B[CITIC Construction Investment: Looking forward to October, performance has entered the verification period, and overseas liquidity pressure has been marginally eased] On October 5, CITIC Construction Investment Securities Research Report pointed out that the overall adjustment of A-shares in September, the tightening of overseas liquidity and the digestion of the valuations of sectors with higher previous gains, the direction of growth and resources has retreated significantly, and low-level sectors such as real estate, medicine, and banks are relatively dominant. Looking forward to October, overseas liquidity pressure has eased, the market has entered a period of intensive disclosure of third quarter reports, and the importance of fundamental verification has further increased. It is expected that the profit of the technology sector will maintain a high growth rate in the third quarter report, and the profit expectations of some industries such as resource products, pharmaceuticals and non-bank finance will also improve; in terms of high-frequency boom, AI hardware will continue to have a high boom, energy prices will remain strong, and the mid-term supply and demand logic of industrial metals will still be supported. After the adjustment in September, the valuation pressure on some high-prosperity industries has been relieved. In terms of allocation, it is recommended to focus on AI hardware with high performance certainty, industrial metals, coal, oil and gas and basic chemicals supported by supply constraints and improved profits, as well as innovative drugs with good industry trends and securities insurance with low valuations and improved profits. B[The central bank uses multiple tools to protect liquidity, and funding is expected to be stable across quarters] On September 29, the end-of-quarter assessment superimposed the demand for capital reserves before the National Day holiday, and the inter-bank market faced a cross-quarter test. The central bank extended the medium-term lending facility (MLF) ahead of schedule, increased the upper limit of overnight reverse repurchase operations, and injected funds with reverse repurchases of different maturities to provide support for a stable cross-season. Many institutions believe that the central bank's increased investment, coupled with the net return of government debt funds and an increase in fiscal expenditures at the end of the quarter, will generally control the funding pressure this week. After the cross-quarter, post-holiday cash flow and other factors are expected to promote loosening of funds, but in late October, we still need to pay attention to the disturbance caused by the superposition of tax payments and the expiration of open market operations. (Shanghai Securities News) B[CITIC Construction Investment: The AI industry chain is still the main line in the medium term] On September 28, CITIC Securities Research Report believed that the main reason for the shrinkage of A shares last week was trading and seasonal factors, and a restorative rebound is expected after the holiday. The overseas main line has shifted to "reacceleration + reflation + interest rate increase". The U.S. economy has moved from a K-shaped differentiation to a comprehensive recovery, but cost pressures remain. Long-term interest rates have soared, real interest rates have risen, Europe and Japan have followed up with interest rate hikes, and global financial conditions have tightened. The stronger RMB exchange rate provides a certain buffer, but the constraints of tightening external liquidity are difficult to completely lift in the short term. Under the combination of external interest rate disturbances that have not subsided and internal pre-holiday shrinkage that needs to be repaired, it is recommended to maintain a balanced and flexible offensive and defensive configuration. Offensive end: The AI industry chain is still the main line in the mid-term. Once market enthusiasm recovers, the technology sector will often see the most obvious compensatory gains; industrial metals may be suppressed by the interest rate hike cycle, but fundamentals are still supportive, so focus on callback allocation opportunities. Defensive end: It is recommended to use low valuation, high dividends and cash flow certainty as the bottom position. Non-banks have both valuation and performance resilience, and the bank dividend bottom position is still there. In addition, the main line of resource products with hard supply constraints and rising prices is allocated as a hedge against the environment of rising external inflation rates and high valuations that put pressure on growth. B[Hong Kong's first five-year plan: Promote more mainland institutions to invest in the Hong Kong bond market and expand the channels and business volume of "Stock Connect", "Bond Connect", "Wealth Management Connect", and "Private Equity Connect"] On September 16, Hong Kong SAR Chief Executive Lee Ka-chiu announced the "First Five-Year Plan for Economic and Social Development of the Hong Kong Special Administrative Region (2026-2030)" (referred to as the "Plan") and the "Chief Executive's 2026 Policy Address". The "Plan" mentions the need to optimize the international bond market. Collaboratively promote primary market issuance, improve secondary market liquidity, expand offshore RMB business, and build fixed income and monetary infrastructure. Improve "Bond Connect" (Southbound Connect) and continue to promote the optimization and expansion of Southbound Connect in terms of investment scale, investor scope, products, trading arrangements, etc. Promote more mainland institutions to invest in the Hong Kong bond market and expand the channels and business volume of "Stock Connect", "Bond Connect", "Wealth Management Connect" and "Private Equity Connect". B[Hong Kong’s first five-year plan: Strengthening Hong Kong’s function as the world’s largest offshore RMB business hub] On September 16, Hong Kong SAR Chief Executive Lee Ka-chiu announced the “First Five-Year Plan for Economic and Social Development of the Hong Kong Special Administrative Region (2026-2030)” (hereinafter referred to as the “Plan”) and the “Chief Executive’s 2026 Policy Address”. The "Plan" mentions strengthening Hong Kong's function as the world's largest offshore RMB business hub. Comprehensively expand the scale of offshore RMB business, continue to improve the offshore RMB ecosystem, enhance liquidity support, establish a liquidity supplement mechanism for Hong Kong's offshore RMB market, accelerate offshore RMB product innovation and expand product types, build a full-coverage, multi-level RMB cross-border circulation network, and improve the stability of offshore RMB financing. Actively promote the RMB as the government's payment currency. Further enhance the ability of the offshore RMB market to support the real economy, comprehensively enhance its support and promotion role in areas such as trade, investment and financing, and cross-border business expansion, support enterprises in using RMB more extensively in cross-border economic and trade business, and facilitate the exchange of RMB with currencies in other regions. B[PBoC Lu Lei: During the "15th Five-Year Plan" period, the offshore RMB market will be developed to enrich the supply of offshore RMB liquidity] On September 10, at a press conference of the State Council Information Office, Lu Lei, deputy governor of the People's Bank of China, said that during the "15th Five-Year Plan" period, efforts will be made to promote reform and development through opening up and promote high-level financial opening up to the outside world. To this end, we promote the internationalization of the RMB, strengthen cross-border connectivity of financial infrastructure, develop the offshore RMB market, and enrich the supply of offshore RMB liquidity. B[UBS: You can now re-buy technology stocks, and you are more optimistic about A-shares than Hong Kong stocks] On September 1, Wang Zonghao, head of China equity strategy research at UBS, said at a media conference on Tuesday that you can now re-buy technology stocks, and taking into account factors such as funding, you are more optimistic about A-shares than Hong Kong stocks. Wang Zonghao said that the factors that previously triggered the correction of technology stocks include changes in the AI narrative, concentration of positions, and leverage reduction. All three factors have now changed. However, it is expected that investors will look for more non-AI sectors in the second half of the year, making the sector performance of the overall stock market less narrow than in the first half of the year. Compared with Hong Kong stocks, which have more IPOs and placements, A-shares have relatively abundant funds. At the same time, they are more optimistic about hardware stocks, and A-shares also account for a larger proportion of such stocks. Due to the dumbbell configuration, I am also optimistic about bank stocks, and recommend non-ferrous sectors that are not so closely related to AI, as well as overseas themes.
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