To The Moon

During the seven days the A-share market was closed, the macroeconomic news flow was largely quiet, while overseas markets, particularly US stocks, delivered notable performance. With US September nonfarm payrolls adding only 29,000 jobs and market-implied odds of a Fed rate hike in October compressed to roughly 20%, the Nasdaq Composite rose for four consecutive trading sessions and twice set record closing highs; Hong Kong stocks, after tumbling 2.60% on October 2, first rallied then pulled back, sliding again in the final stretch of the holiday, with the Hang Seng Index closing down 0.62% at 24,130.5 points on October 7. Over the A-share holiday period, the index fell a cumulative 1.96%.

Before the holiday, A-shares were mired in the year's deepest "volume drought." On September 29, total market turnover hit a more than 14-month low, the Shanghai Composite Index dropped below 3,900 points, and the ChiNext and STAR 50 indices had just endured their worst quarters on record. Can the overseas recovery lift confidence in the A-share market? Industry insiders interviewed by Yicai believe October could bring a rebound, especially for tech stocks, which after a full quarter of position clearing in Q3 could rally at any moment once earnings and industry catalysts emerge. Meanwhile, October opens the A-share third-quarter earnings disclosure window, and earnings verification will be a key factor shaping the market's trajectory.

Holiday Overseas Markets: Nasdaq's Four-Day Rally to Record Highs, Rate Hike Expectations Ease

During the National Day holiday (October 1-7), A-shares were closed while US and Hong Kong markets traded normally. The Nasdaq Composite rose for four straight sessions from October 1 to 6, climbing from 26,871.60 at the October 1 close to 27,599.79 on October 6, a cumulative gain of 2.71%, with record closing highs set on both October 5 and 6. The S&P 500 closed at 7,818.93 on October 6, also a record closing high.

Driving this rally was a repricing of the rate hike path triggered by employment data. The US Labor Department reported on October 2 that September nonfarm payrolls rose by just 29,000, far below the roughly 90,000 expected, while July and August figures were revised down by a combined 60,000. The unemployment rate rose unexpectedly to 4.2% from 4.1%, though mainly due to a higher labor force participation rate. According to CME's "FedWatch" tool, after the data release traders priced the probability of a 25-basis-point rate hike at the October FOMC meeting at about 15% to 23% (varying slightly by institution), while the probability of holding rates steady rose above 77.9%.

But rate hike expectations were merely delayed, not eliminated. ISM data showed the September manufacturing PMI came in at 54.5 versus expectations of 55.0, a slight pullback from August's 54.6 but still in expansion territory; the services PMI registered 54.9, below the expected 55.2. Both indices remained above the boom-bust line, yet their price sub-components moved higher against the trend, with the manufacturing prices paid index jumping from 71.1 to 77.9, the highest since May. Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management, said the weak jobs data refutes the notion that the labor market is re-tightening, and one more rate hike in December remains her base case, though sustained market pressure and further gains in energy prices could also force the Fed to act this month.

Hong Kong stocks saw significant volatility during the long holiday, tracing a "twists and turns" path of decline, rebound, then pullback. On October 2, the Hang Seng Index fell 2.60% to close at 23,972.29 points, touching a intraday low of 23,865.33, the largest single-day drop since March 23; the Hang Seng Tech Index fell 2.26% that same day to 4,157.94 points, hitting a intraday low for the year. After two consecutive sessions of weak, low-volume rebounds on October 5 and 6, Hong Kong stocks declined on October 7, with the Hang Seng Index and Hang Seng Tech Index closing down 0.62% and 0.68% respectively, as tech names such as Montage Technology, Nexchip, and GigaDevice led the market lower. Counting from October 2, the Hang Seng Index still fell a cumulative 1.96% over the holiday.

After A-shares' Sustained Volume Drought, What Comes Next Post-Holiday?

In contrast to the bustle overseas, A-shares before the holiday were in a low-volume state. On the final two trading days, September 29 and 30, total market turnover fell further to 1.42 trillion yuan and 1.45 trillion yuan, marking the year's lowest and second-lowest turnover respectively. The September 29 turnover was the lowest single-day level since July 8, 2025, a more than 14-month low and also the lowest single-day turnover within 2026.

In terms of indices, the market weakened in tandem with shrinking volume. In late September, the Shanghai Composite Index adjusted continuously, breaking below the 3,900-point mark in one swoop and closing at 3,842.19 on September 30; the ChiNext Index hit a new low since its phase adjustment began. On the final two trading days before the holiday, the market oscillated weakly on low volume at low levels. Structurally, after a sharp July decline and a weak August rebound, the tech sector saw some localized rebounds in the first half of September, but many individual stocks gave back their monthly gains in the final two weeks. Overall, September's market lacked a clear main theme, with strong wait-and-see sentiment among funds.

After the low volume, where does the market go? Historically, A-shares around National Day tend to show a pattern of "cautious volume contraction before the holiday, repair and warming after." According to Wind data, over the ten years from 2016 to 2025, the Shanghai Composite Index rose on the first trading day after National Day in seven of those years. On the funding side, margin funds tend to reduce positions before the holiday and replenish after; except for 2022, margin balances mostly rebounded on the first post-holiday day over the past decade, with 2024 seeing a surge of 107.7 billion yuan on the first day after the holiday.

Private fund and brokerage sources interviewed by Yicai believe whether the market stabilizes post-holiday still depends on volume recovery, the degree of Q3 earnings delivery, and external variables such as the Fed's December meeting. The market may still be in a bottoming and consolidation phase, with a major index adjustment unlikely, but a trending rally will also require new catalysts.

Regarding the pre-holiday volume contraction in A-shares, Liu Chenming, chief strategist at GF Securities, believes that in a bull market, adjustments accompanied by volume shrinkage are normal, and the current 55% shrinkage is not unusual. The pre-holiday contraction across A-shares was also hit by the National Day holiday calendar effect and does not reflect a drop in market-wide participation willingness to alert levels. Based on the average and median of the past 15 years, market volume typically shrinks by 25% to 30% before the National Day holiday.

Looking ahead to the post-holiday period, Zhao Xi, investment director at Shanghai Yinghao Asset Management, believes the market could show a slightly stronger oscillating trend from after the holiday until October 25, after which caution is warranted through year-end. Zhao told Yicai that in his view there are two main reasons for optimism about the short-term post-holiday market. First, overseas stock markets are repeatedly hitting new highs, especially US and Japanese equities. "A-shares fell continuously before the holiday, with低迷 sentiment and thin trading. In such conditions, restoring confidence and enthusiasm cannot happen overnight, but with positive feedback forming in overseas equity markets, A-share confidence could be repaired, coupled with earnings catalysts from Q3 disclosures," Zhao said.

Second, the probability of a Fed rate hike in October has fallen notably, and more importantly, oil prices. Since Middle East oil exporters are currently shipping crude via detours, with export volumes already back to 90% of pre-geopolitical-conflict levels, the current situation is insufficient to drive oil prices much higher.

Entering October, A-shares will usher in the Q3 earnings disclosure season, and the pricing focus may shift toward earnings delivery and industry trends. Looking at the tech sector's outlook, Zhao believes the prosperity and fundamentals of sub-sectors such as electronic cloth, PCB, and semiconductor equipment remain positive. With Q3 disclosures and a global tech stock resonance, A-share tech could rally at any time, but the sector has already been through multiple rounds of speculation and valuations are not cheap, so only a minority of tech stocks will see rebounds exceeding their June price highs.

Zheshang Securities judges that the AI sector's fundamental prosperity is still rising, and in October tech could make a second push to find its "fundamental top," with pricing focus shifting to earnings delivery. CICC cautions that tech is currently in a state of "waiting for industry trends," and if fundamentals continue to deliver, there remains room for a rebound. CITIC Securities believes the period around Q3 earnings is the year's last offensive window. With an upward earnings trend, macro risks becoming explicit, and depressed sentiment, a major index adjustment is very unlikely.