On September 28, the first trading day after the Mid-Autumn Festival holiday, the A-share market experienced significant volatility and correction. The Shanghai Composite Index fell 1.67%, the Shenzhen Component Index dropped 3.44%, and the ChiNext Index declined 4.53%, with total market turnover of approximately 1.7 trillion yuan and more than 4,500 individual stocks closing lower.
The communications equipment sector, which had been highly popular earlier, saw a notable pullback in this round, with multiple communications and computing power-themed ETFs among the biggest decliners, with the largest drop exceeding 7%. It is worth noting that although some tech-focused ETFs fell sharply, they still attracted net capital inflows against the trend. Interviewees believe that the tech sector will continue to diverge going forward, and beyond the tech mainline, dividend assets also offer allocation opportunities.
Communications and Other Tech ETFs Plunge
The tech sector underwent another deep correction, with computing power-related concepts showing particular weakness. Wind data shows that as of the close on September 28, the optical module concept index fell more than 7%. Specifically, the communications sector (Shenwan Level 1 industry) plunged 7.36%, the largest decline among all industries, with multiple trillion-yuan market cap bellwether stocks in the sector taking heavy hits. Among them, optical fiber leaders Hengtong Optic-Electric and FiberHome Telecommunication Technologies hit the daily limit down, while Zhongji Innolight fell more than 9%, with its market cap dropping below the trillion-yuan mark; Eoptolink Technology and T&S Communications, among other core optical communication targets, all declined more than 8%.
Dragged down by the sector as a whole, communications-themed ETFs led the declines across all market ETFs. Data shows that Guotai Communications ETF fell 7.66%, Fullgoal Communications ETF dropped 7.33%, GF ChiNext Computing Power ETF declined 7.02%, while GF Communications ETF, ChinaAMC Communications ETF, and Harvest Communications ETF all fell more than 6%. Da Cheng ChiNext Artificial Intelligence ETF and E Fund ChiNext Artificial Intelligence ETF also dropped more than 6%. The underlying indices tracked by these ETFs are all related to the AI industry chain.
Despite the heavy losses suffered by communications and other tech sectors on that day, from a short-term capital flow perspective, tech ETFs still saw net inflows. Data shows that as of September 25, since the beginning of September, ChinaAMC STAR 50 ETF, E Fund ChiNext ETF, E Fund Growth ETF, ChinaAMC STAR Semiconductor ETF, and Guotai Communications ETF each received net capital inflows exceeding 2 billion yuan. Over a longer time frame, ChinaAMC STAR Semiconductor ETF and Guotai Communications ETF each received net capital inflows exceeding 30 billion yuan year-to-date.
Short-Term Tech Stocks Have Heavy Profit-Taking Pressure
Han Wei, Managing Director of Taishi Investment, said in an interview with the International Financial News reporter that the core of this correction is not a major deterioration in fundamentals, but rather a combination of multiple factors. First, trading has become too crowded. Han Wei believes that the tech mainline, including computing power, has risen for multiple consecutive rounds, with profit-taking positions and emotional capital piling up heavily. Once high-level themes show signs of retreat, stampede-style profit-taking easily occurs. "The volume-driven decline is more like squeezing out previously overextended valuations and sentiment."
Second, capital is rotating and repositioning. "On the same day that growth stocks were killing valuations, defensive directions with high dividends and low valuations such as banks and oil & gas were rising, indicating that a considerable portion of capital is making defensive reallocations, taking profits from earlier gains and switching to relatively safer places. This seesaw itself is a reflection of rising risk-aversion sentiment."
Finally, there is resonance from the external environment and news flow. Han Wei stated that overseas tech stock volatility combined with disturbances from news in segments such as optical modules was amplified in an already fragile market sentiment, accelerating the sector's decline. Combined with the approaching holiday, some capital chose to exit and wait on the sidelines, further amplifying selling pressure.
Han Wei said that going forward, tech stocks will become more differentiated, and it will be difficult to see the broad rally of the past again, with more of a shift from buying sectors to selecting individual stocks. "Investors are expected to be more willing to tilt positions toward directions with stronger earnings certainty and more fully digested valuations, such as optical communications, PCB, and some domestic computing power leaders with order and profit support. The cost-effectiveness of such targets is improving after the correction."
In contrast, Han Wei believes that pure theme plays that remain at the concept and thematic level without earnings realization have already overextended their gains earlier. Even if the medium-to-long-term logic still holds, they need time to digest valuations through earnings. From a medium-to-long-term perspective, the core logic of computing power as a strategic direction has not changed, and industry prosperity remains. However, in the fourth quarter, more attention should be paid to structural opportunities, anchoring to fundamentals, and it is not advisable to continue chasing purely thematic targets with crowded trading.
For ordinary investors, Han Wei advises against blindly chasing rallies or panic-selling during sharp declines, and to patiently wait for market sentiment to stabilize. Returning investment judgment to the fundamental of earnings realization will make investing more composed compared to chasing short-term price fluctuations.
Medium-to-Long-Term Focus on Tech and Dividends
Recently, the Shanghai Composite Index has continued to correct, once again falling below 3,900 points. In response, Golden Eagle Fund believes that the A-share decline before the holiday may be mainly driven by trading factors. The current market has already priced in many negative factors such as geopolitics, oil prices, and high interest rates. A post-holiday market rebound may still be expected, and patient buying at current levels could bring unexpected surprises.
Lombarda China Fund also believes that the index weakness is more about insufficient willingness to absorb, which may be related to the holiday effect and concerns about external uncertainties. It suggests focusing on strategic resources (non-ferrous metals/chemicals/oil shipping), AI (hardware/mispriced applications/robotics), and new energy in the medium-to-long term, while paying short-term attention to dividends (export chain/domestic demand), AI, and precious metals.
Great Wall Fund believes that September to November is a traditional window for密集 catalysts in the overseas AI industry in the second half of the year, and subsequent resonance catalysts are expected to increase. The domestic tech sector has repair opportunities following overseas mapping. In terms of investment rhythm, short-term investors can follow the tech industry cycle with more focus on tech; if tech or the index reaches highs, they can gradually shift attention to cyclical or high-dividend sectors. In terms of direction, the tech sector can focus on optical communications, semiconductors, and other AI hardware directions; the high-dividend sector can focus on banks, coal, etc.; the cyclical sector can focus on hog farming, etc.
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