Today, A-shares saw a volatile uptrend. The Shanghai Composite Index rose 0.23% to 3,969.25, while the Shenzhen Component Index gained 0.37%, and the ChiNext Index climbed 1.03%. The STAR Composite Index edged up 0.03%. Total turnover in Shanghai and Shenzhen markets reached approximately 1.87 trillion yuan, down 43.42 billion yuan from the previous session. Sector-wise, anti-involution themes remained strong, with solar energy, carbon neutrality, and new energy vehicles leading gains. Power grids, machinery, and coal also performed well, while TMT sectors faced corrections, particularly semiconductors and computers.
Market risk appetite appeared neutral today, with about 3,400 stocks advancing. In terms of style, micro-caps outperformed small-caps, which in turn beat large-caps. Growth stocks led value stocks, though the STAR and ChiNext markets diverged. Overall, risk sentiment stayed balanced.
A-shares continued consolidating below 4,000 points, with TMT sectors still under pressure. Structurally, we maintain that without significant policy support in Q4, high-growth sectors will likely remain concentrated in AI and anti-involution themes, with limited spillover to consumer sectors. Post-tariff uncertainties may also create opportunities in export-linked and globally priced commodities. From a positioning perspective, mutual funds’ TMT allocations hit a record 40% in Q3, suggesting slower upside ahead. Guojin Securities notes that while domestic AI leaders posted solid YoY Q3 earnings growth, stock performance lagged expectations—mirroring the 2021 new energy sector’s trajectory where slowing outperformance coincided with price declines. Additionally, investors are reassessing U.S. tech giants amid Q3 earnings divergence, shifting focus from capex guidance to ROI metrics, as seen in recent dips for Meta and Microsoft.
Guojin Securities highlights that despite robust YoY Q3 revenue and profit growth for domestic AI leaders, sequential slowdowns and lofty expectations triggered volatility. Post-earnings analyst upgrades suggest optimism for Q4, though this raises the bar for delivery. Meanwhile, China Merchants Securities warns of potential mutual fund profit-taking and benchmark policy impacts on crowded trades.
Could the TMT slowdown broaden the rally? We see potential in domestic-manufacturing recovery and overseas rate cuts coupled with easing trade tensions, favoring globally priced industrial resources like non-ferrous metals. Strategically, we recommend sticking with anti-involution themes via ETFs like Photovoltaic 50 ETF (159864) and New Energy Vehicle ETF (159806), while monitoring emerging strength in Non-Ferrous 60 ETF (159881) and Mining ETF (561330). Stay cautious on TMT near-term risks but maintain neutral optimism on large-caps.
Bonds may shine in Q4: Since the PBOC’s October 27 announcement to resume treasury trading, yield upside has been capped, boosting bullish sentiment. October’s weaker-than-expected PMI (49.0, down 0.8 MoM) underscores macroeconomic strains—weak domestic demand remains a structural hurdle, limiting downstream transmission of anti-inflation policies. With fundamentals soft, treasury yields could dip further, favoring 10-Year Treasury ETF (511260) and Treasury ETF (511010).
Details show production (49.7) and new orders (48.8) dragged the PMI most, reflecting anti-inflation pressures and tepid demand. Tariff uncertainties also dampened trade. Price components weakened, signaling fading anti-inflation effects as downstream demand fails to support price hikes.
Overseas, the U.S. government shutdown has delayed key data, raising uncertainty. Fed Chair Powell’s hawkish tilt contrasts with slowing growth and contained inflation. Domestically, PBOC Governor Pan’s bond-trading restart signals comfort with current yields, fueling optimism. Further policy impact depends on tenor preferences.
In summary, bonds present bullish opportunities across fundamentals, policy, and technicals. We recommend staying attuned to 10-Year Treasury ETF (511260) and Treasury ETF (511010), riding the trend.
Risk Disclosure: Investors should note that systematic investment plans differ from savings products. While they facilitate long-term cost-averaging, they don’t eliminate inherent fund risks or guarantee returns. Equity ETFs/LOFs/structured funds carry higher risk-reward profiles than mixed, bond, or money market funds. Investments in STAR/ChiNext involve unique risks. Sector/fund performance data is illustrative only and not a guarantee. Stock mentions are not recommendations. Views expressed are for reference only. Investors must assess risk tolerance per suitability rules.
[Author: Guotai Asset Management]
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