A-share reviews: The three major indices fluctuated downward after opening higher, and the market style changed rapidly

Today (10/17), the three major indices fluctuated downward after opening higher. By the close, the Shanghai Index was down 1.05%, the Shenzhen Stock Exchange Index was down 0.74%, and the GEM Index was down 0.32%. The total turnover of the two markets was about 1.5 trillion yuan, surpassing 1 trillion yuan for the 12th consecutive trading day.

On the market, the high-speed copper cable connection concept is active, with Kaiwang Technology rising and falling; the Sora concept strengthened, and Zhongguang Tianze and Huayang Lianzhong rose and stopped; in addition, sectors such as information security concepts, Huawei computing power concepts, semiconductors, and aviation registered the highest gains; sectors such as real estate, construction materials, and gas supply and heating registered the highest declines.

In terms of volume, the total daily turnover of the Shanghai and Shenzhen markets was 1491.26 billion yuan, an increase of 115.888 billion yuan over the previous day. Among them, the turnover of the Shanghai market was 557.347 billion yuan (533.062 billion yuan on the previous trading day), and the volume was 529 million lots (516 million lots on the previous trading day); the turnover of the Shenzhen market was 933.913 billion yuan (the previous trading day was 842.31 billion yuan), with a turnover of 760 million lots (701 million lots on the previous trading day). Oriental Wealth had the highest turnover of 20.859 billion yuan. This was followed by Runhe Software, Softcom Power, Changshan Beiming, and Yinzhijie, with turnover of 19.877 billion yuan, 14.491 billion yuan, 13.805 billion yuan, and 10.633 billion yuan, respectively.

In terms of capital flow, today the Shanghai and Shenzhen markets had a net outflow of 40.682 billion yuan, accounting for 2.73%; the net capital outflow from large orders was 26.845 billion yuan, accounting for 1.8%; and the net inflow of capital from small orders was 34.025 billion yuan, accounting for 2.28%.

CICC believes that the main trading line of the current market focuses on industries with large losses in the previous period and directly favorable policies, and the market style is rapidly changing. In the first phase from September 24 to the end of the month, A-shares rose rapidly and generally, benefiting from the positive tone set by the Financial Policy and Politburo meeting. The main trading lines of the market focus on three aspects: first, the consumer sector, such as food and beverage, and consumer services, which saw a greater rebound; second, non-bank finance, real estate, construction materials and other industries with directly favorable policies led the way; and third, growth style sectors, such as highly valued industries such as computers, electronics, communications, and new energy, showed outstanding performance.

CICC pointed out that in early October, the market entered a policy waiting period, and fluctuations intensified, but overall there was still a big increase compared to before September 24. The market style stabilized during this period. Sectors such as banks and utilities showed strong resilience. Cash bulls, dividends, and central state-owned enterprises showed less pullback, and the correction in real estate and construction materials industries with favorable policies was also limited.

The brokerage firm further analyzed that the market recovery mainly benefited from the improved sentiment and return of capital brought about by the policy. However, how the subsequent fiscal policy is strengthened and fundamental improvements will determine the sustainability of the market rebound. At present, monetary policy has gained significant strength, and financial supervision and capital market reform measures have also had a positive impact on market expectations. However, in the second half of the financial cycle, the problem of insufficient demand was prominent, and fiscal expansion was particularly important to boost economic growth and mitigate financial risks.

According to the “policy bottom - market bottom - economic bottom” rule in A-share history, China Financial believes that the current policy bottom signal is quite clear, but further consolidation of fiscal policy is still needed to further improve market expectations and promote the formation of an economic base. In this way, a short-term market rebound driven by sentiment and capital can be gradually transformed into a medium- to long-term deterministic rebound driven by fundamentals.

In terms of style, CICC continues to be optimistic about cash bulls and central state-owned enterprises with stable free cash flow and high dividend rates, especially in the context of the gradual consolidation of the policy base. Furthermore, the US economy may achieve a “soft landing” or even “no landing,” which will benefit companies with high external demand exposure or rapid growth, particularly in cash cow industries such as optional consumption, telecommunications services, and energy resources.

In terms of specific investment lines, CICC suggests focusing on two major directions: one is the durable goods industry, which reflects the resilience of the household sector's needs, such as hardware, plumbing, furniture, and household equipment; the other is the industry that reflects equipment investment and manufacturing cycles, such as computer electronics, industrial equipment, chemicals, and coal and petroleum products.