On October 12, major A-share indices opened collectively lower, with previously hot sectors such as seed industry, optical chips, and CPO leading the declines, and market sentiment clearly cooling. Yet against this backdrop, structural opportunities still emerged: AI comic drama, gaming media, and short drama concepts continued their pre-holiday strength, with multiple stocks hitting consecutive limit-ups; in the innovative drug concept, Lummy Pharmaceutical and North China Pharmaceutical quickly hit the daily limit right after the open. The market was consolidating amid volatility, but capital was rapidly rotating between sectors.
Facing a market of "index consolidation and structural rotation," industry insiders believe the most prudent approach is a barbell allocation of "technology plus dividend." As for how to position specifically, readers can also obtain more investment opportunities for free from the video in this article.
Indices Open Lower and Drift Down
Today, major A-share indices all opened lower, with a host of previously hot sectors such as seed industry, optical chips, and CPO leading the declines. Among individual stocks, more than 4,300 share prices retreated over the course of the day, and the profit-making effect was relatively weak. There are three core factors behind the market's lower open and drift down.
First, external sentiment transmission. After the holiday, the A-share technology sector was already in a correction channel, and the direct triggers were overseas expectations of export restrictions on optical modules and doubts about the pace of AI commercialization brought by OpenAI's revenue data falling short of expectations. The AI computing power direction, as a hot main line in A-shares, bore the brunt.
Second, the suppression of the high interest rate environment. The 10-year U.S. Treasury yield briefly broke above 5.35%, hitting a multi-year high. High global interest rates mean a higher opportunity cost of capital, creating valuation pressure on high-valuation growth sectors. This is precisely why foreign institutions repeatedly emphasize that "high interest rates are a normal condition that must be dealt with."
Third, leverage structure adjustment and geopolitical disturbances. In a recent view, CITIC Securities pointed out that A-shares are in a second wave of leverage structure adjustment, compounded by overseas liquidity tightening and Middle East geopolitical disturbances, with risk appetite continuing to come under pressure.
But even in this context, some sectors and stocks still rose against the trend. The AI comic drama concept continued its pre-holiday strength, with Decai Co., Ltd. hitting a one-word limit-up and notching three limit-ups in four days (see Figure 1); Ciwen Media hit two consecutive limit-ups; Bona Film Group, H&R Century Union, and Zhangyue Technology also rose strongly to the limit. The catalyst for this direction comes from a two-way drive of policy and industry. The Beijing Municipal Radio and Television Bureau previously issued management measures to support the high-quality development of the "AI plus audiovisual" industry, while the implementation of AI short dramas and AIGC long dramas validated the real logic of "content cost reduction." Before the holiday, a group of media stocks including Chinese Online, Mango Excellent Media, and Shanghai Film had collectively hit the limit-up, and the heat has now successfully extended beyond the holiday.
In the pharmaceutical sector, North China Pharmaceutical, Lummy Pharmaceutical, and Haixin shares hit the limit-up one after another. After deep corrections earlier, the pharmaceutical sector's valuation is at a historical low. When volatility in technology stocks increases at high levels, capital usually flows back to such defensive growth directions that have "fallen enough and have earnings certainty."
Ge Weidong Makes His Move
Facing a market of "index consolidation and structural rotation," the mistake ordinary investors are most prone to make is jumping back and forth chasing the day's limit-up stocks. A more prudent approach is to understand the "two legs" of the current market.
CICC proposed a vivid barbell allocation framework of "technology plus dividend": on the left hand, allocate offensive technology growth to pursue elasticity; on the right hand, allocate defensive dividend assets to provide stable cash flow. The focus is on positioning at both ends while reducing exposure to mediocre sectors in the middle.
Dividend assets are suitable as a base position. In an environment of high interest rates, low growth elasticity, and repeated swings in risk appetite, companies with steady profits and cash flow, sustainable dividends, and reasonable valuations can provide stable cash returns and portfolio stability. This is also the core of CITIC Securities' recommendation to "prioritize defense and use dividends as the base position."
Technology assets are suitable for the offensive end. The key is to pick companies with "clear industry trends, long-term competitive advantages, and earnings that can be delivered," rather than indiscriminately buying concepts. Standard Chartered also emphasized that the ecosystem chain for monetizing technology applications and raising productivity is the real opportunity in the second half of AI.
CITIC Securities offered a more specific short-term response strategy: in a high interest rate environment, focus on two directions—prosperous varieties and supply-cleared varieties. So-called prosperous varieties are areas where third-quarter earnings are expected to grow strongly or improve; supply-cleared varieties are segments where the industry's competitive landscape has already been cleared and supply is scarce.
Regarding positioning in the technology sector, well-known investor Ge Weidong, who enjoys high popularity in the market, recently made another move. On the evening of October 8, Sinoma Science & Technology, a leader in AI specialty fiber cloth, disclosed the result of its private placement. The company issued 87.1819 million shares to 15 targets at 51.40 yuan per share, raising a total of about 4.481 billion yuan. Among them, Ge Weidong was allotted 13.6187 million shares, with a subscription amount of about 700 million yuan, becoming the company's fifth-largest shareholder, with a six-month lock-up period (see Figure 2). It is also worth noting that in the second quarter of this year, Wang Ping, who is related to Ge Weidong, had already entered Sinoma Science & Technology's top ten shareholders as a new holder, with 7.4639 million shares at the end of the quarter (see Figure 3). By then, the two had combined holdings of 21.0826 million shares. Based on the closing price on October 12, the combined market value of their holdings was about 1.097 billion yuan.
Of course, entry by a star investor does not mean the stock price will immediately rise. Sinoma Science & Technology's highest gain in the first half of the year once exceeded 170%, and it has corrected sharply since the end of June. After the private placement announcement, the stock price is still fluctuating. Competitive risks brought by industry capacity expansion, as well as the pace of valuation realization, are variables that need to be watched. It is fine to follow the direction of big names, but do not simply copy their positions.
What Are Foreign Institutions Saying?
If Ge Weidong represents the movement of domestic smart money, then the recent statements of foreign institutions constitute another signal. On October 9, Chinese assets in U.S. stocks collectively surged, with the Nasdaq Golden Dragon China Index closing up 2.69%, and Alibaba, Li Auto, and Tencent Music all rising more than 5%. Supporting this rally was also a "systemic shift" by overseas investment banks in allocating to Chinese assets.
In its October China market outlook, Standard Chartered proposed that Chinese assets are now more balanced: stocks and bonds have returned to a relatively balanced level, and growth and value styles have returned from overvaluation to reasonable levels. Standard Chartered set Chinese equities as a core allocation, reasoning that in the face of geopolitical uncertainty, China's economy has shown relative resilience, is less affected by oil price shocks, and is developing rapidly in technological innovation and AI localization investment. By sector, Standard Chartered is overweight information technology, communication services, energy, and raw materials, and underweight consumer, utilities, and real estate.
Goldman Sachs maintained an "overweight" rating on China A-shares in its report "The 720: Investing in a Differentiated Asia," arguing that Chinese assets are high-quality targets for diversified allocation, and that A-shares are superior to H-shares. Goldman Sachs expects the MSCI Asia ex-Japan Index to deliver a 26% return in U.S. dollar terms over the next 12 months, with the core basis being an AI-driven long cycle in technology hardware.
Citi recently raised Chinese equities to "overweight" in emerging market asset allocation, arguing that as the rally spreads, China's stock market has the conditions to perform. In addition, UBS Securities expects A-share earnings to grow 15% in 2026; BlackRock maintained a neutral stance on Chinese equities but explicitly focuses on AI hardware, power grid equipment, and physical AI; Invesco is bullish on China's technology ecosystem; Fidelity International also pointed out that the A-share forward price-to-earnings ratio is only about 10 times, below the historical average, leaving room for improvement in both earnings and valuation.
Data from the Securities Association of China show that as of the end of June this year, overseas institutions and individuals held 4.66 trillion yuan of domestic stocks, an increase of nearly 30% from the end of the previous year. For ordinary investors, the most valuable reference right now is not guessing index levels, but understanding two main lines: first, foreign allocation to Chinese assets is moving from "the end of reducing positions" to "re-evaluation"; second, domestic smart money is still firmly positioning in the long-term track of hard technology. A barbell structure with dividends as the base and technology on the offensive may be a relatively prudent choice for navigating a volatile market.
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