On the first trading day of the second half-year, the market experienced a rotation reminiscent of a 'festival for undervalued stocks'.

Looking at the sector performance briefly, the farming and breeding sector saw a collective surge, with multiple stocks like New Hope, Aonong Bio-Technology, Xiangjia Shares, and Yisheng Livestock hitting the daily limit-up. The large financial sector strengthened, led by securities and insurance, with Huaan Securities, Tianfeng Securities, and Guosheng Securities reaching the limit-up. The innovative drug sector continued its strong performance, with Huiyu Pharmaceutical and Xuantaipharm rising by 20%.

The robotics concept also showed activity, with Topstar surging 20%.

On the downside, the energy storage concept faced a correction, with inverter-related stocks leading the decline, as Sungrow Power Supply fell over 13%. Computing hardware stocks also pulled back, with declines in fiber optics, CPO, and PCB sectors; Quick Intelligent hit the daily limit-down. The semiconductor sector weakened in the afternoon, with GRINM Advanced Materials falling to the limit-down.

Notably, seven major A-share tech giants—Cambricon, Industrial Fulian, Hygon, GigaDevice, Sheng Yi Technology, Hengtong Optic-Electric, and Zhongtian Technology—collectively adjusted, weighing on the broader indices.

This market behavior stems partly from momentum for a rotation from high-valuation to low-valuation sectors, and partly because the mid-year earnings season has commenced.

As of July 1st, over a dozen companies have pre-announced profit growth exceeding 50%, showing some divergence from Q1 performance. For instance, Yisheng Livestock, a poultry firm, pre-announced H1 net profit growth of 4287%–4774%. Chemical leader Hengyi Petrochemical pre-announced growth of 2326%–2547%.

Fuxiang Pharmaceutical, focused on pharmaceutical raw materials and lithium battery materials, pre-announced H1 net profit growth of 2487%–3204%.

The strong performance from these more traditional sectors provided significant impetus for today's rally in non-AI themes. This raises the question: has AI performance been overextended or is it simply weak?

The answer isn't necessarily negative; earnings releases might simply be delayed. Coupled with recent risk warnings from popular tech stocks, the intent may be to avoid fueling market speculation and to manage the pace.

Looking ahead, July 15th is the mandatory deadline for A-share listed companies to issue mid-year earnings pre-announcements. Companies must issue a pre-announcement if H1 net profit changes by over 50% year-on-year, records a loss, or turns a profit after a loss.

Several A-share tech leaders are expected to issue pre-announcements in the first half of July, allowing the market to assess the health of the AI industry chain.

In late July, most of the US 'Magnificent 7' (excluding Nvidia), along with companies like Intel, Seagate, and ARM, are scheduled to report earnings between July 22nd and 30th.

Returning to market themes, among the many neglected sectors, innovative drugs stand out today. This sector has shown intermittent strength recently, supported by multiple positive catalysts.

First, news that 557 drugs passed the preliminary review for the 2026 national medical insurance reimbursement list served as a significant event-driven catalyst for the pharmaceutical sector.

Second, on June 22nd, several innovative drugs were approved for market launch on the same day, including products from Baili Tianheng, Carsgen Therapeutics, Zhixiang Jintai, and Eli Lilly.

Third, recently, multiple Chinese innovative drug companies have密集 reached overseas licensing or strategic R&D cooperation deals, with total potential transaction values approaching $90 billion.

Fourth, institutional statistics show that from April 1st to June 12th, 88 A-share and H-share listed pharmaceutical companies initiated share buybacks, while 96 companies issued a total of 215 shareholding increase announcements.

More importantly, the pharmaceutical sector is genuinely 'cheap'.

Having undergone significant risk release earlier, current valuations have fallen to historically low ranges. The current crowding level in innovative drugs is at only the 12.8th percentile, indicating a low historical position.

Consequently, the innovative drug sector has become one of the few non-AI themes recently experiencing both rising volume and price, making it a key target for capital rotating from high-valuation areas. The sector rotation pattern of 'tech correction → innovative drug strength' has been playing out repeatedly.

Regarding related ETFs, the Hang Seng Healthcare ETF (159892) rose 3% today. Its major holdings include industry leaders like BeiGene, Innovent Biologics, and WuXi AppTec, providing relatively comprehensive coverage of key innovative drug R&D and production stages.

Currently, many investors positioned in traditional sectors eagerly await a style rotation. However, a word of caution: while rotation from high to low valuations will happen eventually, 'cheap does not guarantee a rise'.

A recent news item provides food for thought: 'Baijiu Sells for Cola Prices'.

The report details how the deep adjustment in the baijiu industry is transmitting from downstream distribution channels to upstream production.

Previously, base liquor was considered a distillery's 'gold mine' and foundation, with high-quality aged base liquor increasing in value over time. Now, the situation has completely changed.

On auction platforms like JD.com and Alibaba, cases of base liquor auctions have increased noticeably recently. According to incomplete statistics, since 2026, base liquor from over ten distilleries has been auctioned, but most items failed to sell after multiple rounds. Successful auction prices were generally below appraisal values.

In May this year, on the JD Auction platform, Anhui Wuzi Gu Brewing's base liquor was auctioned due to bankruptcy. After five failed auctions, two lots were finally sold at low prices, equivalent to 3.9 yuan and 3.7 yuan per 500 grams respectively—similar to supermarket cola prices.

In November 2025, Sichuan Luzhou Luhe Distillery's 5549.55 tons of base liquor were sold at the 13th auction for 13.9 million yuan, a unit price of only 1.25 yuan per 500 grams. Compared to the 110 million yuan market appraisal, this was essentially a 90% discount.

The 216 tons of base liquor from Sichuan Dayi Chuanyi Distillery auctioned on June 24th had a starting price of just 1637.67 yuan per ton, translating to less than 1 yuan per 500 grams, and also faced multiple failed auctions.

The premise for an industry to have prospects and hope is genuine consumer demand and spending; growth discussions are otherwise built on sand.

This leads to a bold speculation: in the future, might traditional internal combustion engine vehicles and high-alcohol baijiu, representatives of traditional consumption, be viewed as 'special-purpose vehicles' and 'specialty beverages', becoming niche products for specific uses and fading from the mainstream Chinese consumer market?

This view may not be entirely accurate and is open to critique. Finally, here is a 'more uplifting piece of news'.

Reports indicate that as of April 2026, South Korea's fertility rate has grown positively for 22 consecutive months, with the number of newborns increasing 18% year-on-year. Concurrently, Seoul's residential property transaction prices rose 8.6% year-on-year in May 2026.

South Korea's total fertility rate fell to a global low of 0.72 in 2023, recovering slightly to 0.80 in 2025.

As many are aware, the South Korean stock market has performed well over the past two years.

In some online communities, netizens suggest that 'a sustained bull market creates a wealth effect, releasing demand for marriage and childbirth. When people's wallets are fuller and confidence is higher, those with needs naturally dare to spend and have children'.

Perhaps, rising stock markets do bring tangible wealth effects. Asset appreciation gradually repairs household balance sheets, effectively alleviates life anxieties, and improves young people's expectations for the future.

If the stock market truly has such a significant effect, it would serve as a positive incentive for social confidence—a commendable achievement indeed.