East Money Information: Despite External Setbacks, the A-Share Market Rebound Remains on Track

East Money Information Securities issued a research report stating that the negative feedback loop from capital flows in the A-share market in the earlier period shows signs of reversal, the massive inflow into broad-based ETFs reflects strengthened absorption capacity, and the implementation of the RMB100 billion swap facility and the State Council Executive Meeting's call to "improve the capital market stabilization mechanism and enhance the intrinsic stability of the stock market" have also formed significant policy tailwinds. Overall, the external markets may be overreacting in the short term to the results of the U.S. midterm elections. Apart from the possible marginal tightening of requirements for AI data center construction, the U.S. midterm election results may also improve U.S. tariff policy, which is conducive to ending the Iran war and easing interest rate expectations. Once external market volatility stabilizes, the rebound in A-share and Hong Kong stock markets is expected to continue. The main viewpoints of East Money Information Securities are as follows: Using industry turnover share to characterize the concentration and diffusion of capital across industries, the firm conducted a systematic review of the entire process of several rounds of chip structure rebalancing from concentration since 2019, and derived three stable patterns: First, industries with higher crowding during the capital concentration period experienced larger declines in crowding and larger price drops during the rebalancing period, while low-crowding industries saw limited adjustments, with some even rising against the trend; Second, overall, industries that bottomed earlier during the rebalancing period rebounded more strongly after touching bottom; Third, most previously high-crowding industries were able to follow the market in forming a rebound after bottom confirmation, but this momentum mainly came from recovery after the market stabilized. In comprehensive judgment, the firm believes that the current round of capital concentration has significantly declined, the chip structure rebalancing is nearing completion, and the market is currently in a stage where the bottom area is being gradually consolidated and market consensus is being rebuilt. The short-term rebound has strong directional certainty; looking ahead, as the chip structure adjustment is completed and the volume center is restored, related directions are expected to become the vehicle for capital to regroup, and a new round of market movement is worth anticipating. This week, Democrats in the U.S. midterm elections achieved significant victories at both the congressional and state election levels, and the market is concerned that subsequent data center construction may face tightened approvals at the state and local levels. The firm believes that apart from the possible marginal tightening of requirements for AI data center construction, the U.S. midterm election results may also improve U.S. tariff policy, boost the development of Shanxi Guoxin Energy Corporation, promote the end of the Iran war, and help ease interest rate expectations. The impact of the midterm election results on the medium-term development trend of the U.S. AI industry may also be overestimated, and related statements can continue to be monitored. Regardless, the impact on the overall fundamentals of China's stock market is more limited. At the allocation level, the firm favors a "balanced offense and defense" approach: First, prefer quality blue chips and directions pointing to improving fundamentals per third-quarter reports; Second, select directions with independent narratives and clean chip structures, such as AI applications (media, computers, humanoid Siasun Robot&Automation), power equipment and new energy, pharmaceuticals, and defense; Third, pay attention to domestic computing power and other sectors where chip structures have been cleared and oversold rebounds are occurring, with focus on tracking related catalysts and the indications from institutional fourth-quarter position changes regarding the progress of chip structure clearing.