On July 20, Chinese stocks rose after a four-day decline triggered by the impact of the Iran war and a correction in the semiconductor sector. The market rebounded following intervention measures from the securities authorities.
The Shanghai Composite Index closed up 0.85% at 3,796.28, while the Shenzhen Component Index fell 0.70% to 13,610.23. The ChiNext Index increased by 0.42% to finish at 3,443.10.
Earlier in the day, the Chinese stock market experienced a drop due to a sharp decline in the semiconductor sector. The upcoming listing of CXMT (Changxin Memory Technologies), a Chinese DRAM manufacturer, on July 27 has absorbed significant market liquidity, coinciding with a global correction in semiconductor stocks. The ChiNext, which is heavily populated by semiconductor companies, has fallen about 25% from its July peak. Additionally, ongoing military tensions between the U.S. and Iran, which have persisted for nine days, have led to disruptions in shipping through the Strait of Hormuz, contributing to rising international oil prices and further pressuring the Chinese market.
However, news that the China Securities Regulatory Commission convened securities firms and asset management companies to discuss market stabilization measures helped turn the market around in the afternoon. Reports of state-owned investment firms purchasing large amounts of stocks to defend the market also boosted investor sentiment.
On the same day, the People's Bank of China announced it would keep the benchmark interest rate unchanged for the 14th consecutive month. The Loan Prime Rate (LPR), which serves as the benchmark interest rate in China, remains at 3.0% for one-year loans and 3.5% for five-year loans. Despite the second quarter GDP growth rate coming in at a disappointing 4.3%, below expectations, analysts interpret the robust growth in exports and advanced manufacturing as a reason to delay any interest rate cuts.
The power sector showed strong performance, with Huayin Electric and Leshan Electric hitting their daily price limits. News that Jiangsu Province recorded a peak electricity usage of 157.59 million kW on July 19, a record high, also served as a positive signal. Jiangsu is a hub for manufacturing and data centers in China, and the market interpreted this as an indication of rising electricity consumption nationwide, leading to an increase in power companies' stock prices.
The baijiu sector also saw gains, with Gujing Gongjiu reaching its daily price limit and Jinhuijiu recording significant increases. Guizhou Moutai, a leading baijiu producer, announced on July 18 that it would raise the retail price of its flagship product, Feitian Moutai, from 1,539 yuan to 1,639 yuan. This price increase was seen by the market as a signal that the baijiu industry has hit bottom.
Meanwhile, the People's Bank of China set the yuan's central parity rate at 6.7948 yuan per dollar, a slight increase of 0.0014 yuan from the previous trading day, resulting in a 0.02% depreciation of the yuan.
* This article has been translated by AI.
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