AI hardware financing positions retreat sharply; Moutai Index and Ning Combination strengthen against the trend

On November 3, A-shares showed a pronounced style seesaw. Selling pressure in the technology growth sector widened in the afternoon, with the CPO concept index plunging and hitting a new low since late March, while other hot tech tracks such as PCB, memory chips and semiconductors fell in tandem. On the board, hot tech stocks came under indiscriminate selling, with leaders such as Eoptolink (300502.SZ) and TFC Optical Communication (300394.SZ) successively hitting new stage lows, and Beijing Stock Exchange-listed Hengdongguang (920045.BJ) plunging more than 20%. The STAR 50 Index, dragged down by sharp declines in heavyweight stocks such as Cambricon (688256.SH) and Hygon Information (688041.SH), hit a new stage low.

On the other side of the tech rout, the Moutai Index and Ning Combination strengthened against the trend, with former leaders in major consumer and new energy stocks among the top gainers and bottom-fishing funds flowing in noticeably, while baijiu, batteries and pork were active. The current market is the exact opposite of late May to June this year, with AI assets and non-AI assets forming an extreme rotation—so is this round of non-AI asset rotation laying the groundwork for the market outlook?

Sixty percent of electronics and communications stocks have been "halved," and leveraged funds adding positions against the trend are trapped again

On November 3, the technology sector led the market lower in a one-way decline, with losses widening in the afternoon. By the close, the CPO concept index had fallen 6.77% to a low since late March, PCB (circuit boards) and memory chips had dropped 5.14% and 6.47%, and AI hardware was awash in new stage lows.

Selling pressure hit optical modules and optical communications first and hardest: Zhongji Innolight (300308.SZ) fell 12.69% to 480.2 yuan, losing the 500-yuan level for the first time since December 2025 and down about 66% from its June high; Advanced Fiber Resources (300620.SZ) fell 12.86%; optical chip company Yuanjie Technology (688498.SH), after plunging 57.3% in October, fell another 10.78% yesterday to 604.9 yuan, a cumulative pullback of about 69% from its June high; and Hengdongguang fell 23.15%.

The chip sector weakened in tandem: Cambricon fell 10.81%, MetaX (688802.SH) fell 11.01%, Moore Threads (688795.SH) fell 8.95%, and ChangXin Technology (688825.SH) fell 7%. The PCB segment saw a wave of limit-downs, with Shengyi Technology (600183.SH), Shennan Circuits (002916.SZ), Huazheng New Material (603186.SH) and others hitting the limit down. SMIC (688981.SH) bucked the trend to rise 2.11%, one of the few stocks in the green.

The tech selloff dragged the dual-innovation indices to new stage lows. The STAR 50 closed at 1,151.28 points, down 3.81%, with an intraday low of 1,132.33 points, a pullback of nearly 50% from its July 1 high of 2,255.25 points; the ChiNext Index also refreshed its stage low, closing down 2.73% with an intraday low of 2,376.39 points, a pullback of about 45% from its late-June high.

As hot tech concept sectors kept hitting new lows, a large batch of stocks were "halved" or even more severely cut. Wind data show that as of the November 3 close, 221 communications and electronics stocks had hit new 60-day price lows (classified by SW Level 1 industries, same below), involving leaders such as Zhongji Innolight, Eoptolink, Yuanjie Technology, Foxconn Industrial Internet and Cambricon.

Meanwhile, of the 650 electronics and communications stocks combined, 391 had pulled back 50% from their intra-year highs, accounting for 60.2%, of which 206 had pulled back more than 60%. Forty-eight stocks, including Eoptolink, Longsys (301308.SZ), Demingli (001309.SZ), GigaDevice (603986.SH) and Changguang Huaxin (688048.SH), had pullbacks exceeding 70%.

Leveraged funds are becoming the amplifier of this selloff. Based on margin trading data as of the November 2 close, the market-wide margin financing balance had fallen from about 2.52 trillion yuan at the end of September to 2.30 trillion yuan on November 2, a cumulative decline of about 220 billion yuan, including net repayment of 41.4 billion yuan on October 30 alone.

Margin positions in core AI hardware names retreated most violently: Zhongji Innolight's margin balance fell from 31.98 billion yuan in early October to 19.54 billion yuan, a drop of nearly 40% for the month; Eoptolink's fell from 19.83 billion yuan to 11.61 billion yuan, a drop of more than 40%; Cambricon and TFC Optical Communication fell 18.5% and 21.6% respectively; and the margin balance of the entire SW electronics sector shrank by about 23.9 billion yuan in about a week.

Notably, on November 2 margin funds had tried to bottom-fish leading tech stocks against the trend, with Zhongji Innolight, GigaDevice and Eoptolink receiving net margin purchases of 310 million yuan, 230 million yuan and 180 million yuan respectively on November 2—and this batch of leveraged funds that entered at low levels was trapped again in the short term.

Existing funds turn to low-valuation bets

On November 3, as the tech sector fell broadly, bank stocks that had been rising steadily pulled back. The bank index closed down 0.44%, with ICBC down 1.15% and Bank of Communications down 2.10%; state-owned bank stocks that had hit new highs on November 2 weakened overall on the 3rd.

On the other side, the Moutai Index and Ning Combination rose 2.13% and 0.91%, while baijiu, battery and pork concepts gained 2.35%, 2.32% and 2.84%, active against the trend. Kweichow Moutai rose 2.84% to 1,480.00 yuan, Wuliangye rose 1.75%, and Pien Tze Huang rose 6.27%; in new energy, CATL rose 3.80% to 249.32 yuan, EVE Energy gained, and Sungrow followed higher.

Behind the return of former core assets to investors' view is a flurry of recent market-stabilizing policies. The People's Bank of China announced on November 2 that on November 3 it would conduct a third batch of securities, fund and insurance company swap facilities, with a one-year term that can be extended, and 31 institutions declared more than 100 billion yuan in demand; the relending facility for stock buybacks and increased holdings was converted into a long-term institutional arrangement the same day, with the rate cut to 1%. The first batch of 18 active ETFs raised more than 35 billion yuan, corresponding to 36 billion yuan in incremental funds, and could be listed as early as late November; the CSRC also made arrangements to optimize market-supportive buybacks.

This structure contrasts with May to June this year, when technology siphoned funds from the entire market and drove a one-way rally while traditional sectors such as consumer and energy fell continuously—a landmark event being Zhongji Innolight's total market value surpassing Kweichow Moutai for the first time, with the STAR 50 Index simultaneously hitting a record high. The CSI Baijiu Index has pulled back nearly 70% from its 2021 high, and the food and beverage sector has fallen back to the starting point of the "9·24" rally. The market style on November 3 was the exact opposite of that time.

After the extreme valuation pullback in technology, many institutions see cyclicals and consumer as key focuses for the rest of this year and even next year. CITIC Securities believes the AI industry trend is still rising in 2027, but stock momentum may fade, and institutions' still-high allocation to the AI sector will constrain the sector's ability to continue attracting incremental funds.

For non-AI sectors, CITIC Securities believes marginally improving factors are increasing—in other words, 2027 may not be worse—first, the pace of RMB appreciation may slow, and second, the overseas high-interest-rate situation may ease. On this basis, the institution believes industry allocation should be moderately diversified going forward, along four threads: steady returns, excellent overseas-expanding companies, domestic demand recovery and new AI technologies. Steady returns start from improved supply patterns and sustainable capital returns, focusing on energy and chemicals, oil shipping, highways, logistics, white goods, pharmacies, insurance, brokerages expanding overseas, and financially sound real estate leaders; excellent overseas-expanding companies should focus on ships, diesel engines, two-wheelers, CXO, power tools and power equipment, capturing opportunities from slower RMB appreciation, improving overseas demand and rising global share of Chinese companies; domestic demand recovery presupposes stronger central fiscal support, and if policy changes exceed expectations, recommended offensive plays include restaurant supply chains, airport duty-free, health supplements and medical device leaders, preferably companies able to capture demand improvement and gain market share.

On baijiu, CITIC Securities believes the industry is in the late stage of bottoming and the tail end of clearing, with bottom signals such as prices, inventories and expectations already appearing, and supply and demand expected to reach a new equilibrium in 2027; it recommends adding to leading liquor companies at the bottom. The institution also argues that consumer has left-side allocation value with "weak demand, high odds," prioritizing cyclical reversal directions such as farming, animal husbandry and dairy products.