On October 23, both A-shares and Hong Kong stocks staged a simultaneous rebound. A-shares weakened in early trading, with the Shanghai Composite Index briefly falling below 3,600 points intraday, while the ChiNext Index and STAR 50 dropped more than 3%. In the afternoon, major indices collectively rallied, with the ChiNext Index closing up 4.16% and the STAR 50 gaining 3.04%. Hong Kong stocks had suffered a sharp sell-off on the previous trading day, with the Hang Seng Tech Index falling back to its September 24, 2024 level; on October 23, the decline halted and a rebound followed, with the Hang Seng Index rising 0.69% and the Hang Seng Tech Index gaining 2.05%.
Institutional analysts believe the rebound was not driven by any single piece of good news, but rather by a combination of oversold technical bounce demand, concentrated inflows into broad-based ETFs at low levels, and the convergence of midday collective statements from leading optical module companies alongside industrial capital buybacks. However, many institutions offered relatively cautious assessments, noting that the market remains in a phase of concentrated repair from pessimistic sentiment and oversold positions.
In reality, recent factors such as doubts over the return on overseas AI capital expenditure, a pullback in technology stocks, and persistently high global interest rates have weighed on the A-share market, with computing power hardware and technology growth sectors that had previously rallied strongly becoming the main source of adjustment. Market risk appetite has repeatedly contracted, and the AI narrative is shifting from "paying for dreams" to "pricing for returns."
Bosera Fund believes the more likely scenario is that the market enters a phase of consolidation and bottom-building, using time to digest valuation and positioning pressures, rather than completing a directional choice in one move. Lotus Asset Management's Hong Hao believes that current market sentiment is pessimistic and growth asset prices have been pressed very low, but U.S. economic growth and earnings remain strong, so there is no need for excessive pessimism; low prices instead offer entry opportunities for bulls. He stresses, however, that trading still requires caution, with a relatively strong rebound likely between the fourth quarter and around Christmas; a true trend reversal would require improvement in the household credit cycle, further policy efforts directed at the household sector, or clarity on the policy path after the U.S. midterm elections in November.
ChiNext and STAR Market Surge
On October 23, the three major A-share indices opened lower and then rallied in a deep-V reversal, with the ChiNext Index and STAR 50 Index posting significant gains. Combined turnover across the Shanghai and Shenzhen markets reached 1.97286 trillion yuan for the full day, an increase of 431.06 billion yuan from the previous trading day; 4,520 individual stocks rose, accounting for 81% of the total. Bosera Fund attributed the direct trigger of the rebound to a resonance across three dimensions: the ChiNext's short-term decline was too large, with technical oversold conditions and positioning clearing providing room for a bounce; broad-based ETFs concentrated inflows at key levels, showing clear characteristics of stabilizing forces defending the market; and at midday, leading optical module companies collectively disclosed their operating conditions, compounded by buybacks from heavyweight stocks, as industrial capital proactively released stabilization signals, becoming the key catalyst for the sentiment reversal.
At the sector level, the rebound advanced along two lines simultaneously: oversold conditions and industrial catalysts. Under the Shenwan industry classification, computers, media, and power equipment led the gains, with CATL rising 7.8% and Unitree Robotics hitting the daily limit; the banking sector retreated, with Bank of China falling more than 4%, indicating a concentrated shift of funds from defensive sectors toward oversold growth sectors.
The concentrated release of industrial catalysts occurred at midday. On October 23 at noon, positive industry news was released in a concentrated manner. Zhongji Innolight, Eoptolink Technology, Tianfu Communication, Lianxun Instruments, Accelink Technologies, Yuanjie Semiconductor, and other optical communications and computing power industry chain companies collectively announced that their production and operations are normal, orders on hand are sufficient, and industry prosperity has not reversed. Among them, Zhongji Innolight explicitly stated that orders from major overseas customers have extended to 2027, with some key customers providing clear guidance for 2028 demand; Eoptolink Technology disclosed that its 1.6T optical modules have entered a phase of continuous volume ramp-up, and simultaneously announced a plan to repurchase shares for 800 million to 1 billion yuan, with a maximum repurchase price of 500 yuan per share; CATL conducted buybacks on both October 21 and 22, totaling approximately 5.7596 million shares and spending about 1.299 billion yuan.
On the policy front, Wu Qing, Chairman of the China Securities Regulatory Commission, stated at the recent 2026 Financial Street Forum Annual Meeting that the CSRC will make every effort to address multiple unexpected imported risk challenges, consolidate and improve the market stabilization mechanism, and remain highly vigilant against new risk points such as leveraged products linked to A-share individual stocks overseas.
Hong Kong Stocks Rebound
After experiencing its most violent single-day sell-off on October 22, Hong Kong stocks saw all three major indices rise on October 23, with market sentiment clearly recovering. As of the close, the Hang Seng Index rose 0.69%, the Hang Seng Tech Index gained 2.05%, and the China Enterprises Index rose 0.87%. However, southbound capital through the Stock Connect still recorded a net outflow of 1.67 billion Hong Kong dollars on October 23. At the sector level, most internet stocks rose, with Kuaishou-W up 4.18% and Xiaomi Group-W up 3.88%. Lithium battery stocks rose collectively, with BYD Company up 6.23%, CATL up 5.44%, and CALB up 4.88%. Auto stocks performed strongly, with Xifengxiang Group up 11.57% and XPeng-W up 5.10%. Semiconductor stocks rose collectively, with GigaDevice up 8.62% and Biren Technology up 5.15%. Securities and brokerage stocks advanced, optical communication stocks rose broadly, AI application stocks continued to push higher, and MINIMAX surged nearly 17%.
On the previous day, Hong Kong stocks experienced a major decline. On October 22, the Hang Seng Index fell 3.03%, approaching its year-to-date low; the Hang Seng Tech Index closed down 5.03% at 3,793.93 points, breaching both the 3,900 and 3,800 integer levels intraday, hitting a new low since September 24, 2024, with a cumulative year-to-date decline of more than 30% and a drawdown of 43% from its October 2025 high. Southbound capital recorded a net sell of approximately 9.735 billion Hong Kong dollars for the full day.
Regarding the recent decline in Hong Kong stocks, Tan Zhile, Senior Strategist at E Fund Hong Kong, told Caijing that it was primarily driven by liquidity factors. The U.S. interest rate environment remains tight, the Hong Kong-U.S. interest rate spread has widened, the Hong Kong dollar has weakened and approached the 7.85 weak-side convertibility undertaking level, and banking system liquidity faces pressure. Against this backdrop, the relatively highly valued AI and related technology sectors saw profit-taking and reductions; meanwhile, technology industry earnings remain under pressure, and market caution ahead of third-quarter earnings further intensified selling pressure. Tan Zhile noted that in the short term, Hong Kong stock volatility will persist, and investors should focus on risk management. In the medium to long term, if the liquidity environment improves, there is a possibility of a technical recovery in Hong Kong stocks, but the specific timing and magnitude are difficult to predict accurately and require continuous observation of macro liquidity, capital flows, and actual corporate earnings performance.
Who Is Buying?
ETF fund flows reveal the direct driving force. According to closing data compiled by Caijing, multiple ETFs recorded elevated trading volumes. Among them, E Fund ChiNext ETF (159915) traded 19.74 billion yuan, up 4.24%, with a turnover rate of 24.29%; Huatai-PineBridge CSI 300 ETF (510300) traded 15.42 billion yuan; and ChinaAMC STAR 50 ETF (588000) traded 15.20 billion yuan. In addition, several other broad-based ETFs recorded trading volumes exceeding 5 billion yuan. Over a longer time frame, as of October 22, the CSI 300 saw net inflows of 39 billion yuan over the past week, the ChiNext Index saw net inflows of 17.2 billion yuan, and the STAR 50 saw net inflows of 14.6 billion yuan. The top 12 broad-based ETFs by net inflows over the past five days collectively attracted more than 82 billion yuan in net inflows.
At the valuation level, the valuation percentiles of the STAR 100 and ChiNext 50 are at historically low ranges, while the CSI Dividend after this week's pullback has a PE ratio of approximately 9 times, at a historically elevated percentile; the valuation percentiles of the STAR 50, CSI 500, and Shanghai Composite Index are also relatively high. The CSI 300, which recorded the largest net inflows, is at approximately the 60th percentile level over the past five years. The table above shows statistics on stock indices with the highest ETF net inflows over the past week. It can be seen that bottom-fishing capital did not choose the "cheapest" assets, but rather broad-based tools with the best liquidity, largest capacity, and ability to absorb large-scale buying in a short period.
In addition, the first batch of 18 actively managed ETFs collectively launched issuance on October 23, with a single-fund fundraising cap of 2 billion yuan and a combined cap of 36 billion yuan. E Fund, ChinaAMC, Fullgoal, and China Universal each subscribed 200 million yuan of their own products with proprietary capital, and Hua An Fund also announced participation in self-purchases with 100 million yuan. Caijing learned from industry sources that as of the afternoon of the issuance day, products from E Fund, JPMorgan, and other companies had first-round fundraising exceeding 2 billion yuan, and multiple actively managed ETFs were sold out in a single day.
When Will the Reversal Come?
Multiple institutions noted that a deep-V reversal itself does not equal a trend reversal, with disagreements mainly centering on how far this repair can go and in what form it will unfold. Guotai Fund is relatively optimistic, believing that continuous large net inflows into major broad-based ETFs and密集 buybacks by multiple listed companies have released market stabilization signals, and the market is expected to see a monthly-level rebound opportunity. "The top 5% of individual stocks' share of trading volume, as well as congestion indicators such as the share of trading volume in electronics and communications, have all fallen below year-to-date averages, and equity valuations have returned to below-average levels after a significant retracement of historical gains." However, Guotai Fund also cautioned that persistent global macro disturbances, a pause in upward revisions to domestic corporate earnings growth expectations, and slowing incremental market entry will constrain the height of any short-term rebound.
Chen Guo, Deputy Director of the East Money Securities Research Institute and Chief Strategist, believes that after two previous rounds of declines, most funds still holding technology positions harbor a "sell on any bounce" mentality, while funds preparing to enter and speculate on a rebound worry about being used as exit liquidity by existing holders, and thus actively avoid institution-heavy stocks. The likely path is that non-institution-heavy stocks rebound first, and after the rally broadens, other individual stocks are then pulled up.
"The underlying tone of this rebound is extremely pessimistic sentiment combined with concentrated repair after oversold conditions, rather than the emergence of incremental fundamental variables," Bosera Fund believes. Listed company announcements address the panic over "whether fundamentals have deteriorated," but do not change medium-term suppression factors such as high overseas interest rates and doubts over AI capital expenditure returns. The more likely subsequent scenario is that the market enters a phase of consolidation and bottom-building, using time to digest valuation and positioning pressures, rather than completing a directional choice in one move.
Looking ahead, the Invesco Great Wall investment research team recommends maintaining balanced allocation and selecting structures carefully to cope with volatility. Long-end interest rates are at historically low levels, making high-dividend sectors an important choice for defensive allocation; the AI technology revolution remains a medium-term industrial trend, and some technology companies offer bottom-up allocation opportunities; pro-cyclical sectors represented by consumption and cyclical industries offer relatively high odds, but the trend remains on the left side.
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