To The Moon

More than 2,800 stocks declined as A-share indices closed lower across the board, with the Shanghai Composite Index falling 0.41%, the Shenzhen Component Index dropping 0.33%, the ChiNext Index sliding 0.4%, the Beijing Stock Exchange 50 Index retreating 1.37%, and the STAR 50 Index down 0.61%.

Total market turnover reached 1.84 trillion yuan, shrinking by 16 billion yuan from the previous session, while declining stocks outnumbered advancers by over 2,800 issues. Sector performance showed strength in genetically modified crops, corn, agriculture and forestry, food concepts, and education, while precious metals, electronic components, oil and gas extraction services, minor metals, and MLCC concepts led the losses.

The much-anticipated negative catalyst has now fully materialized, with A-shares posting a modest decline on modest volume and a roughly balanced advance-decline ratio. Early Tuesday morning, the Federal Reserve concluded its September meeting by raising rates by 25 basis points while issuing a relatively hawkish outlook, suggesting further tightening may follow. Nonetheless, markets interpreted this as the bad news being priced in.

Intraday action saw A-shares initially rally before giving back gains, then trading sideways in a narrow range, ultimately forming a doji candlestick pattern on the daily chart—a classic sign of indecision. Looking back at the week's activity, the market fell sharply on Tuesday, then rebounded Wednesday, driven by pessimistic capital fleeing early before optimistic capital repositioned ahead of the event.

The current market's agonizing choppiness stems from deeply divided opinions, with no clear directional bias yet. Trading volume and the breadth of advancing versus declining stocks offer supporting evidence of this uncertainty. The modest contraction in turnover suggests that if the market had found conviction—whether bullish or bearish—institutional capital would have moved decisively in one direction. A roughly even split between winners and losers implies comparable profit and loss effects and evenly matched buying and selling pressure.

However, it's important to recognize that the absence of a clear trend does not necessarily mean A-shares will consolidate sideways—a prolonged, gradual decline remains a distinct possibility, and investors should remain vigilant to this risk.

At the sector level, capital rotation toward defensive groups signals a market leaning toward risk aversion, consistent with the cautious index action. Today's gainers included food and innovative pharmaceuticals—traditional safe havens—while precious metals and MLCC heavyweights that surged yesterday suffered sharp reversals. In essence, funds that piled into precious metals and MLCC positions expecting either no Fed action or a dovish hike were caught flat-footed by the actual policy outcome. This bullish-optimistic scenario had been the consensus view among institutions heading into the meeting, but the Fed's independence clearly exceeded what most investors, including ourselves, anticipated.

Looking forward, should the Fed eventually pivot toward easing, non-ferrous sectors like precious metals and minor metals would face immediate pressure, while the technology sector would see its valuation dynamics squeezed from the cost-of-capital side. Tech stocks continue to await positive fundamental catalysts that could offset this overhang, which would require more meaningful earnings breakthroughs at the industry level. Notably, statements from AI giants have all supported slowing development momentum—an indication that these leaders are feeling intensifying competitive pressure while facing higher financing costs that make continued heavy investment increasingly challenging.

Our recommendation is to maintain a cautious posture, potentially increasing exposure to defensive sectors while considering trimming positions in cyclical and technology-oriented offensive areas, given the prevailing uncertainty. We must emphasize that all market activity carries risk and requires prudent decision-making, and the views expressed herein are for discussion purposes only and do not constitute investment advice to any party.