Last week, the market experienced volatile adjustments, with A-shares seeing a broad decline on heavy volume followed by a deep V-shaped rebound.
From the perspective of Shenwan first-level industries, coal, media, and petroleum & petrochemicals performed relatively well, while electronics, telecommunications, and machinery equipment were mediocre.
Macro Analysis: Domestic Manufacturing PMI Returns to Expansion Territory
Overseas, U.S. non-farm payroll data once again came in weak, temporarily easing concerns about consecutive rate hikes. Data released by the U.S. Department of Labor showed that the U.S. added only 29,000 non-farm jobs in September, significantly below the market expectation of 90,000. From an industry structure perspective, givebacks in the leisure and hospitality sector and local government education departments were the main reasons for the decline in non-farm data. Notably, the U.S. employment diffusion index (1-month span) retreated in September, indicating that the breadth of employment growth has narrowed. The unemployment rate edged up slightly to 4.2%, mainly due to increased labor supply driven by the labor force participation rate rising to 61.8%. According to CME data, the market expects only a 22% probability of another rate hike in October. Compared to employment, we believe inflation remains a more important factor influencing monetary policy.
Domestically, the manufacturing PMI returned to expansion territory, with the economy showing a seasonally weak recovery. Data from the National Bureau of Statistics showed that China's September manufacturing PMI was 50.1%, up 0.3 percentage points from August. The service sector business activity index was 50.2%, up 0.9 percentage points from August; the construction sector business activity index was 50.3%, up 3.4 percentage points from August. Analysis suggests that the dissipation of weather disruptions combined with policy efforts driving accelerated production became the main supporting factors. The global AI cycle supports external demand in maintaining resilience, but new domestic orders edged down slightly, and terminal demand still needs further stimulation.
Investment Strategy: Focus on Sectors with Healthy Microstructures
The market is currently in a rest period of a "transitional rally." At this stage, the broad market index has neither expectations of a major new high nor expectations of being too low. It is expected that a "ceiling above, floor below" sideways oscillation may persist for an extended period, and a larger-scale rally still requires time to unfold. The reasons are as follows: First, after A-shares fully priced in industrial narratives in the first half of the year, there is currently a lack of new large-scale growth narratives and investment stories to drive an upward revision of overall expectations, entering a "waiting period" at the logical level. Second, since August, the inflow of incremental capital has slowed noticeably, and the market state has phased from an incremental state to a stock game, so the impact of microstructure on the market will increase. "Gray rhino" factors such as Federal Reserve rate hikes, inflation conditions, and external geopolitical uncertainties will also constrain risk appetite in the short term.
In terms of direction, more attention should be paid to sectors and individual stocks with "healthy microstructures" plus "expectations that can be revised upward." 1) Domestic supply chain technology: With increasing overseas sanctions and trade disputes, the necessity of self-reliance and controllability is rising, and China's AI is expected to have an independent development narrative by 2027. Attention can be paid to domestic chips/semiconductor upstream components and materials/high-end equipment/pharmaceuticals, etc. 2) Strategic resources: Under the complex international situation, demand for resource security is increasing, and geopolitical conflicts and AI construction needs will also tighten supply and demand for bulk commodities. Attention can be paid to precious metals/industrial metals/rare metals/petroleum & petrochemicals/agricultural products, etc. 3) Finance and high dividends: Demand for portfolio stability is rising, and new regulations on insurance capital are boosting willingness to allocate dividend assets. Attention can be paid to banks/brokerages/electricity and utilities/telecom operators/real estate leaders, etc.
Disclaimer: The information contained in this communication comes from sources the Company believes to be reliable and from the personal judgment of researchers, but the Company does not provide direct or implied declarations or guarantees regarding its accuracy or completeness. This communication is not a complete statement or summary of the relevant securities or markets, and any opinions expressed may change without further notice. This communication should not be accepted by recipients as a substitute for their independent judgment or as a basis for investment decisions. The Company or its related institutions, employees, or agents shall not be liable for any losses incurred by any person using all or part of this content or arising therefrom. Without prior written permission from Great Wall Fund Management Co., Ltd., no person may distribute, copy, reproduce, or publish this report or any part thereof in any form, and no abridgment or modification of this communication contrary to its original meaning may be made. The fund manager reminds that every citizen has the obligation and right to report money laundering crimes. Every citizen should strictly comply with relevant laws and regulations on anti-money laundering. Markets carry risks, and investment requires caution.
Comments