Overview
On October 23, after a string of pullbacks, A-shares staged a V-shaped rebound. The Shanghai Composite closed at 3,690.48, up 0.89%; the Shenzhen Component gained 2.79%; and the ChiNext index jumped 4.16%. Turnover across the Shanghai, Shenzhen and Beijing bourses reached about 1.97 trillion yuan, 427.6 billion yuan higher than the previous session, with over 4,500 stocks advancing. The E Fund ChiNext ETF alone traded more than 19.5 billion yuan, a record high since October 9, 2024, underscoring how broad-based ETFs again acted as a backstop for market liquidity.
For the week, equity and cross-border ETFs saw a combined net inflow of 158.07 billion yuan. Sector preferences shifted from “high-valuation narratives” toward “stable cash flows and visible orders”: robotics-themed ETFs were bought, while semiconductor-equipment and coal ETFs were sold. On a weekly basis the market remained soft—the Shanghai Composite fell about 0.69% and the ChiNext 2.26%—with Friday’s bounce only partially retracing the declines.
The rebound matters because it occurred at a sensitive juncture—peak third-quarter earnings disclosure and the approaching Fed meeting—testing the appetite of long-term funds while signaling a shift in pricing logic from “liquidity betting” to “earnings verification.”
Background & Interpretation
1. Macro and Policy Context
Domestic fundamentals underpin the rebound. GDP grew 4.6% year-on-year in the first three quarters and 4.5% in Q3, up 0.2 ppt from Q2; industrial value-added rose 5.3%, with equipment manufacturing up 10.2% and high-tech manufacturing up 14.3%. The monetary framework is being reshaped: the PBOC will gradually make the overnight repo rate (DR001) the main policy rate, and loan pricing is moving from a single LPR reference to a diversified basket, improving transmission. On October 26 the PBOC will conduct a 700 billion yuan one-year MLF operation, continuing its “pre-announce, stabilize expectations” liquidity management.
2. Core Drivers and Underlying Mechanism
Two pillars supported the bounce. First, ETF backstopping: the first 18 active-management ETFs began issuance, with expectations of insurance and pension money entering; 645 A-share firms launched equity-incentive plans this year. Second, earnings verification: by October 18, 108 of 126 Shenzhen-listed firms that reported had pre-announced positive results (~85.7%); H1 net profit rose 19.5%, a three-year high, and buybacks/dividends reached 2.1 trillion yuan—anchoring the “tech down, earnings up” tension.
3. Market Structure and Industry Chain Impact
Sector divergence was stark. The Star 50 rose 1.23% against the trend, dividend assets were resilient, while richly-valued growth stocks came under pressure. Style rotated from “future stories” to “profit and cash flow,” making earnings visibility the core differentiator. Beneficiaries clustered in energy/resources, high-dividend assets, and visibly profitable AI hardware and high-end manufacturing; property and traditional consumption still await confirmation.
Implications & Outlook
The market may extend a choppy recovery. Soochow Securities argues A-shares have entered a bottom zone, with late October to November a key window: Q3 pricing shifts to earnings, and November’s results void favors thematic activity. External constraints remain—Fed hikes, elevated U.S. yields and high oil prices cap growth valuations—but the yuan’s resilience under strong exports preserves room for an autonomous monetary stance.
Takeaways for Industry Participants
For institutional investors: stay balanced, use low-valuation dividend names as a base, and selectively add beaten-down tech subsectors with intact fundamentals. For listed firms: accelerate normalized incentives, dividends and buybacks to attract long-term capital. For wealth managers: capture the product-innovation window from active ETFs and pension inflows. Watch for pullbacks on external rate rises and earnings misses.
This column compiles industry information and shares technical perspectives; it does not constitute investment advice.