On Wednesday (October 21), the A-share market collectively spiked and then retreated, with the ChiNext Index falling 1.62% after earlier gaining nearly 1%. Combined turnover across the two exchanges was approximately 1.43 trillion yuan, a contraction of about 26.8 billion yuan from the previous trading day, reflecting an overall weak and range-bound market.
Computing power hardware defied the broader downtrend, with the optical module supply chain rebounding. The high "optical" exposure ChiNext Artificial Intelligence ETF Huabao (159363) underlying index rose 1.73%. Edge AI and physical AI remained active for consecutive sessions, with the STAR Market Artificial Intelligence ETF Huabao (589520) and STAR Market Chip Design ETF Huabao (589430) underlying indices both gaining over 1%. The driving force came from a recovery in overseas AI trading, combined with persistently high demand for optical modules and optical chips.
The software sector, primarily focused on data services, was also active in tandem. The Cloud Computing ETF Huabao (159099) underlying index rose 1.16%, the Big Data ETF Huabao (516700) underlying index rose 0.95%, and the Software Development ETF Huabao (159036) underlying index rose 0.71%. AI Agents are reshaping software formats, cloud platforms benefit from strong certainty, and the landing of third-quarter reports from computing power leaders has validated sector prosperity, drawing capital attention to the software sector.
The agriculture, animal husbandry, and fisheries sector led gains against the market trend, with the Agriculture, Animal Husbandry and Fisheries ETF Huabao (159275) underlying index rising 1.83%. Affected by El Nino-related restrictions on Peru's anchovy fishing and rising international fishmeal prices, combined with accelerated destocking of breeding sows in the third quarter and growing expectations of a pig cycle reversal, livestock farming and aquaculture stocks collectively strengthened.
Looking ahead, institutions generally believe that A-shares may be poised to oscillate and build a bottom in the short term, and that technology growth stocks may offer repair opportunities after overselling. They recommend buying on dips into prosperity mainlines such as AI hardware and computing power infrastructure, while also monitoring third-quarter earnings delivery and adopting a balanced "technology plus dividend" allocation to cope with volatility.
Where to focus: ChiNext AI, Agriculture, and Software Development ETFs
In individual stocks, the optical module supply chain showed clear internal divergence, with optical components and supporting segments demonstrating greater elasticity. Zhishang Technology surged over 17%, while Photop, Changxin Bochuang gained over 6%, and T&S Communications rose over 5%. Optical module finished-product makers spiked and then retreated, with Zhongji Innolight and Eoptolink turning negative and closing lower.
Compared with optical module finished products, the logic for optical components and related supporting segments is currently "newer," benefiting from multiple catalysts converging: the core drivers are the triple logic of value re-rating, order validation, and supply scarcity.
MPO/passive components are undergoing value re-rating: as NPO/CPO architectures accelerate adoption and FAU iterates toward DFAU solutions, per-channel value has jumped from approximately $1.5 to $21.9, a more than 10-fold increase. Passive components are no longer "low-end consumables," and their strategic value is being repriced by the market.
Large long-term orders are landing intensively: Zhishang Technology announced in early October a $500 million MPO memorandum with a PH customer for 2027, and Shijia Photons also secured a major order, extending order visibility directly to 2027 with extremely strong earnings delivery certainty.
Supply scarcity continues to be validated: Lumentum's CEO stated that optical component capacity is already "sold out" through early 2029, and a supply gap for high-end components objectively exists, giving manufacturers with mass production capability pricing power.
Overall, today's divergence is essentially a "value discovery diffusion" within the optical module supply chain. After leading finished-product makers entered a valuation digestion period, capital dug upstream along the supply chain into supporting components. Combined with catalysts such as large MPO orders and CPO new product production, this formed an intraday pattern of "strong components, weak finished products." This is more a structural rotation than a deterioration in fundamentals, and the long-term logic for optical module finished products (AI computing power demand) remains unchanged.
Shenwan Hongyuan Securities noted that after the sector's third-quarter pullback, investors should focus more on overseas mapping, optical communications prosperity, and earnings delivery. On overseas mapping, the shift from Scale out to Scale up is becoming increasingly significant, with Ethernet and open ecosystems becoming key incremental drivers. On prosperity, as silicon photonics technology accelerates penetration and NPO/CPO solutions advance further, optical communications prosperity is spreading from optical modules to optical components, connectors, chips, cables, OCS, and other segments.
*To position in optical module leaders plus AI applications, consider the ChiNext Artificial Intelligence ETF Huabao (159363) and its off-exchange feeder funds (Class A 023407, Class C 023408), with key exposure to optical module CPO leaders while also covering AI applications. The underlying index has over 35% weight in "Zhongji Innolight + Eoptolink + T&S Communications," making it a core standard-bearer for AI computing power.
Note: As of September 30, 2026, according to CNI, the top three constituents of the ChiNext Artificial Intelligence Index are Eoptolink (weight 12.98%), Zhongji Innolight (weight 12.09%), and T&S Communications (weight 10.8%).
Pig capacity may destock further as livestock farming stocks collectively advance
The agriculture, animal husbandry, and fisheries sector surged against the market trend today. By the close, Dongrui shares hit the daily limit, Chenguang Biotech rose over 6%, and Tiankang Biology, Shennong Group, and Giant Biogene gained over 5%. The Agriculture, Animal Husbandry and Fisheries ETF Huabao (159275) underlying index, the CSI All-Share Agriculture, Animal Husbandry and Fisheries Index, rose 1.83% against the market trend.
Note: As of October 20, 2026, in the CSI All-Share Agriculture, Animal Husbandry and Fisheries Index, the weights of Dongrui shares, Chenguang Biotech, Tiankang Biology, Shennong Group, and Giant Biogene are 0.4%, 0.85%, 1.69%, 0.42%, and 0.89%, respectively.
On the news front, pig prices oscillated downward, and slaughter pressure continued to increase. The latest Yongyi pig price on October 19 was 9.85 yuan/kg, average slaughter weight rose to 129.34 kg, and the price of 7 kg piglets fell to 105 yuan per head. Some analysts believe that looking ahead, supply-side slaughter pressure remains, while demand weakens after the double festivals. The full-year supply rhythm shows a fluctuating pattern of "weak recovery then strong contraction," but supply pressure from herd behavior still warrants caution.
Shanxi Securities stated that if the industry continues to incur losses and cash flow tightens, it may further drive market-oriented capacity reduction, potentially laying the foundation for the next round of pig price upcycles, and recommended attention to certain leading pig farming stocks.
*From a valuation perspective, the current valuation level of the agriculture, animal husbandry, and fisheries sector remains relatively low, and the current period may be a relatively good allocation opportunity. Wind data shows that as of yesterday's close (October 20), the price-to-book ratio of the Agriculture, Animal Husbandry and Fisheries ETF Huabao (159275) underlying index, the CSI All-Share Agriculture, Animal Husbandry and Fisheries Index, was 2.28 times, at a low 8.24% percentile over the past five years, highlighting medium- to long-term allocation value.
Looking ahead, Huayuan Securities stated that palm oil, sugar, cotton, rubber, and other commodities may face more significant production reduction risks in El Nino years. The trending rise in crude oil prices is supporting the bottoming and upward revaluation of agricultural product valuations through the dual paths of "cost push" and "demand resonance." It recommended focusing on sugar, rubber, soybean meal, and related targets whose demand is boosted by rising crude oil prices.
*On pig farming, Guosen Securities noted that industry trends are gradually becoming clear, and the medium- to long-term pig price center is strongly supported. The industry's anti-involution efforts are progressing in an orderly manner, and the current sector valuation is at a historical bottom, with bullish views on sector valuation repair.
*For one-click exposure to the entire agriculture, animal husbandry, and fisheries supply chain, focus on the Agriculture, Animal Husbandry and Fisheries ETF Huabao (159275). According to CSI Index Company statistics, the Agriculture, Animal Husbandry and Fisheries ETF Huabao (159275) passively tracks the CSI All-Share Agriculture, Animal Husbandry and Fisheries Index. Its heavyweight stocks include leading pig farming companies and also cover major sub-sectors of the agriculture, animal husbandry, and fisheries supply chain such as feed, grain planting, and animal health. Off-exchange investors can also access the sector through the Agriculture, Animal Husbandry and Fisheries ETF feeder funds (Class A 013471, Class C 013472).
AI software explodes as IT services strengthen against the trend
The IT Services II sector was active against the market trend, attracting over 3 billion yuan in net inflows from main funds throughout the day, ranking second among all Shenwan secondary industries in terms of capital absorption. Massive Data and Aisino hit the daily limit, Haitian Ruisheng rose over 11%, and Jiuyuan Yinhai, Shuiyou shares, and other stocks followed higher.
At the forefront of AI applications, the Software Development ETF Huabao (159036) tracking index rose as much as 1.77%, closed up 0.71%, reclaimed its 20-day moving average, and secured a three-day winning streak.
On the news front, JPMorgan Chase in a recently published research report expanded its coverage of China's AI value chain for the first time and explicitly stated that industry profit重心 will accelerate from underlying hardware infrastructure toward high-value-added models and vertical application layers. JPMorgan predicted that software and models will dominate growth, with model and application layer revenue expected to achieve explosive growth of 26.9 times between 2026 and 2030 (cloud services growing 12.5 times over the same period).
Notably, on October 20, China Data Group Co., Ltd. was established in Xiong'an New Area, Hebei. This new central state-owned enterprise takes data resource development and utilization as its primary responsibility and main business, filling the gap in state-owned capital entities in the data field and marking a key step in the market-oriented allocation of data elements in China.
Guolian Minsheng Securities believes that as policy packages land intensively, the data elements industry is gradually entering a delivery period, and manufacturers with data element operation, governance, and security capabilities are expected to benefit substantially.
*Tianfeng Securities noted that the global IT services market in 2026 is entering a new AI-driven expansion cycle. IDC expects the total global IT services market to expand at a growth rate of 9%-12% from 2026 to 2027, with Agentic AI having become the core force driving IT budget expansion and expected to account for over 26% of global IT spending by 2029.
*Guosen Securities stated that large models and traditional software are moving toward deep integration rather than one-way replacement. AI is increasingly embedded as an "intelligent interaction layer" into existing software ecosystems with deep industry barriers, and this "AI-empowered software" model can lower operational thresholds and increase vendors' average selling prices and retention rates. With the deep integration of AI plus software, the performance of enterprises benefiting from AI empowerment is expected to be further released.
*On valuation, as of October 20, the price-to-earnings ratio (TTM) of the Software Development Index was 170.40 times, lower than more than 75% of the time since listing, highlighting relatively attractive valuation value and margin of safety.
The end of hardware may be the spring of software
The Software Development ETF Huabao (159036) passively tracks the Software Development Index, directly targeting the frontier of AI applications with 100% exposure to the software development industry. It includes 107 constituent stocks covering areas such as AI plus finance, AI plus healthcare, AI plus office, AI plus education, AI plus information security, and AI plus government affairs. The software development sector currently offers relatively high valuation value and margin of safety. Combined with AI empowerment, Xinchuang drivers, and policy support, the software development direction is expected to ride the momentum. Its feeder funds (Class A: 028914, Class C: 028915) are currently on offer.
Note: For fee rates, please refer to the legal documents of each fund. Source: Shanghai, Shenzhen, and Hong Kong exchanges, CSI Index, CNI Index, Hang Seng Index Company, etc., as of October 21, 2026.
Reminder: Recent market volatility may be significant, and short-term gains or losses do not predict future performance. Investors should invest rationally based on their own financial conditions and risk tolerance, and pay close attention to position and risk management.
*Institutional views reference sources: Shenwan Hongyuan "Communications Industry 26Q3 Outlook: AI Prosperity Continues, Super Node Optical Interconnect Accelerates"; Huayuan Securities October 21, 2026 Agriculture, Animal Husbandry and Fisheries Industry Weekly "Post-holiday Demand Continues to Weaken, Pig Prices Overall Decline"; Shanxi Securities October 19, 2026 Agriculture Industry Weekly "Pig Prices Fell This Week, White-Feathered Chicken Prices Continued to Rebound"; Guosen Securities October 19, 2026 "Super El Nino May Catalyze a New Round of Agricultural Product Uptrend"; Guolian Minsheng Securities October "China Data Group Listing" Industry Commentary; Tianfeng Securities August 3 "Agentic AI Drives Global IT Services Expansion"; Guosen Securities "SaaS Sector Guidance Turns Optimistic, FDE Accelerates Enterprise AI Penetration."
According to the fund manager's assessment, the risk levels of the STAR Market Artificial Intelligence ETF Huabao, ChiNext Artificial Intelligence ETF Huabao, and STAR Market Chip Design ETF Huabao are R4-medium-high risk, suitable for aggressive (C4) and above investors. The risk levels of the Big Data ETF Huabao, Cloud Computing ETF Huabao, Software Development ETF Huabao, Xinchuang ETF Huabao, and Agriculture, Animal Husbandry and Fisheries ETF Huabao are R3-medium risk, suitable for balanced (C3) and above investors. Suitability matching opinions should be based on the sales institution's assessment.
Risk disclosure: The ChiNext Artificial Intelligence ETF Huabao passively tracks the ChiNext Artificial Intelligence Index, whose base date is December 28, 2018, and publication date is July 11, 2024. The Agriculture, Animal Husbandry and Fisheries ETF Huabao passively tracks the CSI All-Share Agriculture, Animal Husbandry and Fisheries Index, whose base date is December 31, 2004, and publication date is December 12, 2016. The Software Development ETF Huabao passively tracks the CSI All-Share Software Development Index, whose base date is December 31, 2021, and publication date is March 29, 2023. Index constituent composition is adjusted in accordance with the index compilation rules, and its back-tested historical performance does not predict the index's future performance. Individual stocks mentioned in this article are only objective demonstrations and enumerations of index constituents, not recommendations for any individual stock, and do not represent the fund manager or fund investment direction. Any information appearing in this article (including but not limited to individual stocks, comments, forecasts, charts, indicators, theories, and any form of expression) is for reference only, and investors must be responsible for any investment decisions they make independently. In addition, any views, analyses, and forecasts in this article do not constitute any form of investment advice to readers, nor do they bear any responsibility for direct or indirect losses caused by the use of the content of this article. Investors should carefully read the Fund Contract, Prospectus, Fund Product Information Summary, and other fund legal documents to understand the risk-return characteristics of the fund and choose products suitable for their own risk tolerance. Past performance of the fund does not predict its future performance, and the performance of other funds managed by the fund manager does not constitute a guarantee of the fund's performance. Sales institutions (including the fund manager's direct sales institution and other sales institutions) conduct risk assessments of the above funds in accordance with relevant laws and regulations. Investors should promptly pay attention to the suitability opinions issued by the fund manager. Suitability opinions of various sales institutions are not necessarily consistent, and the risk rating evaluation results of fund products issued by fund sales institutions shall not be lower than the risk rating evaluation results made by the fund manager. Differences exist between the fund's risk-return characteristics in the fund contract and the fund risk rating due to different factors considered. Investors should understand the fund's risk-return situation, combine their own investment objectives, horizon, investment experience, and risk tolerance to carefully select fund products and bear risks themselves. The registration of the above funds by the China Securities Regulatory Commission does not indicate that it makes any substantive judgment or guarantee on the investment value, market prospects, and returns of the funds. Fund investment involves risks and should be approached with caution.
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