A-shares Face Another Adjustment: What’s Behind the Move

On January 20, China’s A-share market experienced another round of adjustments, with all three major indices closing lower. The ChiNext Index fell over 2% intraday. By the close, the Shanghai Composite Index slipped 0.01%, the Shenzhen Component Index dropped 0.97%, and the ChiNext Index fell 1.79%.

Sector-wise, chemical stocks bucked the trend with strong gains, precious metals remained robust, and real estate showed active performance. Meanwhile, computing hardware and commercial aerospace led the declines. Over 3,100 individual stocks fell, and combined trading volume of the Shanghai and Shenzhen markets reached 2.78 trillion yuan, up 69.4 billion yuan from the previous session.

After a slight recovery yesterday, the market faced renewed pressure today. The Shanghai Index briefly dipped below 4,100 in early trading before rebounding. The 5-day moving average crossed below the 10-day line for the first time in a while. The Shenzhen Component and ChiNext indices closed with pronounced bearish candles, reflecting cautious short-term sentiment.

At the stock level, the average A-share price recorded its second bearish candle of 2026, following the first on January 14—a clear signal of the market’s cooling.

Why is Market Support Weak?

1. External Factors:
Although the U.S. market was closed on Monday, futures performed poorly, transmitting concerns to Asia-Pacific markets. Japanese Prime Minister’s announcement of dissolving the Lower House on January 23 triggered long-term bond sell-offs in Japan, pushing yields higher. Additionally, looming U.S. tariffs on Greenland raised trade tensions, impacting global bonds and equity demand.

2. Domestic Factors:
Onshore, margin trading declined, reflecting capital pressure. Data shows January 19 margin purchases totaled 267.4 billion yuan, down 20.35% from last Friday and 40.68% from the January 14 peak. Large capital also exerted pressure via ETFs, with concentrated selling in CSI 300, SSE 50, and CSI 500 ETFs.

Statistics indicate that January 19 saw net outflows of over 40 billion yuan from stock ETFs, marking the third consecutive day of net outflows exceeding 10 billion yuan, totaling over 190 billion yuan in three days.

Meanwhile, regulatory crackdowns on market misconduct continue. A prominent social media influencer was fined 83.25 million yuan and banned from securities trading for three years for market manipulation, affecting 32 stocks and millions of readers.

Market Summary

1. Uptrend momentum halted, but adjustments remain moderate; the Shanghai Index holds above 4,100.
2. Trading volume shrinks, with some funds exiting or resting.
3. Individual stocks: aggressive short-term rallying cooled, while active funds rotate toward value-investment opportunities.

Tech stocks broadly retreated, with computing hardware, AI applications, and commercial aerospace underperforming. Strong-performing sectors included precious metals, chemicals, consumer staples, real estate, and high-dividend assets.

Spot gold surpassed $4,700/oz, and COMEX silver futures surged. Policy support for zero-carbon factories in the chemical sector is expected to accelerate green transformation and high-quality growth, benefiting petrochemicals, coal chemicals, silicone, phosphorus chemicals, and glyphosate sectors.