Is the A-share market adjustment nearing its end? What are the main investment themes? Here come the strategies from ten major brokerages.

Title context: Is the A-share market adjustment nearing its end? What are the main investment themes? Here come the strategies from ten major brokerages. Text: The latest strategic views from ten major brokerages are freshly out, as follows: CITIC SEC: Market adjustment is nearing its end This round of sharp adjustment was mainly triggered by institutional heavy holdings and gradually spread to sectors with a high proportion of margin financing. Judging from the net inflow speed of Treasury bond ETFs, the willingness to avoid risk remains relatively high at present; from historical experience, for market adjustments caused by institutional position reduction, the signal of ending is usually a recovery in the excess return of institutional-favored stocks relative to non-institutional ones. The increase in trading volume of some broad-based ETFs this week is a positive signal. The adjustment magnitude and duration of this round of core AI stocks have approached those of core new energy stocks from the end of 2021 to the end of April 2022. The first round of hardware valuation adjustment in the process of a downward revision in the second derivative of super-industry-cycle growth is nearing its end. However, for long-term funds that focus on the "first derivative" rather than the "second derivative" of AI growth, the current adjustment is not enough to change the trend. Memory prices, computing-card rental prices, and CSP profit margins are the core variables reflecting the direction of the "first derivative," just as lithium carbonate prices served as a signal for the new energy industry chain in 2022. In fact, during the stage when the "second derivative" is revised down while the "first derivative" is still rising, institutional heavyweight stocks weaken, while trading around new technologies repeatedly heats up, just like the situation from May to August 2022. There are similar circumstances now. From a longer time dimension, overseas high interest rates and AI investment are two sides of the same coin. A downward revision of AI investment expectations may instead lead to a decline in interest rates. Sustained interest rate declines may ease market anxiety and even bring repair in non-AI areas. Negative expectations should not be simply extrapolated in a trend-following manner. China Securities Co.,Ltd.: Opportunities emerge during the A-share market's volatile bottom-seeking phase In previous strategy notes, we believed that the A-share market has now completed a round of obvious style rebalancing, with value defense temporarily outperforming. In the short term, the market is highly likely to continue a pattern of volatile rotation and structural divergence, and the index is unlikely to embark on a one-way sharp rally. At the operational level, in the short term, investors can continue to focus on gaming opportunities in low-valuation dividend resources and some pro-cyclical defensive sectors, and should not rush to bottom-fish high-level growth tracks still in the valuation digestion phase. From a medium- and long-term perspective, the major industrial logic of AI and new quality productive forces has not disappeared. After sufficient correction and a decline in crowding, technology sub-sectors supported by real third-quarter earnings still have repair opportunities. Overall, we recommend balanced allocation, strict control of total position, focus on names with earnings certainty, and avoidance of pure-theme, high-level speculative risks without earnings support. Operationally, we recommend balanced allocation with attention to both offense and defense, using dividend assets as the base position for defense; in the short term, closely follow the third-quarter earnings main line and position in high-prosperity, high-certainty varieties such as AI computing power and chemical resource products, while also paying attention to new energy opportunities driven by European energy security. In the long term, firmly anchor to the main line of new quality productive forces, focusing on four major directions: bottleneck hard tech, AI scenario applications, green and low-carbon energy, and upgrading of traditional industries. Cautiously respond to external disturbances and wait for market expectation repair. BOC International: External pressure, domestic support Overseas risk transmission: valuation compression dominated by real interest rates is the core external cause of this round of adjustment. The rise in the 10-year U.S. Treasury yield this round mainly came from real yields rather than inflation expectations, and yield increases dominated by real interest rates suppress valuations far more directly than increases driven by inflation expectations. External shocks then amplified their impact on the A-share market through risk-appetite contagion. At present, U.S. Treasury real yields have not shown a clear top, and the valuation compression pressure on global growth stocks is difficult to ease systematically. External financial conditions remain the dominant variable for short-term A-share risk appetite. Domestic fundamentals and liquidity: external demand is supported, domestic demand transmission is not smooth, and liquidity is supported. Liquidity was the main source of market fragility this week: margin financing balances saw a net outflow of about RMB 55.862 billion this week. At the same time, although increased broad-based ETF volume absorbed some selling, it was not yet enough to fully offset systemic deleveraging pressure. The CSRC symposium on October 10 proposed to "continuously strengthen the construction of market stabilization mechanisms and further broaden medium- and long-term funding sources, channels, and entry methods," and explicitly stated it would "study and reserve more incremental policy tools," constituting potential support. However, during a stage dominated by external shocks, the formation of a market sentiment bottom still takes time. Key focus: third-quarter GDP and September retail sales, investment, and property data, with the core being the slope of consumption recovery and signs of investment stabilization. During the intensive third-quarter earnings disclosure window, directions with concentrated positive profit alerts such as electronics/PCB/computing hardware have relatively high earnings realization. After the September adjustment, the earnings factor is already somewhat oversold, and attention to the earnings factor is expected to recover in October. Sinolink: If the rebound has not yet arrived For A-share investors, at least the worst environment has passed for now: AI investment has brought high interest rates and rising global capital costs, but AI has narrowed to U.S. technology. At present, cracks in U.S. technology investment will support a decline in real interest rates for a period of time. The market does not currently have the basis for a V-shaped recovery, but the risk period has passed in stages, and we have begun to make appropriate bets in non-AI areas. Recommendations: First, against the backdrop of a slowing trend in the AI industry and diverging fundamentals, the suppression from real interest rates is gradually easing, and gold is ushering in an allocation window. Second, the energy and chemicals chain represented by coal, oil, and oil shipping will continue to benefit from global restocking demand for energy, while also possessing dividend attributes. Third, export data show that AI is no longer the only standout. If interest rates continue to decline in the future, export and overseas expansion sectors will usher in repair, among which white goods, textile manufacturing, commercial vehicles, and home furnishings also combine dividend attributes. Founder: The bottom area is gradually becoming clear The market accelerated its adjustment this week, mainly affected by the loosening of the AI narrative and liquidity shocks, with technology stocks bearing the brunt. In the latter half of the week, as the Shanghai Composite Index adjusted to a key level since the "924 rally," signs of stabilization initially appeared, driven by a sharp increase in broad-based ETF volume. We believe that after the market has undergone sufficient adjustment, the bottom area is gradually becoming clear, and the time to position for an oversold rebound has matured. Judging from the magnitude of the market adjustment, the Wind All A has retraced more than 20% from its mid-May high, with valuation returning to around 20x; the CSI 300 Index has fallen for 10 consecutive weeks, exceeding the 9 consecutive weeks of decline at the end of 2011. Both the time and space of the market adjustment have been relatively sufficient. From late October, important domestic and overseas events will arrive successively, including the domestic policy-related Financial Street Holdings Forum and the Fifth Plenary Session, A-share fund holdings and third-quarter reports, as well as the Federal Reserve FOMC meeting and U.S. corporate earnings overseas. These events will help ease current relatively pessimistic expectations regarding fundamentals, micro-liquidity, and the AI narrative. In terms of style, large-cap style, due to its low-valuation attribute and the arrival of the policy push window, is relatively favored during market stabilization and the early stage of a rebound. Allocation strategy recommendations: For market stabilization, look to technology; for trend formation, look to domestic demand. Focus on three allocation opportunities. First, the oversold rebound in technology. After entering late October, technology catalysts will increase, the AI industry trend and prosperity remain relatively solid, and allocation value has risen significantly after the recent sharp correction. Pay attention to changes in public fund holdings announced in October, with technology stocks tilting toward sub-sectors that can raise prices, expand volume, and achieve new technological breakthroughs. Second, attach importance to the allocation value of domestic demand and pro-cyclical sectors, including the property and infrastructure chain and some consumer goods. Third, non-bank financials, which respond most directly to monetary policy changes, have good earnings-valuation matching, and can stabilize the index. Zhongtai: When will the liquidity negative feedback end? The market has entered the critical point of liquidity negative feedback. The strength of domestic support and the timing of Trump's TACO jointly determine the subsequent path. The market continued to fall this week, the technology direction remains in a downward channel, and the Shanghai Composite Index also broke below its previous bottom area. Whether the current position is effectively broken still requires observing whether it can be quickly recovered in the following trading days. The previous judgments that the global AI cycle would turn upward at the end of August and that U.S. Treasury yields would approach an inflection point in October have been partially realized, but the magnitude of this round of A-share selloff clearly exceeded expectations, and Trump's irrationality on the U.S.-Iran issue has lasted longer, with no substantive breakthrough yet seen in U.S.-Iran negotiations. Under the baseline scenario, the market has entered an important critical point. After extreme pessimism, two paths may form: First, multiple domestic departments' policies and long-term funds increase their involvement in technology and small- and mid-cap stocks, combined with Trump's pre-election TACO on Iran, driving a combination of global technology stock gains plus falling U.S. Treasury yields, and the market stabilizes directly and shows a relatively strong rebound; Second, policy coordination and buying in the technology direction are insufficient, leveraged negative feedback continues to spread, and the market first experiences a round of downward exploration and credit risk pressure release, after which policy rescues according to the principle of "no systemic risk." Both paths may ultimately bring a rebound, but the former corresponds to a better structural market next year, while the latter means greater short-term risk and greater pressure on the policy and market environment next year. Current conditions are close to the dividing line between the bullish and bearish paths. Offensive positions can be gradually prepared for a strong rebound, but before domestic and overseas signals are fully confirmed, the portfolio still needs to retain defense and energy security hedges. 1. If multi-ministry policy coordination appears, the STAR 50, CSI 1000, and other directions continuously receive large inflows, and at the same time Trump's TACO appears, global technology rises, and U.S. Treasury yields continue to decline, positions can be increased with focus on the STAR 50, domestic storage, semiconductor equipment, CSI 2000, and nonferrous metals. These directions fell relatively sharply earlier, and once the liquidity negative feedback is broken, rebound elasticity may also be stronger. 2. The portfolio should continue to retain energy and chemicals and dividend assets with good free cash flow. If domestic policy remains dominated by a single department, buying strength in technology ETFs is insufficient, or Trump continues to take a hard line, such assets can still serve the functions of drawdown control and tail-risk hedging. 3. Internet platform leaders in Hang Seng Tech deserve medium-term focus: they combine cash flow emphasis by current institutions, low valuation, and C-end applications, and are also directions that truly benefit from AI applications such as short dramas; 4. Active funds can continue to focus on AI application directions such as innovative drugs and media. Shenwan Hongyuan Group: Signals at the tail end of the short-term adjustment have appeared Pessimistic expectations currently being digested by the market: 1. The long-term outlook for the AI industry does not generally include computing power inflation, and the industry is currently accelerating correction. Financing for overseas CSP leaders is under pressure, which is both a credit risk concern and a liquidity shortage effect. Pressure naturally transmits to the computing power inflation chain. Concerns about a decline in AI capex growth in 2027 are more stubborn. Breaking through supply bottlenecks in the computing power inflation chain is also the general trend. 2. The overseas asset allocation environment is unfavorable, and clues of macro constraints on industry are increasing. 3. The funding supply-demand environment is unfavorable, and all types of funds reduced positions to some extent in October. The stage of confirming the adjustment wave has now passed, and more discussion should focus on positioning within the adjustment wave. After the adjustment to date, there is already a timetable for long-term cost-effectiveness clearing, and short-term cost-effectiveness improvement has shown results. Indicators signaling extremely high short-term cost-effectiveness are increasing. It is also not far from the state in which various cost-effectiveness indicators uniformly point to short-term rebound demand. The short-term adjustment is already in its tail stage. Non-technology outperformance has lasted longer, and the absolute return period for high dividends has lengthened. The focus in non-technology directions remains unchanged: CXO, innovative drugs, real estate, coal, shipping, precious metals, industrial metals, and basic chemicals. High dividends and technology tracks have a "seesaw effect," based on which attention should be paid to banks and utilities. Before clues of the market returning to strength appear, high dividends can still be held on a defensive basis. Open Source Securities: Chip concentration has improved, but do not rush into left-side heavy positions Judging from A-share performance, chip concentration has improved significantly compared with July, but that does not mean incremental funds have returned. As of October 16, the trading value concentration of the top 5% of A-share stocks fell to 41.01%. The fragility brought by high trading concentration is improving, and previously highly concentrated trading funds are expected to spread to more tiers of stocks. The effectiveness of various strategies is also recoveringsuch as micro- and small-cap, net profit gap, high free cash flow, and high dividend strategies. We believe a short-term rebound may occur at any time, but there is no need to rush into left-side heavy positions. A strong and sustainable rebound still needs new reasons and catalysts. Although the AI industry trend remains and the medium-term logic of technology has not been damaged, a new narrative capable of pushing technology back into a strong Beta market has not yet appeared. Therefore, we recommend waiting for right-side signals: overseas semiconductors stop falling, core A-share names stabilize, and trading and money-making effects continue to improve. In the short term, crowding has eased significantly, and the baseline path remains "reboundhigh-volatility oscillation." Continue to seize rebalancing opportunities brought by the spread of money-making effects. In allocation: 1. Continue to strongly recommend micro- and small-caps, with attention to CSI 2000 and Wind Micro Cap; 2. Technology currently has good soil for a rebound; adhere to "focus on large but include small, emphasize upstream, domestic > overseas"; 3. For industry rebalancing, continue to focus on nonferrous metals, chemicals, pharmaceuticals, agriculture, and shipbuilding, while raising attention to real estate and the real estate consumption chain; 4. High-dividend directions such as banks, utilities, and power continue to have portfolio allocation value. In the medium term, the bull market logic has not yet been damaged, but slope expectations need to be appropriately lowered. Continue to seek the intersection of "secondary ignition within technology + domestic demand policy uplift + fundamental improvement in low-position industries." China Galaxy: After the short-term adjustment, which core variables to watch? A-share market investment outlook: After the holiday, the A-share market adjusted continuously, and the technology growth sector came under pressure. This round of adjustment essentially did not stem from changes in fundamentals, but from denominator-side disturbances jointly caused by high overseas risk-free rates, an upward shift in the center of energy prices, and sentiment transmission across global equity markets. At the external constraint level, first, persistently high U.S. Treasury yields suppress global risk assets; second, high oil prices transmit to the rate side through inflation expectations; third, scrutiny of the revenue side of the AI narrative spills over through the risk-appetite channel. Internally, earnings and policy constitute two verification clues. In late October, A-shares enter the intensive third-quarter earnings disclosure window, and fundamentals continue a K-shaped divergence pattern. Focus on earnings verification and repair opportunities in sectors along the upper edge of the K. On the policy side, new special bond projects focus on key areas such as the construction of the "six networks," and attention should be paid to project implementation progress; top-level deployment of new quality productive forces has been strengthened, and the October 16 State Council executive meeting focused on the "AI+" initiative. In the short term, stock-game dynamics and sentiment transmission have amplified market volatility. At the index level, after continuous adjustment, previous chip pressure has been released in a concentrated manner, allocation cost-effectiveness has risen after valuation correction, and further market adjustment space is limited. At the same time, structural supporting forces have begun to appear: equity ETFs have seen continuous net inflows, and broad-based ETFs increased volume late on Friday, releasing a signal of funding support. However, the conditions for incremental entry still need time to be observed, and the short-term market may be dominated by range-bound oscillation and structural divergence. Allocation opportunities: First, repair opportunities in technology growth after short-term oversold conditions, with focus on communications equipment, PCB, storage, servers, and other directions; for innovative drugs, watch ESMO data catalysts. Second, dividend base positions: overseas disturbances remain relatively numerous, and attention to and allocation value of financials, utilities, coal, and other sectors are rising. Third, policy expectations: policy continues to promote accelerated implementation of major projects and the formation of physical. Watch links such as power grids, energy storage/power supporting facilities, building materials, and construction machinery. Caitong: The market has reached support Overall market outlook: Global liquidity concerns have transmitted shocks, A-shares have fallen to support, and the market subsequently awaits catalysts to restart. Long-term outlook: significant downside risk is limited, and wide-range mid-term oscillation may be more likely. Subsequently watch the window for large China-U.S. IPOs and the possibility of domestic economic support measures being implemented. At present, the market is already at a cost-effectiveness support level, and the necessity of exiting is limited. Short-term catalysts: CPI exceeding expectations + South Korea deleveraging shock; remaining liquidity concerns affect U.S. technology stocks and further radiate globally, but actual rate hike expectation changes are limited. It is more that U.S. stocks had previously priced in too little, while U.S. Treasuries have already traded as if bad news is exhausted. Corresponding allocation directions: The "real gold plus speed" portfolio recommends oil and gas exploration, copper, panels, potash fertilizer, express delivery, etc. Small- and mid-cap technology & new themes PLUS: On the one hand, for new AI technologies/products, look at directions with high earnings realization such as the Rubin chain represented by liquid cooling, connectors, and ceramic substrates; on the other hand, for low-crowding potential ignition themes, pay attention to military industry and others. This article is reprinted from "Cailian Press," GMTEight editor: Jiang Yuanhua.