Huaqin Securities: A-share short-term continued volatility, technology and cyclical sectors continue to dominate.

Huajin Securities issued a research report, stating that the core factors that ended the volatility in the bull market in A-shares in history were positive policies and external events, sufficient adjustment of market sentiment indicators, completion of industry rotation, etc. Comparing historical review experiences, the current adjustment of market sentiment indicators and industry rotation have not been completed, and A-shares may continue to see volatile trends in the short term. From the perspective of factors influencing the trend of A-shares, the slow bull trend is still maintained in the short term. In the short term, continue to allocate technology industries such as CKH HOLDINGS at a low point. Major views of Huajin Securities are as follows: First, positive policies or external events are the core factors driving the end of volatility. For example, in March 2007, the "Two Sessions" proposed vigorously developing the capital market, in March 2009 the Fed expanded QE, in February 2015 the central bank cut the reserve ratio, in February 2020 the central bank cut interest rates while the Fed slashed interest rates significantly in March, in January 2025 the long-term funds entered the market, and in April 2025 the Political Bureau meeting emphasized stabilizing and activating the capital market. Second, sufficient adjustment of market sentiment indicators may also lead to the end of the volatility period: First, the valuation percentile of the Shanghai Composite Index has mostly dropped to the low to medium level of 15%-60%; second, the turnover percentile of the Shanghai Composite Index has mostly dropped to the low to medium level of 6%-60%; third, the turnover of all A-shares has fallen by around 35%-80%; finally, the proportion of stocks above the 200-day moving average has mostly dropped to the neutral to low level of 15%-55%. Finally, the completion of industry rotation is also an important factor driving the end of volatility. Currently, A-shares may continue to be volatile and maintain a slow bull trend in the short term. Comparing historical review experiences, the current adjustment of market sentiment indicators and industry rotation has not been completed, and A-shares may continue to see volatile trends in the short term. Firstly, policies are still leaning towards being positive, with limited external risks. Secondly, since August 26, market sentiment indicators have not fully adjusted: the lowest valuation percentile of the Shanghai Composite Index has only adjusted to 65.7%, the turnover percentile has only reached 75.6%, the turnover of all A-shares has fallen by up to 37%, and the proportion of stocks above the 200-day moving average has only reached 77%, all of which have not yet reached the lower levels seen during previous bull market volatility adjustments. Thirdly, industry rotation has not been fully completed since August 26: the industries with lower previous increases, such as agriculture, forestry, animal husbandry, and fishery, have only seen slight increases, and rotation within industries has not been completed. From the perspective of factors influencing the trend of A-shares, the slow bull trend is still maintained in the short term. Firstly, the economy and profits continue to be in a weak recovery trend: first, in August, export growth slowed, credit growth rebounded slightly, and the short-term economy continued to be in a weak recovery trend; second, the year-on-year decline in PPI in August narrowed slightly, indicating that industrial profits may continue to recover. Secondly, liquidity remains loose in the short term: firstly, US non-farm payroll growth in August was significantly lower than expected, and the Fed is likely to cut interest rates in September, maintaining loose macro liquidity in the short term; secondly, historically, during bull market volatility periods, foreign investments are likely to increase, while financing is likely to be affected by market sentiment, but foreign investments and new fund inflows may remain at relatively large scales, leading to continued high inflows of funds into the stock market in the short term. Industry allocation: In the short term, continue to allocate at a low point in technology, CKH HOLDINGS, and other cyclically sensitive industries. In the short term, technology, CKH HOLDINGS, and cyclically sensitive industries may still have an advantage. Firstly, when adjustments occur in the bull market, the industries that were leading or catching up in the previous trends are relatively advantageous: when there is a strong industry trend, the leading industries in the early stage of the bull market may still perform well during market adjustments; when there is no strong industry trend, industries that were previously lagging may catch up during market adjustments. Secondly, currently, industries such as communication, electronics, and technology growth, as well as non-ferrous metals and cyclical industries, fit the current strong industry trends, and may still perform relatively well during short-term market volatility; additionally, industries such as food and beverage, which have shown relatively lower increases from April 7 to August 26, may also see some performance in the future. In terms of valuation and price-to-earnings ratio, industries such as electrical equipment, automobiles, media, electronics, food and beverage, automobiles, beauty and personal care, and household appliances in the growth sector have relatively high valuation and price-to-earnings ratios. Short-term recommendations for continuing to allocate at a low point: defensively allocate in industries that are benefiting from positive policies and industry trends such as electronics (consumer electronics, semiconductors), communications (computing power), non-ferrous metals (rare and precious metals), computers (computing power), media (AI applications), and mechanical equipment (Siasun Robot&Automation); industries that may marginally improve and catch up include new energy (solid-state batteries, energy storage, wind power), innovative pharmaceuticals, new consumption, food, and aerospace industries. Risk warning: Historical experiences may not necessarily apply in the future, unexpected changes in policies, and weaker-than-expected economic recovery.