Short-term adjustments have deepened just after the Mid-Autumn holiday, with market participants searching for explanations: notable pullbacks in neighboring Asia-Pacific stock markets, rising expectations of a Federal Reserve rate hike in October, and growing uncertainty around U.S.-Iran talks. Amid these disruptions, some investors grew cautious and chose to hold cash over the holiday. Experts say that as the new positioning of China-U.S. relations is further enriched, the marginal impact of external disturbances will gradually fade, while overall stable economic performance and continuously improving fundamentals of listed companies provide support for the capital market to withstand external shocks.
Further enrichment of the new China-U.S. relationship positioning
Economic and trade cooperation is an important part of China-U.S. relations. From September 20 to 23, Chinese and U.S. economic and trade teams held the eighth round of consultations in New York and Washington, reaching positive consensus and contributing economic and trade outcomes to the meeting between the two heads of state. Both sides agreed to establish a China-U.S. Trade Council and a China-U.S. Investment Council, and reached a reciprocal tariff reduction arrangement of "30 billion versus 30 billion"; they also set up an agricultural working group, established a China-U.S. artificial intelligence dialogue, and extended the joint arrangement of the Kuala Lumpur economic and trade consultations to January 10, 2027. The Ministry of Commerce stated that the China-U.S. Trade Council will provide an important platform and institutional safeguard for the two sides to "continuously lengthen the cooperation list and compress the problem list" in the economic and trade field, "helping build a constructive strategic stability relationship between China and the U.S." and creating a stable and predictable policy environment for cooperation between enterprises of both countries. For the capital market, stabilizing and improving China-U.S. relations helps ease external uncertainty and improve risk appetite for funds, providing more stable expectations for sectors such as foreign trade, the export chain, and technology growth. The RMB exchange rate has remained basically stable, and foreign capital continues to increase its allocation to Chinese assets, confirming a steady recovery in international investor confidence.
Fundamentals of tech stocks remain intact
Judging from today's performance of the A-share and external markets, the technology sectors such as the STAR Market and ChiNext were most affected. The long-term trend of an industry is still determined by the quality of its fundamentals. According to the latest data from the National Bureau of Statistics, in the first eight months of this year, profits in the electronics industry grew 1.1 times year-on-year, contributing 62.0% to the profit growth of all industrial enterprises above designated size, an important support for the relatively rapid profit growth of industrial enterprises above designated size. Among them, emerging scenarios such as new energy vehicles, the Internet of Things, and computing power centers drove increased demand for chips, with profits in the optoelectronic device manufacturing and semiconductor discrete device manufacturing industries growing 72.0% and 51.8%, respectively; the rapid development of the electronic basic materials field drove profits in the electronic special materials manufacturing and electronic circuit manufacturing industries up 2.3 times and 49.1%, respectively. Driven by stronger demand, technology companies have entered a fast track of performance realization. Represented by the STAR Market, companies on the board achieved total operating revenue of 1.01 trillion yuan and net profit of 144.887 billion yuan in the first half of the year, up 38.6% and 437.6% year-on-year, respectively, with net profit exceeding the full-year level of the previous year. Among them, 36 growth-tier enterprises continued to unleash innovation vitality, steadily improved operational quality and efficiency, with revenue up 29.1% year-on-year and losses sharply reduced by 62.3%, as the new force of science and technology accelerates its growth. The long-term growth trend of performance requires a continuous supply of research and development support. In the first half of the year, the total R&D investment of entity companies on the Shanghai Stock Exchange exceeded 475 billion yuan, up about 6.5% year-on-year.
The market is not lacking liquidity
Regarding the recent decline in trading volume that has drawn market attention, experts also said that "the market is not lacking liquidity; what it lacks more is confidence." Facing rising expectations of external rate hikes, China has consistently adhered to an "own-priority" fiscal and monetary policy. The People's Bank of China proposed at its third-quarter 2026 meeting that it will continue to implement a moderately loose monetary policy, intensify countercyclical adjustment, maintain ample liquidity, and safeguard the stable operation of the financial market. Data show that at the end of August, broad money (M2) grew 7.5% year-on-year, and the stock of social financing grew 7.2% year-on-year; in August, the weighted average interest rate of interbank lending and the weighted average interest rate of pledged repo were 1.38% and 1.4%, respectively, both at historic lows. In addition, China's abundant foreign exchange reserves provide a strong guarantee for coping with external disturbances. As of the end of August 2026, the scale of foreign exchange reserves reached 3.4383 trillion U.S. dollars, ranking first globally for a long time. The ecosystem of "long-term money for long-term investment" continues to be consolidated. Since the beginning of this year, medium- and long-term funds such as social security, annuities, and insurance have made a total net purchase of more than 600 billion yuan in A-shares, and their holdings of A-share tradable market value continued to grow by 12.5% compared with the end of 2025. It is understood that since the beginning of this year, the Shanghai Stock Exchange has promoted the listing of 8 STAR Market broad-based ETFs and 19 STAR Market industry-themed ETFs, covering sub-themes such as STAR chips, STAR chip design, and STAR artificial intelligence, further enriching the "toolbox" for STAR Market investment. As of September 24, 2026, the Shanghai Stock Exchange had listed a total of 150 STAR Market ETFs, with an overall scale of about 389.8 billion yuan, continuously and effectively guiding social capital to gather in the field of scientific and technological innovation.
Institutions are actively optimistic about the market
As to whether investors should cautiously hold cash over the holiday, many institutions advise investors to be more firm in confidence. Xu Jinfeng, chief strategy analyst at Caitong Securities, believes that the rebound in A-share volume from the bottom and the digestion of negative factors on the overseas denominator side have further reduced downside risk. Qiu Xiang, chief A-share strategy analyst at CITIC Securities, also said that in an environment where the industrial prosperity trend has not yet cooled, but the ceiling of long-term narratives has been touched and priced to a certain extent, the probability that a round of sharp adjustment will directly end the market is very low. Foreign institutions are also expressing optimism about the market through practical actions. Wind data show that as of September 27, 640 foreign institutions have participated in research on A-share listed companies during the year, with a total of 5,949 research visits. The intensive research schedules of foreign institutions reflect international capital's recognition of China's economic resilience, industrial upgrading results, and scientific and technological innovation capabilities. The certainty, scarcity, and global allocation value of Chinese assets are constantly emerging, and their long-term appeal is increasingly strengthening. A recent report released by the Norwegian Government Pension Fund showed that as of June 30, 2026, the Norwegian Government Pension Fund held 658 Chinese stocks, with a total position market value exceeding 47 billion U.S. dollars (about 340 billion yuan); Wind statistics show that as of the end of the second quarter of this year, the Abu Dhabi Investment Authority held 65 A-shares, with a position market value of 24.992 billion yuan. Public fund views are equally positive. China AMC said that with corporate profits continuing high growth and fundamentals firmly supported, the market has upward momentum, and it is currently in a key window of "profit verification," with A-share profits expected to continue recovering in the fourth quarter. At present, the CSI All Share Index valuation is 20.3 times, at the 69.6% historical percentile, with a price-to-book ratio of 1.75 times, having fallen significantly from the high point in the first half of the year. Concerns not related to performance have been priced to a large extent, and the probability of valuation repair is relatively high. Huatai-PineBridge Fund also said that the resilience, vitality, and stability of China's capital market do not depend on a single industry or individual listed company, but stem from systematic support jointly formed by economic fundamentals, the financing landscape, and policy support. External environmental disturbances are generally controllable, and domestic policies maintain independence and resolve; China's monetary policy adheres to "own-priority," the macro-prudential toolbox continues to be enriched, and the ability to withstand external shocks has significantly strengthened.
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