Recently, affected by spillover from overseas market volatility and disruptions to on-exchange micro-liquidity, major global equity markets have pulled back in sync, and the A-share market has also undergone a rapid round of valuation and sentiment adjustment.
However, with the "9/29" package of macro support policies and a series of incremental policies from the recent Financial Street Forum gradually taking effect, China's fourth-quarter consumption and investment are showing solid momentum for stabilization and recovery, while structural earnings highlights in third-quarter reports have appeared frequently, pointing to strong expectations of fundamental improvement.
In addition, market valuations are in a historically cost-effective range, and medium- to long-term funds are expected to accelerate their entry into the market, so market confidence may see a substantive repair; the current period is a favorable time to "move when dawn breaks" and actively seize the allocation window around the turn of the year.
The market adjustment since late September may have been driven more by external sentiment disturbances, with changes in trading behavior among some existing on-exchange funds due to the impact of consecutive pullbacks, and a temporary weakening of the micro trading structure, causing market sentiment to become more cautious.
Supported by a series of favorable policies and with the macro economy demonstrating resilience, subsequent market pricing will return more to fundamentals.
From the perspective of macro fundamentals, existing and incremental policies are working in concert to steadily improve domestic demand and economic performance in the fourth quarter. Since the introduction of the "9/29" new policies, a series of macro support measures to stabilize growth and expand domestic demand are accelerating their conversion into physical work volume. On the fiscal policy front, local government special bonds, ultra-long-term special government bonds and new policy-based financial instruments are being implemented at a faster pace, and investment in new and old infrastructure such as "two major" and "two new" projects and the "six networks" will continue to play a supporting and pulling role in the fourth quarter. On the consumption front, with the expansion and optimization of the consumer goods trade-in policy and the release of consumption potential in culture, sports, health and elderly care services, fourth-quarter retail sales are expected to continue stabilizing and recovering. The long-term supporting conditions for China's economy of "new growth drivers and improved structure" remain strong, and the resilience of the macro economy will build solid support for the A-share market.
From the perspective of micro corporate earnings and valuation, the A-share third-quarter reports already disclosed are full of highlights, and current valuations already offer a relatively high margin of safety and allocation cost-effectiveness.
We are now in the third-quarter report disclosure period, and the earnings prosperity of many high-quality domestic companies still shows many structural highlights. On the one hand, new quality productive forces centered on high-end equipment manufacturing, smart cars, domestic AI computing power and applications, and semiconductors maintain high-prosperity growth driven by technological innovation and industrial chain coordination; on the other hand, leading export-oriented companies with advantages in technology, cost and supply chains show strong earnings resilience, and earnings in some pro-cyclical and mass consumer sectors have also shown marginal improvement turning points. Along with earnings improvement, after the previous adjustment, the price-to-earnings and price-to-book ratios of the core broad-based A-share indices and many high-quality leading companies are at historically low percentiles, valuations have room for repair, and current allocation cost-effectiveness is relatively high.
The capital market's internal stability mechanisms and incremental capital supply have also shown positive and profound changes. At the 2026 Financial Street Forum annual meeting, regulators released clear market-stabilizing signals: on the one hand, the central bank, together with the National Financial Regulatory Administration and the China Securities Regulatory Commission, established a liquidity support tool to respond to large redemptions by non-bank institutions, which will help reduce the systemic liquidity risk premium and promote smooth market operation; on the other hand, long-cycle assessment mechanisms suited to long-term investment are being accelerated and improved, and the first batch of 18 active ETFs focusing on balanced, value and dividend strategies has been approved and registered, working together with patient capital such as insurance, social security and wealth management funds to continuously inject incremental fresh capital into the market.
Investment recommendations:
Looking ahead, policy warmth, earnings resilience and long-term capital entry are expected to drive an improvement in investor expectations. For positioning around the turn of the year, investors are advised to remain objective and rational and, with a positive "move when dawn breaks" mindset, grasp three main lines: (1) central state-owned enterprises and dividend value sectors that benefit from medium- and long-term capital entry and have high dividends, high yields and stable cash flow; (2) new quality productive forces tracks verified by high-prosperity third-quarter earnings and aligned with the "15th Five-Year Plan" science and technology innovation direction, with attention to AI+, semiconductors and high-end manufacturing; and (3) pro-cyclical core assets that benefit from the "9/29" new policies and the implementation of fourth-quarter domestic demand expansion policies.
Risk factors:
Domestic economic performance falling short of expectations, policy effects falling short of expectations, and major changes in the market environment.
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