On November 5, A-shares surged then pulled back, with all three major stock indices closing higher and total turnover exceeding 2.1 trillion yuan. Sector rotation diverged: power equipment and media sectors performed strongly, while telecommunications, coal, and oil & petrochemical sectors led declines. Interviewees said the market saw short-term profit-taking pressure today, but buying support remained adequate. If turnover stays active and more sectors join the rally, the rebound could continue. After a round of consecutive gains, it is not advisable to chase highs in a concentrated manner; when positioning in laggard sectors, one must discern whether earnings expectations have substantially improved, and avoid mistaking short-term catch-up gains for a trend reversal.
4,869 Stocks Advanced
In terms of index performance, key indices opened lower collectively in the morning, then rose, pulled back after surging, and edged up in late trading, with most indices closing higher by modest margins. The Shanghai Composite Index rose 0.1% to 3,689.91 points, the ChiNext Index gained 0.87% to 2,566.8 points, and the Shenzhen Component Index rose 1.19%. The CSI 300 and SSE 50 edged slightly higher, while the STAR 50 and BSE 50 rose nearly 2%. Daily turnover increased by 83.13 billion yuan, with combined turnover across the Shanghai, Shenzhen, and Beijing markets reaching 2.14 trillion yuan. As of November 4, the combined margin financing and securities lending balance across the three markets slightly increased to 2.3 trillion yuan. On the board, oil & natural gas, coal, and shale gas sectors fell sharply, state-owned enterprise concept stocks weakened in tandem, and the dividend index dropped more than 2%. AI corpus, Kimi concept, furniture, power supply equipment, and HIT battery sectors led gains. Recently, A-shares have continued to rebound, with technology sectors leading gains and obvious sector rotation characteristics. Among the 31 Shenwan primary industries, 27 closed higher, 12 rose more than 2%, and power equipment gained nearly 4%; media, real estate, light manufacturing, commercial retail, computer, basic chemicals, social services, and pharmaceutical & biotech also performed well. The coal sector fell nearly 4%, oil & petrochemicals declined 2.34%, telecommunications fell 2%, and the banking sector also weakened. Non-bank financials, transportation, utilities, steel, and defense & military edged higher. 4,869 stocks advanced, with 86 hitting the daily limit; 625 stocks declined, with none hitting the downside limit. Among actively traded stocks, 10 stocks had daily turnover exceeding 10 billion yuan: Zhongji Innolight fell 7.51% to 493.33 yuan per share, Eoptolink fell 5.54% to 185.61 yuan per share, Changxin Technology fell 3.54% to 42.53 yuan per share, Dongshan Precision fell 5.54% to 89.1 yuan per share, and GigaDevice fell 3.03% to 263.15 yuan per share. CATL, Sungrow Power Supply, and NAURA Technology all rose more than 4%, while AMEC gained 5.83% to 254 yuan per share.
Market Absorption Strengthens
Regarding today's pattern of opening lower, surging, then pulling back, Long Fang, Chief Investment Officer of Juzhen Capital, analyzed that this is normal. The market closed with a large bullish candle on heavy volume yesterday, and today saw short-term profit-taking pressure, but buying support was adequate, and the market ultimately closed with a small bullish candle. Increased trading volume means incremental capital continues to enter. However, it is difficult for the market to experience continuous one-sided bull-market-style gains; during this rebound, volatility and back-and-forth movement may become the norm. Mo Xiaocheng, General Manager of Huanrui Tianze, believes this A-share rebound stems from sentiment repair after the previous rapid market adjustment and easing liquidity pressure. The market opening lower then rising shows that absorption strength has strengthened somewhat, but the pullback after surging also reflects that investor divergence remains significant, and market confidence recovery still needs time. Chen Bozhong, Partner at Zhong'an Dingsheng Investment, told reporters that today's A-share opening lower, rising, and broadly gaining on heavy volume marks the market transitioning from a one-sided technical rebound into a phase of divergent博弈, with bottom-fishing funds and unwinding funds forming a对冲. Currently, the rebound has not yet evolved into a trend reversal, and whether a reversal can be confirmed still requires continuous observation. Li Shiyu, Fund Manager at Xiaoyu Investment, said that overnight U.S. tech stocks fell sharply and the Korean stock market weakened, combined with yesterday's A-share rally. Against this backdrop, A-shares opened lower and rose today; despite the intraday surge and pullback, overall performance still exceeded expectations. Without "mysterious funds" supporting the market, the broad A-share gains generally exceeded expectations, and the worst subsequent performance would likely be box-range consolidation at this level. Wang Zheng, General Manager of Shangyi Fund, pointed out that today's broad A-share rally on heavy volume indicates the participation scope of the rebound is expanding and market absorption has improved. But the pullback after surging also reflects that after consecutive rebounds, pressure from profit-taking and selling by previously trapped positions remains, and willingness to chase highs is not yet sufficient. Modest index gains with active individual stock performance more reflects repair in different directions, and the market is still searching for a main line that can sustainably drive the行情. Regarding key observations for A-shares going forward, Wang Zheng further noted that after the volume expansion, one needs to track whether the price center can steadily rise and whether funds still absorb during pullbacks. If turnover remains active and the scope of gains continues to expand, the rebound may continue; if volume repeatedly expands but prices struggle to rise, then one should watch for selling pressure constraining the market.
Where Are Different Types of Funds Flowing?
Market capital movements are also receiving attention: leveraged funds have notably retreated recently, while ETF inflow signals are prominent. What are the trading structure characteristics of various types of funds? Long Fang said detailed data has not been disclosed. Inferring from the board, leveraged fund positions are highly concentrated in hard-tech tracks such as AI computing power; since the end of September, ETF funds have continued net inflows, mainly broad-based index products such as CSI 300 ETFs, CSI 500 ETFs, and CSI 1000 ETFs; long-term funds such as social security and insurance funds focus on high-dividend sectors including banks, utilities, and coal. Li Shiyu stated directly that leveraged funds remain relatively cautious, with net financing inflows of 1.318 billion yuan despite yesterday's sharp rally; since September 23, there have been only 3 trading days with net financing inflows, and the market is still in a deleveraging process. Over the past 22 trading days, stock ETFs saw net inflows of about 550 billion yuan, with broad-based ETFs such as CSI 300 and STAR 50 seeing the most significant inflows. Long-term institutional funds may flow out of high-level dividend sectors and turn to lower-level semiconductor and new energy tracks. "Recently leveraged funds have retreated somewhat, while ETF funds have continued to absorb, playing a positive role in stabilizing the market." However, Mo Xiaocheng said capital flows more reflect phased risk appetite and trading behavior, and cannot fully represent a company's long-term value. For the market to truly stabilize, one still needs to observe the sustainability of incremental capital and changes in corporate fundamentals. Chen Bozhong, combining trading data analysis, said institutional funds are currently continuously buying broad-based ETFs and some sector ETFs, while retail funds have not yet shown concentrated entry signs. For the market to form a reversal and drive retail funds to bottom-fish, institutional funds still need to continue exerting force. Discussing the positioning directions of various funds, Wang Zheng said recent margin funds have bought into media, power equipment, computer and other directions, reflecting a rebound in short-term risk appetite; ETF subscriptions concentrated in broad-based products indicate funds are also positioning for overall market repair. Long-term funds such as insurance funds still value high-dividend assets while selectively allocating to growth directions. This capital structure not only helps the market maintain elasticity and consolidate absorption strength, but also means the market is unlikely to converge again into a single technology main line; growth and value sectors may rotate alternately. If broad-based ETF subscriptions continue and the scope of margin buying further widens, the rebound foundation will be more solid; if funds only trade back and forth in a few hot sectors, the market will likely maintain a rapid rotation pattern, and upside sustainability will be limited.
Don't Chase Gains or Switch Positions During Rotation
Chen Bozhong said today CSI Dividend-related sectors faced capital selling, and capital flows in tech stocks diverged significantly, increasing stock selection difficulty. It is advisable to use low positions to moderately position in tech tracks with continuously improving quarter-on-quarter performance. Recently sector rotation has accelerated, and some oversold tech stocks have shown strong rebound momentum. But Mo Xiaocheng reminded that many hot tracks, even after significant adjustments, still have expensive valuations that will need corporate earnings to digest in the future. It is advisable to avoid industries whose valuations clearly overdraw future prospects, and focus on pharmaceuticals and consumer sectors, including innovative drugs. Regarding subsequent sector positioning, Long Fang offered two main lines: first, previously oversold AI hardware sectors, especially stocks that fell below margin financing guarantee lines and saw significant reductions in financing amounts, which have strong repair momentum; second, turnaround sectors such as innovative drugs, CRO, power equipment, new energy, and humanoid robots that previously declined consecutively, which may see strong rebounds. Additionally, one can phase down positions in dividend sectors such as banks, coal, power, and highways, but the base position need not be moved. "The recent market is closer to rotational repair, and it is temporarily difficult to confirm a long-term style switch based on this." Wang Zheng said today's power equipment sector strengthened, some traditional industries followed, while within technology there is still divergence, indicating funds are re-comparing valuations and earnings prospects across different directions. In positioning, for growth sectors one can retain directions supported by orders and performance, but after consecutive gains it is not advisable to chase highs in a concentrated manner; for laggard sectors one should watch whether earnings expectations improve, avoiding treating short-term catch-up gains as a trend reversal. Investors with concentrated holdings can use the rebound to moderately rebalance, balancing value assets with stable cash flow while retaining some liquidity, reducing frequent chasing of gains and position switching during rapid rotation. Li Shiyu said after a deep market adjustment, all directions will see varying degrees of repair in the early rebound phase, and the core at this stage is to replenish positions; after most sectors have repaired sufficiently, funds will then concentrate on the strongest main line, and at that stage the most important thing is to "cut the weak and keep the strong."
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