On July 16th, A-shares fluctuated downwards, with the Shanghai Composite Index falling below 3900 points. At the close, the Shanghai Composite Index fell 1.85% to 3882 points; the Shenzhen Component Index fell 1.97%, the ChiNext Index fell 2.95%, and the STAR Market 50, STAR Market 200, and STAR Market Growth indices all fell by more than 4%, while the Dividend Index also fell 1.31%. The total turnover of the Shanghai, Shenzhen, and Beijing stock exchanges was approximately 2.42 trillion yuan, a decrease of over 100 billion yuan compared to the previous trading day. In terms of sectors, biotechnology, liquor, and pharmaceuticals led the gains, while semiconductors, fiberglass, and energy equipment led the declines. In fact, since the beginning of July, most major A-share indices have experienced significant pullbacks. As of the close of trading on July 16, the STAR Market 200 and STAR Market Growth indices had fallen by nearly 20% this month, the STAR Market 50 had fallen by over 16%, and the Shanghai Composite Index had fallen by over 5%. Among the core market indices, only a few, such as the Dividend Index and the Micro-Cap Index, recorded positive returns. It is worth noting that, along with the market correction, there has been a significant increase in funds recently used ETFs (Exchange Traded Funds) for bottom-fishing. Wind data shows that in the past week, net inflows into various ETFs, including stock and cross-border ETFs, reached 131.664 billion yuan, and in the past two weeks, the cumulative net inflow was approximately 199.77 billion yuan. "In the short term, negative factors have largely dissipated, and the market adjustment space may have been sufficient. From a medium-term perspective, we remain firmly optimistic about the A-share market continuing its upward trend with fluctuations. The core driving forces are the resonance between the restructuring of the international order and the trend of industrial innovation, and these two conditions remain unchanged," CICC stated. Who is buying the dip in broad-based and STAR Market ETFs? From a product type perspective, equity ETFs investing in the A-share market are the main source of net inflows, with a net inflow of approximately 121.6 billion yuan in the past week, accounting for 92.4% of the total market net inflow. Bond ETFs saw a net inflow of 10.56 billion yuan, while cross-border ETFs experienced a slight net outflow of approximately 460 million yuan. After several months, broad-based index ETFs have once again seen a significant net inflow trend. Data shows that the total net inflow in the past week was approximately 57.79 billion yuan. Among them, the STAR Market 50 ETF saw a net inflow of 13.71 billion yuan, the CSI 300 ETF saw a net inflow of 12.12 billion yuan, and ETFs tracking the CSI 500, CSI 1000, and CSI A500 saw net inflows of 9.62 billion yuan, 7.76 billion yuan, and 4.55 billion yuan, respectively. This tendency to buy on dips is particularly pronounced during extreme market conditions. On July 13, A-shares experienced a sharp correction, with nearly 60 billion yuan flowing into the market via equity ETFs, marking a new single-day high since April 8, 2025. Broad-based ETFs saw a net inflow of nearly 44 billion yuan. This recent continuous inflow into broad-based ETFs contrasts sharply with the previous trend of continuous net outflows. In April, May, and June of this year, broad-based ETFs experienced significant outflows, with net outflows of 213.6 billion yuan, 287.4 billion yuan, and 182.3 billion yuan respectively. Meanwhile, STAR Market ETFs also saw significant inflows against the trend, becoming the main theme of this round of structural bottom-fishing. Besides the STAR Market 50 Index's linked ETFs seeing a net inflow of 13.708 billion yuan in the past week, the STAR Market Semiconductor Materials and Equipment Index saw a net inflow of 14.098 billion yuan, and the STAR Market Chip Index saw a net inflow of 6.564 billion yuan. Combined with the overall large inflow of 16.744 billion yuan into the entire market's semiconductor materials and equipment index, it can be seen that funds are being deployed across the board along the STAR Market's hard technology theme. At the same time, some indices showed a trend of reducing positions when they were stable or rising. ETFs linked to indices such as Hang Seng Tech, Hong Kong Stock Connect Tech, and CSI Medical saw continuous redemptions this week, showing a significant net outflow of funds overall. Specifically, the Hang Seng Tech ETF saw an outflow of 3.59 billion yuan, and the Hong Kong Stock Connect Tech ETF saw a net outflow of 2.735 billion yuan. The pharmaceutical and healthcare sector led the gains this week, with the Shenwan Pharmaceutical and Biological Index rising 8.79%. However, ETFs linked to pharmaceutical and healthcare indices saw a combined net outflow of approximately 770 million yuan in the past week, with the CSI Medical ETF experiencing a net outflow of 1.33 billion yuan and the CSI 300 Medical ETF seeing a net outflow of 890 million yuan. The net asset value increase of these products contributed approximately 17.98 billion yuan to the scale, while the net outflow mainly came from redemptions. In addition, sectors such as gold and non-ferrous metals, new energy vehicles, and consumer goods also saw slight net outflows in the past week. Is the adjustment entering its final stage? "The recent market correction was mainly triggered by external factors, including a prevalence of negative narratives about AI overseas, the contagion of risk sentiment in overseas markets, and repeated suppression of risk appetite by geopolitical risks. The current market position may have already reflected overly pessimistic expectations, and a better opportunity to position oneself this year is reappearing," a report released by CICC on July 14th stated. "Recently, tech stocks have experienced significantly increased volatility. Besides investor concerns about an oversupply of AI infrastructure sparked by Meta's management, the high valuations of tech stocks after their rapid rise in the second quarter, coupled with overcrowded trading, suggest that profit-taking is the main reason for the price fluctuations," analyzed the research department of BOCOM International. They believe the fundamentals of AI infrastructure remain unchanged. The price decline may present buying opportunities for some stocks. Shenwan Hongyuan Securities judges that the correction phase is nearing its end. Non-tech sectors led the correction in May and June, followed by the tech sector in June and July. The current correction structure has moved from partial to complete, with the contraction of profit-making and momentum effects becoming more pronounced. However, Shenwan Hongyuan also cautions that the short-term supply and demand inertia of funds in the tech sector has been broken, and a new industry catalyst and broader structural participation are needed for the market to restart. "Broad-based ETFs have begun to increase their holdings, and attention should be paid to their role as a stabilizer for medium- and long-term funds." Yao Pei, an analyst at Huachuang Securities, believes that the recent accelerated inflow of funds into ETFs, if continued long-term funds flow in, is expected to play a stabilizing role in the market and provide upward support. Furthermore, Yao Pei believes that with the approaching mid-year earnings season, earnings are expected to provide upward support. The net profit attributable to shareholders of all A-shares (excluding financials) increased by 11% year-on-year in the first quarter of 2026, and the year-on-year growth rate of net profit attributable to shareholders of all A-shares (excluding financials) is expected to be between 10% and 19% in 2026. From a valuation perspective, Yao Pei believes the adjustment has been relatively sufficient. The PE-TTM ratio of all A-shares has decreased from a high of 31 times in May to the current 25 times, a valuation level comparable to that when the Shanghai Composite Index was at 3300 points last April. Since the beginning of the year, 74% of stocks have experienced negative cumulative gains, with the median decline of declining companies at -24%, and the median PE ratio falling from a high of 27 in May to the current 21. "Net inflows into broad-based ETFs indicate that institutional funds in the market are willing to invest against the trend; judging from the margin balance, leveraged funds, mainly large speculative funds and retail investors, are selling," a senior fund investment advisor told Caixin. "From the perspective of trading volume, trading continued to shrink today. From a high of 3.4 trillion yuan to the current 2.4 trillion yuan, it shows that market sentiment has reached a low point. From any perspective, this is not a good selling point, but rather a window of opportunity for investment. If you can't go against human nature to add to your positions, at least avoid chasing highs and selling lows."