On May 18th, the A-share market experienced turbulent adjustments, with the three major indices opening lower, rallying briefly, and ultimately closing collectively lower. The total turnover of the Shanghai and Shenzhen stock markets decreased significantly by 453.2 billion yuan compared to the previous trading day, indicating a cooling down of the willingness to chase highs.
By the closing bell, all three major indices saw declines. The Shanghai Composite Index fell by 0.09% to close at 4131.53 points, the Shenzhen Component Index dropped by 0.2% to close at 15530.23 points, and the ChiNext Index declined by 0.36% to close at 3914.88 points. Across the board, the market was chaotic with over 3000 individual stocks declining.
The total turnover of the Shanghai and Shenzhen stock markets stood at 2.92 trillion yuan, a decrease of 453.2 billion yuan from the previous trading day, marking the first time in May that the turnover fell below 3 trillion yuan.
The drop below 3 trillion yuan in turnover is seen by the market mainstream as a sign of entering the “shrinking volume to find the bottom” stage.
Financial blogger “Lingnan Muyang” stated in a blog post, “The A-share turnover once again failed to hold above the 3 trillion mark, indicating that the market is about to enter the shrinking volume to find the bottom stage. Today, the overall performance of A-shares fluctuated, with little change in the closing index, but most individual stocks fell, with few rising, indicating a very subdued bullish sentiment… The market opened lower today and traded with low volume throughout, this volumeless rise is not a signal of stabilization but rather a typical baiting for more buying, clearly showing the severe lack of confidence among domestic funds.”
Financial blogger “Shangyue Lanjie” analyzed in a blog post, “With A-share turnover once again falling below 3 trillion, it can be confirmed that the market will enter the stage of shrinking volume to find the bottom.”
The reasons given by the bloggers include:
1. Today’s index fluctuations were tumultuous, with the closing loss seeming small, but throughout the day, more stocks fell than rose, a clear reflection of an extremely weak bullish sentiment in the market.
2. The turnover falling below 3 trillion this time compared to the previous week’s consecutive breaches and peak volume reaching 3.5 trillion indicate the most frenzied emotional period coincided with significant selling off by domestic funds.
3. The future direction is clear: shrinking volume recovery is a lure for more buying. The substantial decrease in volume today has set the stage for short-term volatility, with the focus now on waiting for the shrinking volume to find the bottom.
Financial blogger “San Lang Qiaoshi” commented in a blog post, “Today in the A-share market, the rising sectors are mainly technology-related, while the declining sectors are primarily related to cyclical and domestic consumption, connected to economic recovery! The reason is that April’s retail sales data grew only by +0.2%, below the expected +2%, indicating an economic recovery lower than anticipated. Consequently, funds are flocking more towards AI technology, leading to a more extreme segmented market.”