From Limit Up to Limit Down: Is Quantitative Trading to Blame?

Author: Gelonghui

On July 13, at the end of a long summer, the commercial aerospace sector surged and then plummeted, experiencing a sharp decline across the board.

Electric Science Blue Sky fell over 10%, while Aerospace Power, XW Communications, and Tongyu Communications all dropped significantly. Both the Shenzhen Component Index and the ChiNext Index fell by more than 2%. The previously popular AI sector saw a corrective rebound, while funds in the aerospace sector were abruptly withdrawn.

Just a weekend earlier, on July 10, the successful maiden flight of the Long March 10 B rocket and the world's first rocket net recovery news had ignited the entire sector, with over 30 stocks hitting their daily limit up. The two major giants, China Satellite and China Satcom, saw their stocks locked at the limit.

Friday saw a limit up wave, but Monday was a day of crashing.

The stark contrast in market behavior raises the question: what exactly happened?

01. Who is Setting the Prices?

The Long March 10 B was not an ordinary launch.

At 12:15 PM on July 10, this 63-meter-long rocket with a launch thrust of 890 tons took off from the Hainan commercial launch site. About six minutes later, after the first and second stages separated, a booster stage returned vertically and was caught by the flexible net of the "Navigator" recovery platform—marking China's first controllable recovery of a large-capacity rocket booster and the world's first net recovery. China became the second country after the United States to master this technology.

Such significant news only lasted through the weekend.

Interestingly, market discussions almost unanimously pointed to quantitative trading as the culprit.

The emotional cycle of "sharp drop → sharp rise → pullback" is rooted not in news, but in the structure of money.

According to the Securities Times, public funds and social security have long been underweight or even absent from commercial aerospace. Stocks like SRE New Materials and Information Development, which have risen over 100%, have not seen any public fund presence among their top ten circulating shareholders. Although institutions participated in Aerospace Power and Aerospace Development, their overall holdings remain limited.

This indicates that institutional funds have not formed a widespread, systematic heavy position, and the overall fund structure remains dispersed. Without long-term bottom support, the sector becomes a ship without an anchor. When prices rise, everyone rushes in; when they fall, no one steps in.

Data shows that quantitative funds account for 20% to 30% of A-share trading volume. In sectors lacking institutional bottom support, their influence is magnified—there are no ballast stones to counteract their algorithmic commands.

The underlying logic of quantitative trading is volatility arbitrage, which requires creating volatility to profit. Limit up waves and crash days are two sides of the same strategy for them. When a hot trend emerges, algorithms push prices up before retail investors can react; once retail investors follow, the algorithms turn around and sell off.

This mechanism operates particularly smoothly in the commercial aerospace sector, as there are not enough long-term counterparties to absorb the selling pressure. The absence of public funds in commercial aerospace makes it the area with the most intense reshuffling.

On July 10, the top five buyers on the Long March Development's leaderboard were from the Shenzhen Stock Connect, institutions, and speculative trading departments. Notably, the fifth seller was the first trading department of Dongfang Caifu in Lhasa. On the limit up day, institutional net buying was 85.71 million, while retail investors in Lhasa net sold 18.06 million.

Moreover, this company has appeared on the leaderboard eight times in the past six months, with an average drop of 10.66% five days after each appearance. Funds entering on the limit up day averaged a loss of over 10% five days later.

This is not an isolated phenomenon for a single stock; the entire sector lacks long-term capital anchoring, being repeatedly sliced by algorithms in a rhythmic manner.

In stark contrast to the chaos of the secondary market is the continuous betting in the primary market.

In terms of industrial capital, according to the Taiber Think Tank, there were 89 publicly disclosed financing events in domestic commercial aerospace in the first half of 2026, with a total financing amount reaching 15.13 billion yuan. Among these, financing in the rocket launch sector accounted for 44%, making it the sub-sector with the largest capital investment. National and local guiding funds are the mainstay of patient capital, and the industry is shifting from "spontaneous exploration" to "national systematic guidance."

SpaceX is the best example. After its IPO this year, its market value soared to $1.77 trillion, despite a net loss of $4.94 billion in 2025. A company losing nearly $5 billion has been valued at nearly $2 trillion by the market.

The money in the primary market is betting on the long-term potential of the entire space economy—an estimated market size of 2.83 trillion yuan (according to CCID Think Tank), the certainty of launching tens of thousands of satellites within five years, and the brutal rule of "first come, first served" for orbital resources.

However, this pricing logic is not aligned with the secondary market's timeline. The primary market allows a company to lose $4.9 billion as long as its rocket can be recovered 34 times, its Starlink users exceed 9 million, and it has already secured the positions of tens of thousands of satellites in orbit. It looks at who has the capacity in five years and who occupies the orbit in ten years. Profit statements can wait, but orbital windows cannot.

Currently, the secondary market, under the dominance of retail and quantitative trading, has drowned out the real progress of the industry with short-term algorithmic games.

The question is, when will the secondary market catch up with the primary market's pricing logic?

02. Valuation System Undergoing Testing

If we only look at one day's stock price, commercial aerospace appears to be a round of quantitative harvesting. But if we extend the timeline to nearly two years, the situation is entirely different.

In the past two years, this sector has experienced several market phases.

The first wave was at the beginning of 2025. China submitted a one-time application to the International Telecommunication Union for frequency and orbital resources for 203,000 satellites, covering 14 constellations. Prior to this, China had never applied for orbital resources at such a scale. The market responded with enthusiasm, speculating on the "Chinese version of SpaceX" concept. The price-to-earnings ratio of China Satellite soared to 2400 times. China Satcom itself issued a warning about the "obvious flower-passing effect."

However, its significance lies not in the price increase but in the fact that it was the first time the understanding that "space is a scarce resource" was introduced to the market.

The second wave occurred at the end of 2025. The National Space Administration established a Commercial Aerospace Division, the first national-level dedicated regulatory agency. The fifth set of listing standards for the STAR Market was introduced, clearing financing obstacles for unprofitable rocket companies. Blue Arrow Aerospace aimed to become the first commercial aerospace stock on the A-shares. The driving factor shifted from concept to policy.

However, the recovery tests of the Zhuque-3 and Long March 12 A rockets failed. With technology still unverified, the market was forced to retreat.

The third wave occurred in the spring of 2026. Recoverable rockets entered a dense testing window. Zhuque-3's static ignition was completed, the Lijian-2 successfully made its maiden flight, and the Long March 10 B was originally scheduled for its first flight in April. Meanwhile, the first quarter financial reports unveiled the profit structure of the industry chain for the first time—upstream profits soared, while downstream losses were staggering, creating a glaring disparity. The driving factor upgraded again: from policy to technology verification.

However, after the Tianlong-3's ignition and flight anomaly, the first flight failed. The explosion on April 3 caused the market to cool down again.

In the last three trading days, the commercial aerospace sector fell for eight consecutive days, with Shenjian Co. hitting the limit down and many stocks dropping over 10%. Until noon on July 10, when the Long March 10 B launched from Hainan, achieving the first complete "orbital launch + controllable recovery" closed-loop process, becoming the second country after the United States to master large-capacity recoverable rockets.

Does this mean a new round of market activity has begun? No one can guarantee that. But one thing is certain:

After several rounds of market activity, the path of driving forces is clear: concept → policy → technology verification.

The capital market's pricing power seems to be on a different track. From the first wave dominated by speculative funds, to the second wave where speculative funds resonated with retail investors, to the recent rounds where the influence of quantitative models has become increasingly significant.

This disconnection is unsustainable. Because the logic on the industrial side is becoming clearer, clear enough to be expressed in simple arithmetic.

Take the core recoverable technology as an example.

The first stage of the rocket accounts for over 70% of the rocket's cost. Recovering it saves 70% of the manufacturing cost. SpaceX's Falcon 9 has reduced its unit launch cost to 19,000 to 28,000 yuan per kilogram through 34 reuses. Currently, domestic launch prices range from 50,000 to 100,000 yuan per kilogram. Blue Arrow Aerospace's Zhuque-3 aims to be below 20,000 yuan per kilogram. If recoverable technology truly matures, industry estimates suggest it could eventually drop below 1,000 yuan per kilogram.

Behind this is a simple supply-demand mismatch. The GW constellation plans for 12,992 satellites, while the Qianfan constellation plans for 13,904 plus 1,296 satellites, totaling over 50,000 satellites. However, there are only 18 commercial launch sites nationwide, with another 7 under construction. The average wait time is one month. With many satellites and few rockets, rocket capacity becomes a strategic resource.

Yuanhe Chenkun's "Low Earth Orbit Satellite Internet Industry Research Report" clearly ranks investment priorities: rocket systems > satellite operators > satellite systems > satellite components. Their logic is that whoever first conquers recovery and reduces costs will hold the total valve of the constellation market. The private rocket sector may ultimately only accommodate two to three leading companies.

In the second half of the year, this industrial logic will also face a concentrated pressure test.

The recovery test of Zhuque-3's remote second stage is the latest exam. If successful, it will become the first liquid rocket to achieve orbital recovery by a private enterprise. The first flight of the Zhishen-1 is imminent, and after the Tianlong-3's failure in April, it will also attempt a second flight in the second half of the year. The Long March 10 B is set to attempt its first reuse flight by the end of the year—transitioning from "recoverable" to "reusable" is not an easy step, comparable to the first flight.

Capital movements are also accelerating in sync. After SpaceX's IPO, its market value soared to $1.77 trillion, setting a reference line for global commercial aerospace. Blue Arrow Aerospace's STAR Market IPO has progressed to the inquiry stage, with Zhongke Aerospace following closely. These domestic rocket companies about to enter the capital market will face the first public market test of their valuation systems.

The mid-year report window is also approaching. China Satellite just disclosed its performance forecast for the first half of the year on July 12: a net profit of 30.5 million to 36.5 million yuan, turning a profit from a loss year-on-year. A satellite manufacturing leader with a market value of 100 billion yuan has a profit of just over 30 million in half a year.

Meanwhile, upstream Zhenlei Technology reported over 400 million yuan in revenue for Q1, with a profit margin of 31%, and Bolite's Q1 revenue increased by 40.5%, with net profit doubling. Downstream Aerospace Hongtu's Q1 revenue plummeted by 86% and has already been designated as ST.

These catalysts are interconnected. Successful rocket verification, IPO landing, reusable flights, bulk orders, and mid-year report confirmations—each step of verification adds weight to the industrial logic and influences the timing of the transfer of pricing power.

03. Conclusion

The countdown for a rocket launch and the entry of funds are not the same.

The successful recovery of the Long March 10 B marks a historic breakthrough for China's commercial aerospace. The recoverable technology has crossed the most critical hurdle, and the path for cost reduction has been opened. From an industrial perspective, this is a clear positive signal.

Commercial aerospace is a long and gradual path. Industrial trends cannot be achieved overnight; they evolve progressively, and last week's technological breakthrough is just a key step in this long process.

However, a positive signal from the industry does not equate to immediate market recognition.

Whether funds sufficiently confirm that this sector has reached an inflection point remains to be seen. Currently, the sector's volatility remains extremely intense—limit up on Friday, crash on Monday, and the pricing system dominated by quantitative trading has not yet exited. The profit differentiation between upstream gains and downstream losses has not narrowed either.

Investors looking to position themselves in this sector must recognize that there is still a considerable distance between the industrial inflection point and the pricing power inflection point.

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