**Key Takeaways** 1. November concluded with a volatile market trend, signaling a potential shift from liquidity-driven momentum to fundamentals-driven dynamics. Data shows a reversal in financing balances, turning net negative after six consecutive months of inflows, while ETF inflows slowed significantly, suggesting the end of liquidity-fueled rallies. (Source: Wind)
2. Looking ahead to 2026, fundamentals are expected to play a more pivotal role. Major foreign investment banks project improved corporate earnings growth in China’s equity market, which could drive further upside. However, profit recovery remains uneven, as seen in recent industrial enterprise data, indicating short-term fluctuations that may influence market performance.
3. December is anticipated to see lower market volatility, with implied options volatility dropping to historically low levels, reflecting cautious risk appetite. Investors may consider positioning for 2026’s fundamental recovery while aligning with risk tolerance. (Source: Wind)
**Market Transition in November** A-shares quietly shifted gears in November. Over the past three months, ETFs and margin financing were the primary market drivers, with financing balances surging over CNY 600 billion from July to October and ETF inflows nearing CNY 120 billion. However, November saw ETF inflows shrink sharply to just over CNY 20 billion, while financing balances turned negative after six months of net inflows. (Source: Wind)
**2026 Outlook: Fundamentals Take Center Stage** UBS’s latest report, *2026 China Equity Strategy Outlook: Another Leap?*, predicts market performance will hinge more on earnings growth (projected at 10% EPS growth for MSCI China index constituents) than valuation expansion. Morgan Stanley shares optimism, forecasting 6% profit growth for Chinese firms in 2026, potentially rising to 10% by 2027. Goldman Sachs expects a 30% rally in major Chinese indices by end-2027, driven by 12% earnings growth and valuation re-rating. (Source: Securities Star)
**Profit Recovery Requires Patience** Industrial profit data reveals intermittent recovery trends, warranting further monitoring. Coupled with year-end defensive positioning, December’s market volatility is likely to ease, as reflected in declining implied volatility and subdued risk appetite.
**Today’s Market Snapshot** - **Equities**: The Shanghai Composite fell 1.67% monthly, retreating from a decade-high mid-month to end a six-month winning streak. The ChiNext Index dropped 4.23%, while the Shenzhen Component showed a "dip-and-rally" pattern. On November 28, A-shares traded narrowly with CNY 1.6 trillion turnover (vs. CNY 1.72 trillion previously). The SSE gained 0.34%, the SZSE rose 0.85%, and the ChiNext added 0.7%. (Source: Wind) - **Bonds**: Mixed closes for treasury futures—30-year up 0.05%, 10-year up 0.03%, while 5-year and 2-year contracts dipped 0.03% and 0.02%, respectively. (Source: Wind) - **Global Markets**: U.S. markets were closed for Thanksgiving. Europe’s STOXX 600 edged up 0.12%, nearing a two-week high. The FTSE 100 was flat, while the DAX and CAC-40 rose 0.2% and 0.04%. (Source: Wind) - **Commodities**: Brent crude rose 0.61% amid thin holiday trading, while COMEX gold fell 0.3%. (Source: Wind)
**Other Highlights** 1. The ECB signaled no rush to cut rates, with some policymakers questioning whether the easing cycle had ended. Minutes from its October meeting emphasized maintaining current rates as a buffer against shocks. 2. OPEC+ is likely to keep oil output unchanged at its upcoming meeting and finalize a mechanism to assess member production capacities, maintaining its 2026 Q1 output freeze.
**Risk Disclosures** Investment advisory services are provided by YinHua Fund Management Co., Ltd. Strategies may include funds managed by YinHua or third parties. Investors assume all risks and should assess suitability independently. Past performance does not guarantee future results. Pilot-phase advisory services carry regulatory uncertainty.
*Disclaimer: Market risks apply; investments involve uncertainties.*
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