A surge of bullish factors drove a powerful afternoon rally in A-shares on November 4, with all major indices pushing higher and market sentiment turning decisively positive.
By the close, the Shanghai Composite Index stood at 3,686.17 points, up 2.16%. The Shenzhen Component Index closed at 11,335.69 points, gaining 4.22%. The ChiNext Index jumped 6.40%, while the STAR 50 and STAR Composite indices climbed 9.92% and 9.90% respectively. The Beijing 50 rose 4.56%.
Trading was extremely active, with combined turnover across the two markets reaching 2.05 trillion yuan on November 4, returning above the 2 trillion yuan threshold. More than 4,600 individual stocks advanced, while only 777 declined. The combined turnover of the three leading optical module stocks exceeded 60 billion yuan.
Huang Junhao, fund manager at Newfos Investment Fund, attributed the rebound to three converging drivers. First, institutional policy arrangements have been strengthened—share buyback and shareholding increase relending has been converted into a long-term institutional arrangement with interest rates lowered to 1%, swap facility operations have been implemented, and market stabilization funding channels have become more常态化. Second, the technology sector had undergone deep corrections earlier, with chip structure, crowding levels, and valuation pressures improving markedly, giving it greater elasticity in responding to policy and sentiment recovery. Third, the U.S. midterm elections have concluded and the APEC summit window is approaching, leading to a phase of recovery in overseas risk appetite. Overall, the policy bottom is becoming clearer, while the earnings bottom still awaits confirmation from upcoming data.
"There is little point in remaining pessimistic at the current position. Valuations have become attractive, and some proactive positioning is warranted," said Li Bo, fund manager of the Morgan Stanley Large-Cap Growth Active Equity ETF.
A-Share Turnover Returns to 2 Trillion Yuan
When trading opened on November 4, the Shanghai Composite Index hovered near 3,600 points, dipping 0.10% by the morning close. The turning point came in the afternoon, when capital rushed in and indices surged rapidly.
The "dual innovation" boards performed particularly well. By the close, the STAR Composite Index had risen 9.90%, the STAR 50 had gained 9.92%, and the ChiNext Index had surged past 6%.
The market displayed clear structural divergence. The electronics sector led gains with a 9.74% advance, with 97% of stocks in the sector closing higher. Dozens of stocks including Skyverse, Kingsemi, and Jiangfeng Electronics hit the daily limit. The telecommunications sector rose 7.05%. Non-ferrous metals gained 5.34%. Machinery equipment and conglomerates both rose more than 4%.
However, five sectors declined. Consumer, energy, and financial blue chips weakened against the trend. Food and beverage fell 1.79%, while coal, oil and petrochemicals, and banking sectors posted modest pullbacks.
Zhongji Innolight topped the turnover rankings with 30.669 billion yuan traded on the day. Eoptolink and Changxin Technology each saw turnover exceeding 20 billion yuan. Dongshan Precision and CATL recorded turnovers of 17.652 billion yuan and 14.141 billion yuan respectively.
Capital continued to flow into technology themes through ETFs, with multiple STAR semiconductor-themed ETFs gaining more than 10%. Data showed that equity ETFs saw net inflows of 84.5 billion yuan on November 3 alone, marking 22 consecutive trading days of net inflows since September 28, with cumulative inflows exceeding 562 billion yuan. Since the start of the fourth quarter, net subscriptions have reached approximately 520 billion yuan, concentrated in broad-based products such as CSI 300, STAR 50, and SSE 50.
Previously, the AI sector had experienced consecutive declines. Li Bo noted that the main reason for the AI selloff was overseas—Google and Meta both saw their free cash flow turn negative in the third quarter (Google for two consecutive quarters), sparking concerns that future capital expenditure could only be supported by financing. Meanwhile, top AI companies like Anthropic saw month-on-month ARR growth slow.
From industry feedback, entrepreneurs generally indicate that the AI industry remains in the midst of vigorous investment. GPU prices and server prices continue to hit new highs, and leading domestic companies are still investing heavily in AI, with year-on-year increases exceeding 50% or more. Therefore, no inflection point in AI investment has been observed.
Nomura Securities expressed a similar view. In a report dated November 4, Nomura noted that the recent selling pressure on tech stocks stemmed mainly from two market concerns: first, that AI businesses might cannibalize the traditional businesses of tech giants; second, that massive capital expenditure has turned free cash flow negative. However, these two concerns do not necessarily constitute negative factors.
"Large tech companies cannot cut AI investment, which instead indicates that computing power demand remains strong—this is not bad news for the semiconductor industry. As for negative free cash flow, this results from the timing mismatch between capital expenditure and investment income recognition and cannot be directly interpreted as a deterioration in corporate profitability," Nomura stated.
Market Stabilization Policies Provide Support, Midterm Election Results Serve as Catalyst
The reasons behind the strong A-share rebound are multifaceted, including both the continued accumulation of recent policy positives and the catalyst from the U.S. midterm election results.
From a policy perspective, the government has rolled out a series of measures to stabilize the market and expectations. On November 3, PBOC Governor Pan Gongsheng delivered a financial work report to the Standing Committee of the National People's Congress, making clear that the central bank will continue to implement a moderately accommodative monetary policy, continuously improve the capital market stabilization mechanism, maintain stable operations in the stock, bond, and foreign exchange markets, and hold the bottom line of preventing systemic financial risks.
The policy toolbox continues to deliver. On November 2, the PBOC, the National Financial Regulatory Administration, and the CSRC jointly convened a symposium, explicitly calling for the full and effective use of structural monetary policy tools. On November 3, the PBOC conducted swap facility operations for securities, fund, and insurance companies totaling 100 billion yuan through a rate bidding process, with 31 securities and fund companies participating in the bidding and a winning rate of 10 basis points. On November 4, the volume of share buyback and shareholding increase relending applications submitted by banks exceeded 200 billion yuan.
Huatai Securities research team estimates that this round of policies could directly bring in approximately 300 billion yuan in incremental capital. Among this, the third batch of swap facility applications exceeded 100 billion yuan, comparable to the current balance of 105 billion yuan. Buyback and shareholding increase loans signed approximately 440 billion yuan, with over 280 billion yuan already disbursed and approximately 160 billion yuan pending deployment. Eighteen active ETFs raised more than 35 billion yuan, awaiting position building. The three items total approximately 295 billion yuan, on the same order of magnitude as the decline in margin financing balances since August.
Regarding share buybacks by listed companies, the CSRC stated it supports, encourages, and urges qualified listed companies—especially important index constituent companies and leading technology companies—to actively implement share buybacks in accordance with the above requirements and in light of their own circumstances, and to continuously improve market value management.
On the morning of November 4, Changxin Technology significantly raised the upper limit of its buyback plan to 5 billion yuan, an increase of 3 billion yuan from the previous plan, making it the largest single buyback on the STAR Market to date. Since the beginning of this year, shareholders and senior executives of STAR Market semiconductor companies have committed to shareholding increases totaling up to 1.25 billion yuan.
From an external perspective, on November 4 Beijing time, the U.S. midterm election results were released, with the Democratic Party recapturing control of both the House of Representatives and the Senate, regaining control of Congress.
Zhao Yaoting, Global Market Strategist for Asia Pacific at Invesco, said that Democratic control of Congress will make it harder for the U.S. government to pass major partisan legislation, which could reduce the likelihood of large-scale additional fiscal stimulus measures over the next two years, potentially having some impact on Asian markets. Weaker fiscal stimulus could ease upward pressure on U.S. economic growth, inflation, and Treasury yields, thereby potentially alleviating to some extent the pressure that rising U.S. interest rates and a stronger dollar place on Asian currencies and monetary policy.
"Overall, the U.S. midterm election results have not fundamentally changed the investment environment in Asia-Pacific markets. For regional investors, the key variables remain U.S. interest rates and dollar trends, China's economic growth outlook, trade and technology policies, and corporate earnings performance," Zhao stated.
Valuations Have Reached Historical Lows
"After the adjustments of the past two months, current market valuations have reached historically extreme levels. From a medium- to long-term perspective, this is a very low position. People inevitably become pessimistic during declines, but over the long term, this is certainly not wrong," Li Bo said.
Li Bo provided a comparison: non-financial listed companies are expected to see earnings growth exceeding 15 percentage points this year, while the CSI 300 has already fallen more than 15%. "Valuation compression alone accounts for negative 30 points, representing one of the largest three-year drawdowns in history. The valuation-to-growth ratio has reached a very attractive buying zone. There is no need to sell stocks out of panic at this position," he said.
Xingshi Investment believes that the short-term A-share decline is primarily driven by valuation compression, with corporate earnings showing no significant change, and the market is in a process of bottoming out and structural rebalancing. From a medium-term perspective, after valuation compression, major index valuations are in a reasonable range: the Wind All-A price-to-earnings ratio stands at 19.5 times, in the 62nd percentile over the past 10 years, while the equity risk premium has rebounded to approximately 3.5%, in the 84th percentile over the past 10 years. Listed companies remain in an earnings growth cycle, AI technology stock earnings realization is expected to digest valuations, and non-AI assets are expected to benefit from capital rebalancing and policy support, leading to valuation recovery.
Looking ahead at China's macroeconomy, Zhu Chaoping, Senior Global Market Strategist at Morgan Asset Management, said that the Chinese economy continues to show structural divergence: exports remain resilient, consumption is recovering moderately, and real estate investment remains weak. Fiscal spending and government bond issuance have been weaker than expected, while the monetary and credit environment is generally stable. The market adjustment since September may have already priced in considerable pessimistic expectations, and as market valuations decline, the investment value of certain sectors is beginning to emerge. With increased policy support and the potential stabilization of overseas AI technology sectors, A-share market performance may improve.
Li Bo believes that A-share market valuations are currently in a low range, with All-A non-financial earnings growth expected to reach double digits in 2026, making it a favorable window for fund position building. He recommends focusing on power equipment, consumer electronics, and consumer sub-sectors.
"The lithium battery supply chain benefits from growing demand for energy storage and new energy vehicles, combined with orderly capacity expansion. The industry is expected to usher in a new round of prosperity, and we are bullish on battery and material segments with strong supply constraints. The consumer electronics industry is at the starting point of a major innovation cycle, with AI acceleration driving end-side hardware iteration. Short-term headwinds have brought leading companies' valuations to low levels, and if earnings grow steadily, they possess long-term allocation value," he said.
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