Last week, due to the delisting crisis, small and micro-cap stocks plummeted during the first four trading days. After the market closed on Thursday, the China Securities Regulatory Commission (CSRC) stepped in to soothe the market, leading to a rebound in small and micro-cap stocks and a catch-up decline in large-cap stocks on Friday. Over the holiday, multiple bearish factors fermented, and today resource stocks, dividend stocks, and Mao Index-weighted stocks all plummeted, causing the market to open low and dive, with the Shanghai Composite Index nearly launching another 3000-point defense battle.

This is the current situation in the A-share market, where under the condition of stock quantity game, it's a cutthroat competition, and sectors rotate rapidly. When a logic or a sector is being hyped by the entire market, it's basically reaching its peak, because there are no additional funds, and all the active funds have been invested, so where are the new retail investors? For example, the dividends and going global that were hyped the most before, after accelerating their rise in the past two weeks, have started to adjust.

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Let's take a closer look at today's major events:

Cyclical stocks plummeted

Today, the entire cyclical sector of A-shares has undergone a significant adjustment, whether it's coal and oil that are attributed to the dividend line, non-ferrous metals that are attributed to resource stocks, or shipping. Essentially, this is a correction of the market's overly optimistic expectations for the global economy in the early stage, and there has also been a relaxation in geopolitical games. This year, the cyclical sector has led in gains, and now with the logic being damaged, it naturally undergoes a significant adjustment, with the non-ferrous metals sector already adjusting for several weeks.

In recent weeks, the economic data for May released by the United States has mostly been below market expectations, indicating a weakening U.S. economy. Although the non-farm employment data released on Friday greatly exceeded expectations, the unemployment rate rose to 4%, which is mainly due to different statistical methods. The non-farm employment data exceeded expectations due to an increase in part-time jobs by illegal immigrants, while the number of full-time employees actually declined significantly. In addition, indicators such as U.S. residents' savings and credit card default rates all suggest that U.S. consumer spending may weaken. Under the current slightly weak U.S. economy, if the Federal Reserve delays interest rate cuts, the risk of recession may increase.

As for Europe, the Eurozone's manufacturing PMI and service PMI released last week in May were slightly below market expectations. Although the European Central Bank lowered interest rates last week, the tone was hawkish, and coupled with the constraints of the Federal Reserve, it is difficult to continue lowering interest rates.

Last Friday, we warned everyone that the People's Bank of China stopping the increase in gold holdings is a major bearish factor. The important logic for institutions to be bullish on gold was the continuous increase in central bank holdings. However, in reality, the People's Bank of China significantly reduced the amount of gold it increased in April, and in May, it stopped increasing holdings altogether. There must be price considerations in this. Gold is the anchor for the significant rise in non-ferrous metal prices this year. The expectation of recession, coupled with a sharp drop in gold prices, led to a sharp drop in the futures prices of silver, copper, and other commodities on Friday.

Today, the non-ferrous metals sector of A-shares opened significantly lower, with gold, copper, aluminum, and other sectors plummeting, and the oil, coal, and other cyclical sectors also plummeting.Let's talk about shipping. In the past two months, COSCO Shipping has seen a strong bull market, with three main underlying logics: a global synchronized recovery in the first quarter, with a demand for restocking; due to South American tariff impacts, some companies have stocked up in advance; the Israel-Palestine conflict has led to a crisis in the Red Sea, driving up freight rates.

Regarding the Israel-Palestine conflict, there was a major news over the weekend. According to Xinhua News Agency, the United Nations Security Council passed Resolution 2735 on the 10th, calling for an "immediate, comprehensive, and complete" ceasefire in the Gaza Strip to end the Israel-Palestine conflict that has been ongoing for 8 months as soon as possible. The resolution was supported by 14 of the 15 members of the Security Council, with Russia abstaining. The resolution urges Israel and the Palestinian Islamic Resistance Movement (Hamas) to fully implement the resolution "without delay and without conditions."

Affected by this, today's container shipping index (Europe line) plunged by more than 5%, and the shipping sector in the A-share market also plummeted today, with the big bull COSCO Shipping hitting the daily limit down.

During the holiday, the "Science and Technology Evaluation" ("Ke Te Gu") research report released by the Founder Securities Cao Liulong team was quite popular. The report stated that the government work report at the two sessions listed "new quality productive forces" as the top task among the ten major tasks for this year. Following "China Special Evaluation" ("Zhong Te Gu"), "Science and Technology Evaluation" is also considered a "safe" asset, just like "China Special Evaluation." The report also provided a definition for "Science and Technology Evaluation," pointing out that it focuses on the transformation and upgrading of new quality productive forces, including advantageous manufacturing, China-made, and advanced intelligent manufacturing. The unfriendly external environment has led to an undervaluation of China's new quality productive forces, and China's technology manufacturing industry, including high-end manufacturing and advanced intelligent manufacturing, is in urgent need of "Science and Technology Evaluation."

In the past, sectors that fermented over the weekend would open high and close low on Monday, but today's technology sectors such as semiconductors, military, and consumer electronics opened and went high, with the semiconductor sector even triggering a wave of stock price limits.

We believe that the market may be trying to switch styles. In the first six months of this year, resource stocks, dividend stocks, and overseas lines were mainly leading the gains, while technology stocks performed poorly, especially in the electronics sector. In fact, their performance has improved, but due to market style suppression, their performance was not good. Now that the previously strong stocks have started to adjust, there will naturally be funds trying to invest in low-position technology stocks, not to mention the expectations of the third phase of the large fund and the third plenary session in July.

Guizhou Moutai's stock price plummeted.According to research, during the holiday period, the price of Moutai's loose bottles has fallen, with the current batch price for loose Mao ranging from 2430 to 2460 yuan, and the box Mao from 2710 to 2730 yuan. The group purchase price (in the Shanghai area) has not fluctuated much. We believe the main reason is the weak demand during the off-season (the Dragon Boat Festival's liquor performance was mediocre, and travel data show that consumer power has not fully recovered), and on the margin, the pressure from scalpers has had a certain impact on prices and market sentiment.

Today, Guizhou Moutai fell by more than 3%, Luzhou Laojiao fell by more than 4%, and Wuliangye fell by nearly 3%. The liquor sector has continued to weaken recently, setting a new low in the recent period.

Finally, let's take a brief look at the market. As of the close, the Shanghai Composite Index fell by 0.76%, the ChiNext Index rose by 0.35%, the Hong Kong Hang Seng Index fell by 0.94%, and the Hang Seng Technology Index fell by 0.41%. The turnover of the two markets shrank to 0.7 trillion, with more than 3,000 companies rising, and the number of companies hitting the limit down narrowed to 33. The collective selling of small and micro-cap stocks may have come to an end.

In the short term, this week China will announce the social financing data and CPI data for May, and the United States will announce the CPI data for May on Wednesday evening. On Thursday morning, the Federal Reserve's interest rate decision will be implemented, making it another super heavy week. The market is expected to be cautious. In the medium and long term, we believe that there is no big risk of a sharp drop in A-shares, and it is unlikely to break through the 3000 point mark. After the previous strong stocks make up for the decline, the rebound is about to start.