According to Zhitong Finance APP, Morgan Stanley Fund stated that in October, A-shares fell for a second consecutive month, with the decline widening notably, as the Shanghai Composite Index retreated from around 3,840 points to near 3,600 points, down 6.33%.
In terms of style, large-cap value significantly outperformed while small-cap growth plunged; capital increased its defensive posture, with oil & petrochemicals, banks, and food & beverage leading gains while technology led declines. The main reason: crowded positioning in some tracks earlier, concentrated unwinding of positions, and capital rotating toward assets with earnings certainty.
In terms of rhythm, the post-holiday rebound lacked momentum, with two sharp drops in late October, and the 3,600-point level was lost at month-end. Morgan Stanley Fund noted that the market faced pressure from three fronts.
The first is the continuation of negative overseas AI developments: leading companies' revenue guidance diverged, deteriorating free cash flow triggered doubts about both earnings and credit, investment banks broadly cut target prices and earnings outlooks, and computing power leasing prices fell more than 70% from their peak; financing conditions also tightened in tandem, with AI-related bond issuance surging while credit spreads widened, and the market continued to reprice the sustainability of the boom narrative.
The second is rising geopolitical concerns: the market worries that U.S.-Iran conflict may intensify after the midterm elections. The U.S. has reportedly notified Gulf states to prepare for the possibility of resuming strikes as early as November 4, while Iran has said it may strike first if necessary. If the conflict escalates, oil prices could spike again, and imported inflation and risk-aversion would simultaneously weigh on risky assets.
The third is weaker-than-expected Q3 earnings verification for A-shares: the net profit growth rate for all A-shares slowed from the interim report, and some leading companies' results fell short of expectations, undermining capital's confidence in holding shares.
The continued fermentation of negative factors triggered a negative feedback loop in capital flows: margin financing balances saw a net outflow of more than 180 billion yuan in October, with cumulative outflows exceeding 600 billion yuan since the May peak. Margin positions declined for multiple consecutive days, with electronics and communications the main sectors from which funds withdrew. Net subscriptions to equity ETFs exceeded 360 billion yuan that month, but this support was difficult to fully offset the outflows.
Entering November, concerns over Q3 earnings are removed, and the market enters an earnings vacuum period for a relatively long time; unfavorable overseas factors may be difficult to reverse in the short term, but the negative feedback in capital flows is a trading-level factor that requires external intervention to break.
Over the weekend, media reported that the central bank, securities regulator and other financial ministries will hold a meeting on November 2 to study support for the capital market. Tools such as stock buyback and shareholding increase relending are expected to receive new quotas on the order of 200 billion yuan, with one state-owned major bank's new quota to Guoxin and Chengtong potentially reaching 100 billion yuan. Stabilizing-market funds are being substantially increased, and capital conditions may improve.
Historically, the concentrated use of these two tools has occurred in stress windows and effectively supported the market. If this increase is implemented as expected, companies that previously had不高 valuations and stable growth may be the first to recover — such assets combine earnings certainty with valuation safety margins and often attract incremental capital replenishment early in a capital-condition recovery.
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