Brokerage Morning Meeting Highlights | Fed Rate Hike: Future Allocation Focuses on Technology and Sectors with Improved Supply and Demand

Yesterday, the market fluctuated and rebounded, with the STAR 50 Index fluctuating and rebounding by more than 4%, the ChiNext Index rising nearly 2%, and the Shenzhen Component Index rising more than 1%. The combined turnover of the Shanghai and Shenzhen stock markets was 1.84 trillion yuan, and more than 4,100 individual stocks in the entire market rose. On the board, sectors such as computing power hardware, PCB, optical fiber, CPO, liquid cooling servers, and semiconductor materials showed strong performance. On the declining side, sectors such as construction machinery showed relatively weak trends. As of the close, the Shanghai Composite Index rose 0.71%, the Shenzhen Component Index rose 1.26%, and the ChiNext Index rose 1.96%. CICC believes that with the Fed rate hike, future allocation should focus on technology and sectors with improved supply and demand; CITIC SEC believes that attention should be paid to sectors with certain growth; China Securities Co.,Ltd. believes that global semiconductor equipment components are undergoing a historically rare round of full-chain price increases. CICC: Fed Rate Hike: Future Allocation Focuses on Technology and Sectors with Improved Supply and Demand In terms of allocation, it is recommended to focus on: 1) Technology growth. The performance of growth stocks still depends crucially on the industry's own prosperity and earnings realization. With solid fundamentals, a U.S. rate hike may not necessarily have a greater impact on global growth stocks. The A-share technology sector may show divergent trends in the future, requiring careful selection: AI infrastructure-related segments, such as optical communications and PCB, are still highly likely to remain in a high-prosperity state this year, and are expected to rebound after an earlier downturn. For many companies in semiconductors and computing power and other fields, it is still necessary to pay attention to the matching degree between fundamentals and valuation; many innovative drug companies have entered the stage of clinical data verification, which is worth bottom-up attention. 2) Taking into comprehensive consideration the geopolitical situation and the position in the capacity cycle, pay attention to areas with improving performance and improved supply-demand patterns, such as power grid equipment, petrochemicals, and chemicals. The progress of fundamental recovery in purely domestic demand industries is still relatively slow and requires further observation. CITIC SEC: Focus on Sectors with Certain Growth The Federal Reserve raised rates by 25bps in September as expected, upgraded this year's growth and inflation forecasts, and both the dot plot and Warsh's remarks released hawkish signals. Strong market expectations made the rate hike a choice the Federal Reserve went along with. The pace and magnitude of the Federal Reserve's subsequent rate hikes depend to a large extent on oil prices, which is difficult to predict, but given that headline inflation year-on-year may decline significantly early next year, the rationale for continuing to raise rates should weaken by then. It is expected that the Federal Reserve will raise rates by another 25bps within the year and may stay put next year. U.S. financial conditions are currently unlikely to ease meaningfully, and under the growth narrative, assets with fundamental support rather than those benefiting merely from liquidity should be sought. China Securities Co.,Ltd.: Global semiconductor equipment components are undergoing a historically rare round of full-chain price increases Pricing power in the semiconductor industry chain is structurally shifting upward from chip terminals to equipment and components. Component companies are smaller in scale and have a high proportion of fixed costs, so price increases directly profits; at the same time, production line expansion cycles last as long as 12-18 months, making supply elasticity the weakest. Pay attention to the domestic substitution demand and price increase logic brought by extended delivery times from overseas suppliers of valves and piping, ceramic parts, RF power supplies, GAS BOX, and others. This article is reprinted from "Cailian Press", GMTEight editor: Jiang Yuanhua.