This week, A shares surged and then retreated, with the Shanghai Composite Index briefly surpassing 3,600 points before falling back. The Shenzhen Component Index, ChiNext Index, and CSI 300 also pulled back after hitting yearly highs, while the STAR 50 Index ended its 11-day winning streak. Weekly trading volume slightly declined to 9.05 trillion yuan.

Despite minor market adjustments, margin traders continued to aggressively increase positions in A shares, with a net purchase of 372 billion yuan for the week—marking the sixth consecutive week of net purchases exceeding 100 billion yuan. The margin balance reached 1.97 trillion yuan, a 10-year high since June 2015. Most Shenwan primary industries saw net margin purchases, with pharmaceuticals and electronics each attracting over 60 billion yuan in net purchases, the computer sector receiving over 30 billion yuan, and banking and communications each gaining over 20 billion yuan. Only coal, petrochemicals, non-ferrous metals, and agriculture sectors saw minor net selling.

Data also showed that pharmaceuticals were the most favored by institutional funds, with eight consecutive days of net inflows totaling over 308 billion yuan for the week. The electronics sector attracted over 251 billion yuan, while machinery and communications each saw inflows exceeding 100 billion yuan. In contrast, non-ferrous metals experienced net outflows of over 104 billion yuan, and transportation, food & beverage, and non-bank financial sectors saw outflows exceeding 40 billion yuan.

Pharmaceutical stocks demonstrated strong resilience during the market adjustment. The hepatitis concept index hit a record high, the Helicobacter pylori concept index reached a 3.5-year peak, and the traditional Chinese medicine (TCM) sector index hit a yearly high. Sub-sectors like private hospitals, vitamins, and assisted reproductive technology maintained gains every trading day of the week.

Qizheng Tibetan Medicine (002287) rose by the daily limit for three consecutive days, hitting a near five-year high (adjusted for dividends, same below), with a year-to-date surge of over 66%. Anglikang (002940), Hanshang Group (600774), and Guizhou Bailing (002424) each rose by the limit for two straight days. Aoxiang Pharma (603229) gained for seven consecutive days, while Wuzhou Medical (301234), Nanxin Pharma, and Baicheng Pharma (301096) were among over 10 stocks that rose for five or more days. Chenxin Pharma (603367) and Fuyuan Pharma (601089) hit all-time highs.

On the policy front, the National Development and Reform Commission (NDRC) disclosed that, in line with the Central Economic Work Conference, it recently launched a healthcare infrastructure enhancement initiative with the National Health Commission to address weaknesses in grassroots medical services.

Additionally, China has significantly expanded TCM exports in recent years, achieving substantial results. According to the National Administration of Traditional Chinese Medicine, TCM has spread to 196 countries and regions, with global treatments covering over one-third of the world’s population.

WHO statistics show that 113 member states recognize TCM therapies like acupuncture, 29 have established laws for standardized TCM use, and 20 include acupuncture in their healthcare systems.

China Commercial Industry Research Institute predicts China’s TCM market will reach 550–600 billion yuan by 2025 and 1.2–2 trillion yuan by 2030, with a CAGR of 10–14%.

CITIC Securities noted that TCM firms have steadily increased R&D investment, supported by stable cash flow, which will remain a key growth driver. Innovative TCM will contribute steady growth, while innovative chemical and biologics may offer additional valuation upside.

Looking ahead, Pacific Securities analysts stated that short-term adjustments do not alter the medium-to-long-term uptrend, with 3,480 points serving as a strong technical support level. Option market volatility remained stable, suggesting expectations of range-bound movement, with no clear bearish patterns in major indices.

Shenwan Hongyuan believes profit-taking momentum is accelerating, potentially bringing forward A shares’ transition to full incremental trading. The shift from high- to low-valuation stocks reflects a search for new market leadership amid strengthening bullish sentiment. Investors should focus on tech trends like AI, midstream manufacturing with improving fundamentals, and innovative pharmaceuticals.