Midday Report for A-shares: Shanghai Composite Index Returns to 3900 Points, Chinext Index Up Nearly 3%, Nearly 4600 Stocks in the Entire Market Are in the Red.

On October 21, the A-share market continued to rebound on shrinking trading volume, with the Shanghai Composite Index returning to 3900 points and nearly 4600 stocks floating in the red. By the midday close, the Shanghai Composite Index was up 1.20%, the Shenzhen Component Index was up 1.97%, and the ChiNext Index was up 2.92%. It is worth noting that the market continued to rise on shrinking volume today. What signal does this release? China Galaxy Securities believes that shrinking volume does not mean a complete withdrawal of funds, but rather a differentiation in fund structure. Against the background of overall shrinking volume, the fund structure exhibits the characteristics of "passive inflow + active withdrawal" - on one hand, stock-type ETFs continue to see net inflows, providing important "bottom support" for market liquidity; on the other hand, margin trading balances have fallen, and northbound funds have also become more cautious in allocation due to external uncertainties. This differentiation implies that there is no systematic selling pressure in the market, but the lack of incremental funds driving the increase relies more on stockpile speculation and event catalysis. Open Source Securities believes that as long as the core DRIVE of the market is not disrupted, the market is likely to achieve further breakthroughs after a period of "rebalancing". In terms of the market, the hot spots are relatively chaotic - brokerage stocks surged, with Tianfeng leading the way; new thematic concepts fermented, with the deep earth technology concept rising, Shanghai SK Petroleum & Chemical Equipment Corporation and Sinopec Oilfield Equipment Corporation both hit limit up, driving the collective strength of deep-sea technology, engineering machinery, shale gas, and flammable ice sectors; the fruit chain and consumer electronics sectors rose, with Luxshare Precision Industry briefly hitting limit up; real estate stocks rose, with Winnovation Culturaltainment Development hitting limit up for two consecutive days; the semiconductor sector strengthened, with storage chips leading the way; CPO and other computing power hardware continued to rebound, with Hui Lyu Ecological Technology Groups hitting limit up for two consecutive days; in addition, the non-ferrous and wind power sectors performed well. On the downside, coal and gas sectors saw a pullback, with Shanxi Antai Group briefly hitting limit down. Looking ahead, Orient believes that in the short term, in terms of market sentiment, the effects of making money and market heat are approaching neutral levels, and it is not very realistic to expect the stock index to strengthen. Range oscillation remains the main characteristic of the market. Hot sectors 1. Apple concept on the rise The fruit chain and consumer electronics sectors saw a volatile rise, with Jutze Intelligence Technology up over 10%, and Luxshare Precision Industry, Lens Technology, Lingyi Itech, and Goertek Inc. following suit. Comment: Apple's stock price rose nearly 4% overnight, reaching a historical high. This strong rebound was mainly driven by sales of the iPhone 17 series exceeding expectations, with data showing that sales of the iPhone 17 series in China and the US in the first 10 days of its launch were 14% higher than the previous model. Analysts say we are at the beginning of the long-awaited upgrade cycle for Apple. 2. Storage chip concept strong The semiconductor sector strengthened, with storage chips leading the way, with Shannon Semiconductor Technology up over 10%, and ICkey, Puya Semiconductor (Shanghai) Co., Ltd., Shenzhen Longsys Electronics, and Shenzhen Techwinsemi Technology following suit. Comment: In terms of news, an executive vice president of Micron Technology recently stated that the supply situation for DRAM memory in 2026 will be even more severe than it is now. This is because the consumption of wafers for HBM is about three times that of traditional DRAM products, and a large amount of production capacity from three major memory manufacturers has been invested in HBM; additionally, the time and cost required to build new DRAM wafer fabs are increasing, making it impossible to ramp up production on a large scale in the short term. 3. CPO concept continues to rebound Comment: CPO concept stocks continued to rebound, with Hui Lyu Ecological Technology Groups hitting limit up for two consecutive days, and Zhongji Innolight, Yuanjie Semiconductor Technology, Hubei DOTI Micro Technology, Eoptolink Technology Inc., and Cig Shanghai leading the gains. Industrial research reports indicate that ongoing industrial chain surveys show continuous upward revisions in demand for 1.6T optical modules. Overseas major customers have recently raised their 2026 purchase plans for 1.6T optical modules, from 10 million to 15 million, and now to 20 million, mainly driven by the accelerated deployment of the GB300 and subsequent Rubin platforms, rapid growth in AI training and reasoning network bandwidth demand, and the mass production release of 1.6T products. 4. Man-made diamond concept active Man-made diamond concept stocks have been actively traded again, with Henan Huanghe Whirlwind hitting limit up for two consecutive days, Sf Diamond Co., Ltd. up 10%, and HFZS, Inno Laser Technology, and Henan Liliang Diamond following suit. Comment: In terms of news, at the 15th China (Henan) International Investment and Trade Fair, Henan Liliang Diamond officially announced the successful cultivation of a 156.47-carat artificial diamond. Previously, the Ministry of Commerce, together with the General Administration of Customs, issued an announcement on the implementation of export control measures for items related to superhard materials, which will be officially implemented on November 8. Institutional viewpoints 1. China Securities Co., Ltd.: Shrinking volume rotation continues, style switching has begun China Securities Co., Ltd. believes that after the overheating of the computing power sector trading in early September and the market entering a bullish consolidation phase, it has displayed the characteristics of high capital cutting, index range-bound consolidation, and shrinking volume rotation. Overall, the logic of the bull market is still intact, with capital market reforms entering a deep water zone, structural prosperity providing support, ample liquidity in the financial system, and limited downside. In terms of mid-term allocation, style switching has begun, with a focus on "countermeasures + risk aversion" in the short term, and dividends + technology styles at the end of the year. Key sectors to focus on include dividends, non-ferrous metals (rare earth, precious metals), major financials (banks, insurance), steel, agriculture, forestry, animal husbandry, fisheries, AI, batteries, chips, Siasun Robot&Automation, and innovative drugs. 2. China Galaxy: Short-term market style switch, focusing on "the 15th Five-Year Plan" expectations China Galaxy believes that in the short term, under the uncertainty of external trade frictions and with some sectors having accumulated large gains, market sentiment has become cautious. Trading volume has decreased, with some capital styles shifting, and the probability of the market entering a period of temporary volatility is high. With the focus of the Fourth Plenary Session of the 20th Party Central Committee on the "15th Five-Year Plan" and the concentrated disclosure period of the third quarter results, providing investors with more allocation clues, sectors focused on policy priorities and strong earnings certainty should be given priority. In terms of allocation opportunities, in the short term, dividend sectors with defensive properties are prominent, including banking, transportation, and food and beverage industries. In the medium term, the focus is on new productive forces themes, "anti-scramble," large consumption sectors, and "two-realm" areas. 3. Orient: Range oscillation remains the main characteristic of the market Orient believes that in the short term, in terms of market sentiment, the effects of making money and market heat are nearing neutral levels, and it is not very realistic to expect a strong rise in the stock index. Range oscillation remains the main characteristic of the market; for operations, continue to balance allocation and focus on semiconductor equipment, AI edge, non-ferrous metals, and other sectors. During the third quarter earnings window, earnings remain the focus of fund attention. Additionally, the coal sector has also shown strong performances, fundamentally benefiting from price hike expectations, with the winter peak season for electricity consumption approaching, coal supply and demand being tight, prices have room to rise, indicating a strong period performance.