology.
As of 11:20am, sector fund-flow data showed main net inflows of RMB 13.16 billion in telecom equipment, up 4.3%; RMB 8.28 billion in components, up 5.35%; and RMB 33.48 billion in semiconductors, up 3.86%. Stocks in sub-sectors such as optical modules, CPO, high-end PCB and AI servers repeatedly hit their daily trading limits.
Overnight, US stocks advanced and Middle East tensions showed signs of easing, with US technology stocks broadly stronger. Recent earnings from North American cloud vendors showed several companies raising 2026 capital expenditure guidance, shifting the AI sector from concept-driven speculation to a fundamentals-driven phase.
In the second quarter of 2026, the total market value of active funds' bank holdings stood at RMB 25.812 billion, down 20.1% quarter-on-quarter. After the banking sector rose 15% in July, short-term trading crowding increased. In early-session inflow rankings, in addition to AI-related sectors, medical services, automation equipment, minor metals and batteries also featured prominently.
The banking sector's market value shrank by RMB 1.54 trillion in the first half. As of Aug 4, 19 banks still offered dividend yields above 5%, while the 10-year government bond yield stood at 1.74%.