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Spots are limited, and they will go quickly. Let us go together to honor the promise of sustainability! [Click to register] Last week, the A-share market pulled back overall, with major stock indices all closing lower. From the perspective of the Shenwan Level 1 industries, only food and beverage and banking performed relatively well, while communications, electronics, and power equipment were weaker.
Macro analysis: The rebound in oil prices remains the main driver of stronger domestic prices. Overseas, U.S. CPI for September broadly exceeded expectations, with core items being the main source of the upside surprise: September CPI rose 0.65% month on month, compared with the previous reading of 0.4%; core CPI rose 0.33% month on month, versus expectations of 0.2%; CPI rose 3.74% year on year, versus expectations of 3.6%; core CPI rose 2.56% year on year, versus expectations of 2.5%. Compared with the disturbance from a small number of items in August, the rebound in core goods and services month on month in September was broad-based, the diffusion of inflation increased, and the three-month annualized rate of supercore inflation rose to a high level above 4%. Looking ahead, if oil prices continue to fluctuate at high levels, the significance of the "base effect brought by high oil prices" may weaken: first, the extent of the oil price decline is limited, so the base effect it creates is even more limited; second, the persistence of high oil prices means greater risk of inflation diffusion. Although uncertainty around geopolitical events is very high, the market is currently more worried about upside risks to oil prices, which will strengthen the risk that expectations for a Fed rate hike in October rise. Domestically, the rebound in oil prices remained the core driver of stronger prices in September. Data released by the National Bureau of Statistics showed that China's CPI growth rebounded to 0.9% year on year in September, while PPI growth rebounded to 5.0% year on year. Gains in oil prices and chemical-related industries drove PPI up by about 0.6 percentage points month on month and about 2.0 percentage points year on year; CPI growth rebounded by 0.1 percentage points from August, with gasoline prices contributing about 0.47 percentage points. Prices in AI-related industries such as electronics continued to rise; price conditions in the building materials chain improved marginally, corroborating the rebound in the September construction PMI to 50.3%. The PPI-CPI scissors gap widened to 4.1 percentage points, the largest since May 2022. Looking ahead, oil prices remain the biggest variable. If oil prices fall, CPI growth will face pressure while core CPI and food prices have yet to take over as drivers. At the same time, data from the General Administration of Customs showed that China's export growth in September once again exceeded expectations. In U.S. dollar terms, China's exports grew 36.3% year on year (market expectation 25%, previous reading 25.0%), while imports grew 31.0% year on year (previous reading 28.2%). The September goods trade surplus rose to $133.5 billion (previous reading $119 billion). Specifically, there were three marginal changes: 1) exports of high-tech products maintained high growth, while exports of non-high-tech products also resumed an upward trend. 2) Exports to both the United States and non-U.S. regions accelerated at the same time, with ASEAN and the European Union contributing greatly to September export growth, and exports of goods such as mechanical and electrical products, automobiles, and furniture surging again after flattening. 3) From high-frequency freight indicators, export volumes may have stabilized, and the divergence between price and volume has also narrowed somewhat.
Investment strategy: Focus on sectors and individual stocks with healthy microstructures. At present, the overall broad market index is oscillating and weak. Some relay funds have entered the market, but short-term market sentiment has still not reversed clearly. Low trading volume highlights that weak sentiment may persist, and a recovery rally still needs time. The reasons include the following: at present, after A-shares fully priced in industrial narratives in the first half of the year, there is temporarily a lack of new large-scale growth narratives and investment stories to drive an upward revision of overall expectations, and at the logical level the market has entered a "waiting period." At the same time, since August, the pace of incremental funds entering the market has slowed noticeably, and the market state has also temporarily shifted from an incremental state to a stock-game state, so the impact of microstructure on the market will increase. Short-term "gray rhino" factors such as Fed rate hikes, the inflation situation, and external geopolitical uncertainty will also constrain risk appetite. In terms of direction, investors can pay attention to a more balanced and diversified strategy approach, focusing on sectors and individual stocks with "healthy microstructures" plus "expectations that can be revised upward." 1) Domestic supply chain technology: with more overseas sanctions and trade disputes, the need for self-control and self-reliance increases, and in 2027 China's AI sector has an independent development narrative. Investors can watch domestic chips/upstream semiconductor components and materials/high-end equipment/pharmaceuticals, etc. 2) Strategic resources: under a complex international situation, demand for resource security rises, and geopolitical conflicts plus AI construction demand will also tighten supply and demand for bulk commodities. Investors can watch precious metals/industrial metals/rare metals/petrochemicals/agricultural products, etc. 3) Financials and high dividends: demand for portfolio stability is increasing, while new insurance fund rules raise the willingness to allocate to dividend assets. Investors can watch banks/brokerages/utilities and public services/telecom operators/leading real estate companies, etc. Disclaimer: The information contained in this newsletter comes from sources the company believes to be reliable and from the personal judgment of researchers, but the company does not provide direct or implied statements or guarantees regarding its accuracy or completeness. This newsletter is not a complete statement or summary of the relevant securities or markets, and any opinions expressed may change without further notice. This newsletter should not be accepted by recipients as a substitute for their own independent judgment or as a basis for investment decisions. The company or its related institutions, employees, or agents shall not be liable to anyone for the use of all or part of this content or for any losses arising from it. Without the prior written permission of Great Wall Fund Management Co., Ltd., no one may distribute, copy, reprint, or publish this report or any part of it in any form, and no abridgement or modification of this newsletter contrary to its original meaning may be made. The fund manager reminds that every citizen has the obligation and right to report money laundering crimes. Every citizen should strictly comply with relevant laws and regulations on anti-money laundering. Markets carry risks, and investment should be approached with caution. MACD golden cross signals have formed, and these stocks have performed well!
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