A-shares suffered their largest monthly drop of the year in July; the Sci-Tech
Innovation 50 index fell nearly 26% on the month with a peak intra-month
drawdown exceeding 30%. Several public fund-of-funds (FOFs) heavily weighted to
tech and related thematic allocations recorded notable losses. Hong Kong
hard-tech names outperformed after Changxin Technology listed on the STAR Market
and a batch of hard-tech firms accelerated approvals. Market views diverge: one
camp says current tech growth is tracking offshore moves and inflows
concentrated in cyclical pockets such as memory/storage, which lack
sustainability; another argues that once China’s equity funding structure
stabilizes, tech growth still has runway. Jinxin Fund manager Kong Xuebing warns
the A-share funding profile has become markedly short-term: margin lending,
leveraged quant strategies and high-frequency trading have likely amplified
trading enthusiasm, masking a shortage of incremental and long-term capital. In
a macro backdrop with limited systemic opportunities and K-shaped divergence,
this convergence of flows creates crowded, consensus trades that are more prone
to episodic collapse.
