A-shares closing review | Shanghai Composite Index fell 2.45% under pressure from internal and external factors! Index plummets significantly.

Today, the market fell on high volume, with the China Shipbuilding Industry, AI application concepts, and other sectors leading the gainers. The market traded around 2 trillion throughout the day, significantly higher than the previous trading day with a volume of around 250 billion, and over 5000 stocks fell in the two markets. Risk aversion sentiment continued to ferment, following the trend of the overnight US stock market, with major losses in the Asia-Pacific markets today. Institutions pointed out that the core logic behind the global market synchronously moving lower is the dual effect of changing liquidity expectations and differentiation in the AI narrative: on one hand, the US non-farm data beating expectations led to a significant decrease in the probability of a rate cut in December, disappointing market expectations for loose liquidity and causing funds to shift from growth stocks to defensive sectors; on the other hand, a sell-off in the Japanese bond market has raised concerns about global liquidity tightening, decreasing cross-border risk appetite and resulting in emerging market assets being hit first. Additionally, while NVIDIA's Q3 financial report was impressive, the seemingly strong performance did not reverse the outflow trend in the AI sector, with global capital reducing its holdings in NVIDIA, reflecting market concerns about the sustainability of high valuations in the AI sector, with the profit effect of the AI narrative weakening at the margins. Compared to the liquidity-driven adjustment in overseas markets, the volatility in the A-share market is more due to internal structural contradictions and external emotions resonating. On one hand, the market had completed a round of phase valuation repair relying on loose liquidity expectations, especially in sectors related to the AI, semiconductor, and NVIDIA industrial chains, with some valuations reaching historical highs. However, with the marginal effects of liquidity diminishing, the market has entered a phase of fundamental verification, where high-valuation targets lacking earnings support naturally face downward pressure. On the other hand, the recovery process in sectors like consumer goods and real estate did not meet expectations, making it difficult to absorb the funds exiting the technology sector, leading to a lack of clear trend leadership in the market and making it more prone to amplified volatility under overseas emotional impacts. Regarding the market performance, military equipment stocks surged in the afternoon, with the China Shipbuilding Industry remaining active all day. Hubei Jiuzhiyang Infrared System hit the limit-up, whilst CSSC Offshore & Marine Engineering and CSSC Science & Technology followed suit. In terms of news, according to Securities China, apart from the ongoing escalation of tensions in Japan, the military industry sector seems to be receiving continued catalysis. CCTV news published "Hard Power! Major Country's Weapon "Updates" Three Times in a Row", pointing out that major country's weapons have been updated one after another, with China's first electromagnetic catapult aircraft carrier Fujian Ship entering service and conducting its first sea-based live ammunition training missions. Meanwhile, in terms of performance, the military industry sector saw significant growth in the first three quarters. Furthermore, concepts like Sora, Huawei Pangu and other AI application concepts surged in the afternoon, with Easy Click Worldwide Network Technology and Visual China Group hitting the limit-up, while the forestry sector rose and then fell. In terms of declines, short-term sentiment neared freezing point, with heavyweight themes collectively falling. Lithium resources, energy metals, and solid-state battery sectors all experienced drastic corrections, with multiple stocks like Jinyuan EP Co., Ltd., and Chengxin Lithium Group hitting limit-down; the solid-state battery sector took the lead in declines, with Nuode New Materials, Yunnan Energy New Material, and other conceptual stocks experiencing a widespread limit-down; the photovoltaic and organosilicon sectors trended lower; the storage chip sector suffered significant losses, with Shenzhen Techwinsemi Technology, Beijing New Space Technology, and others hitting limit-down; the power equipment, consumer electronics, minor metals, oilfield services, and other sectors all saw comprehensive declines. On individual stocks, two major suspension-checked stocks, Strait Innovation Internet and Zhongfu Straits, resumed trading with significant volatility, both hitting limit-down at the close; the new listing on the Northbound Exchange, Dapeng Industrial, surged over 100% in the afternoon, with an increase of nearly 180% from the opening price and a turnover rate of over 95% during the day. Outlook for the future: - Debon Securities stated that the market style continues to be cautious, with external factors such as the decline in Fed rate cut expectations and heightened tensions between China and Japan potentially continuing to influence the market, leading to a continued pattern of "weight protection + structural themes" in the short term. - From the perspective of individual stocks, there were 354 gainers and 5,072 decliners in the two markets, with 26 showing no change. There were a total of 33 limit-up stocks and 107 limit-down stocks. At the close, the Shanghai Composite Index fell by 2.45% to 3,834.89 points, with a turnover of 824.9 billion yuan; the Shenzhen Component Index fell by 3.41% to 12,538.07 points, with a turnover of 1,137.7 billion yuan. The ChiNext Index fell by 4.02% to 2,920.08 points. Fund flow: Today, major funds focused on agriculture, marine equipment, and fisheries sectors. The top stocks with major net inflows included Hunan Kaimeite Gases, Sai MicroElectronics Inc., and Fujian Longxi Bearing (Group) Corp. Headlines recap: 1. Morgan Stanley releases its 2026 China stock strategy outlook: next year will be a stabilizing year Recently, Morgan Stanley's Chief Strategy Officer in China, Wang Ying, released the 2026 China stock strategy outlook. Wang Ying stated that after a year of high returns in 2025, 2026 will be a year of stabilization. Index gains are limited, earnings growth is moderate, valuations are stabilizing in a higher range, and as China solidifies its position in the global tech competition and eases trade tensions, fundamental and thematic stock selection will remain key. 2. National Energy Administration: Total electricity consumption in October was 857.2 billion kilowatt-hours, an increase of 10.4% year-on-year According to the National Energy Administration, total electricity consumption in October was 857.2 billion kilowatt-hours, a 10.4% year-on-year increase. By industry, the electricity consumption in the primary industry was 12 billion kilowatt-hours, up 13.2% year-on-year; in the secondary industry, it was 568.8 billion kilowatt-hours, up 6.2% year-on-year, with industrial electricity consumption increasing by 6.4%; and in the tertiary industry, it was 160.9 billion kilowatt-hours, up 17.1% year-on-year. 3. Foxconn collaborates with OpenAI to jointly design hardware for data centers Foxconn and OpenAI announced a collaboration on AI infrastructure hardware. Foxconn stated it will produce AI data center components in the US. The collaboration with OpenAI is aimed at strengthening the AI supply chain in the US. Foxconn and OpenAI will jointly design and develop AI data center racks. The agreement between OpenAI and Foxconn does not include any purchase commitments. Future judgment: 1. Zheshang: Maintain a cautiously optimistic stance on the market, focus on pro-cyclical and tech growth directions Zheshang believes that the Shanghai Composite Index is currently in the midst of the 3rd monthly wave since February 2024. Considering factors such as the global situation, economic cycle, domestic policy, fund flows, market sentiment, and comprehensive valuation, they maintain a cautiously optimistic stance on the market. Looking ahead, the current "systemic 'slow' bull" run is smooth. In terms of style, a focus on pro-cyclical and technological growth sectors for a more balanced, benchmark-driven approach is recommended. At the industry level, attention should be paid to the four major directions of large consumer sectors, prosperity, traditional industries, and dividend plays. In terms of thematic investment, grasping "technology + domestic demand" and focusing on seven major directions including AI computing power, Siasun Robot & Automation, solid-state batteries, lithography, controllable nuclear fusion, deep-sea technology, and the silver economy is advised. 2. Huaxin Securities: Observe the progress of the bull market with ten major indicators, no signs of peaking yet Huaxin Securities stated that in the short term, A-shares are in a tug-of-war around the 4000-point mark, with the rise of the US dollar index suppressing tech valuations. Internal factors such as accumulated profits in the tech sector, some tech financial reports falling short of expectations, and high concentration of tech holdings, alongside ten major indicators in valuations, volume, crowding, technical analysis, financing, and more triggering short-term consolidation signals, but signs of a peak have not yet appeared, with the A-share market still in the middle segment of the bull market, waiting for follow-up retail bank deposits, mutual funds, and foreign capital to join. It is predicted that A-shares will operate in a volatile manner in November, with a rebalancing of styles. Focus should be on the low-position recovery on the trading side, performance on the earnings side, and technology theme on the policy side. 3. Debon Securities: Market style continues to be cautious, focusing on policy-driven defensive sectors Debon Securities believes that the market style continues to be cautious, with a focus on future domestic and global economic data. The recent market weakness persists, with external factors such as a decline in Fed rate cut expectations and escalated tensions between China and Japan potentially affecting the market. In the short term, they believe the market will continue in a pattern of "weight protection + structural themes" volatility, with undervalued financial stocks like insurance and banks offering defensive allocation value; industrial sectors like lithium mining, being driven by orders and prices, may offer some upward elasticity; event-driven thematic sectors like aquaculture may maintain some heat in the short term, but caution is needed for potential correction risks following significant short-term gains. In the upcoming period, attention should be paid to the November manufacturing PMI and the Fed's December interest rate meeting. If the PMI remains weak, the market may further focus on policy-driven defensive sectors; if the US core PCE inflation falls more than expected, the Fed rate cut expectations may rise, relieving pressure from foreign capital outflows in the A-share market.