China’s main equity gauges suffered a sharp reversal on Monday, with the Shanghai Composite, Shenzhen Component and ChiNext all falling more than 2% and the STAR Market’s SciTech 50 index plunging over 3%. Turnover across the two exchanges contracted to CNY 2.58 trillion, about CNY 250.8 billion lower than the previous session, as selling intensified; more than 4,600 stocks fell and 123 names ended the day at their daily limit‑down.
The intraday action was uneven: traditional defensive and infrastructure‑linked pockets outperformed while cyclical and high‑growth segments were punished. White‑spirit producers — a perennial retail favourite — staged renewed rallies, with several stocks posting consecutive gains, and power‑grid equipment manufacturers posted multiple limit‑ups. By contrast, base metals, oil and gas, chemicals, coal and semiconductor‑related shares were among the worst hit, with major miners and storage‑chip suppliers such as Gigadevice and Capio Cloud (兆易创新, 开普云) falling to limit‑down levels.
The breadth and intensity of the selloff point to a marketwide de‑risking rather than a targeted sector rotation. The sharp underperformance of the SciTech 50, paired with declines across energy and materials, suggests a convergence of domestic and external pressures: weaker commodity prices, renewed risk aversion in overseas markets and profit taking after January gains that left benchmarks nearer technical resistance. The drop in trading volume also signals that buyers are reluctant to step in, amplifying downward pressure when sellers accelerate.
External markets added to the headwinds. Commodity and resource indexes in Europe logged steep daily falls, and notable weakness in regional markets — including a Korean circuit‑breaker episode — fed through to sentiment. For China this translates into direct pain for resource and technology exporters, and second‑order effects for domestic supply chains tied to metals and semiconductors.
For policymakers and institutional investors the immediate question is whether authorities will act to stabilise the market before the Lunar New Year lull. Chinese regulators have in the past used moral suasion, adjustments to margin rules, liquidity injections or guidance to large state‑linked funds to arrest sharp falls, particularly when selling threatens household wealth and broader confidence in the financial system. Any intervention, however, must balance short‑term market support with longer‑term concerns about market discipline and the pricing of systemic risks.
Looking ahead, investors will watch for a number of near‑term signals: any official comment from the People’s Bank of China or the China Securities Regulatory Commission, incoming economic data that could justify policy easing, and whether buying rotations into defensive consumer names and infrastructure play out into sustainable flows. Absent clear policy reassurance or fresh buying interest, the market remains vulnerable to further downside, particularly in cyclical and semiconductors sectors where earnings and inventory dynamics already point to softness.