Zhongtai Securities released a research report suggesting investors adopt a balanced allocation strategy to navigate the current market uncertainty while patiently awaiting a renewed focus on the technology sector. This week saw a broad-based decline in trading volumes, with the tech sector experiencing the steepest drop, signaling an accelerated style shift through market correction.
Key observations on fund flows: 1. Broad-based ETFs recorded accelerated net inflows, while northbound and southbound capital maintained balanced allocations. 2. Leveraged and institutional funds accelerated net outflows, reinforcing the equilibrium trend between northbound and southbound investments. - Leveraged trading activity declined significantly, falling below the "mean +1 standard deviation" level, comparable to early August. Hot stocks largely deleveraged, with inflows shifting to basic chemicals, power equipment, and agriculture. - Institutional funds saw intensified net outflows, though the absolute volume remained below the October 30 level. - Northbound capital countercyclically increased positions in banks despite an overall decline in heavy holdings. - Southbound capital continued balanced allocations, with notable net inflows in retail, electronics, banking, and real estate.
ETF purchases stood out as the sole net inflow amid widespread capital withdrawals. From Monday to Thursday, broad-based ETFs (excluding the STAR 50 ETF) saw higher daily net inflows than the prior week, followed by a surge on Friday.
**Catalysts for Adjustment**: 1. Global liquidity concerns triggered by U.S. government shutdown risks and lowered rate-cut expectations. Traditional safe-havens like gold and silver fell alongside equities, while domestic bond markets showed muted reactions. 2. Renewed "AI bubble" debates dampened risk appetite. Despite Nvidia’s strong Q3 earnings, subsequent skepticism and price declines dragged down China’s tech stocks. 3. Calendar effects and futures expirations amplified volatility, particularly on November’s monthly derivatives settlement day (Nov 21).
Year-end capital divergence and event-driven catalysts pushed sentiment indicators lower, with the VIX index and domestic futures basis reflecting cooled risk appetite.
**Recommended Strategy**: Zhongtai’s balanced portfolio—designed to hedge against tech volatility—includes: 1. **Financials** (banks/insurance) to offset tech swings. 2. **Chemicals** (cyclical sector). 3. **Innovative pharma**, benefiting from warming U.S.-China narratives.
The firm anticipates a market refocus on tech, potentially within 2023, with sharp corrections accelerating this transition.
**Risks**: Data estimation errors, unforeseen macro fluctuations, market volatility, and delayed information updates.
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