China Securities Co.,Ltd.: A-shares have currently started a second round of recovery rally.

China Securities Co.,Ltd. released a research report stating that A-shares have currently started a second round of recovery rally. The macroeconomic game triggered by overseas Middle East geopolitical conflicts pushing up oil prices and U.S. Treasury yields has been phased out, with oil prices and long-end U.S. Treasury yields subsequently falling. The market's main line has returned to earnings prosperity, and capital has ushered in a window to flow back into high-prosperity sectors; however, it is still necessary to continuously track overseas interest rates, the sustainability of the oil price decline, and external disturbances brought by the late-October FOMC meeting. In terms of allocation, adopt a balanced allocation and layered layout approach. On the offensive side, prioritize segments in the computing power supply chain facing tight supply and price increases (optical chips, PCB manufacturing, CCL, server complete machines) and industrial metals such as copper, aluminum, and tin. On the defensive side, use dividend assets as the base position to hedge against volatility, while flexibly grasping phased opportunities in domestic demand sectors such as agriculture, medical aesthetics, and textiles and apparel catalyzed by policy expectations. The main views of China Securities Co.,Ltd. are as follows: Since mid-August, the main line of global market pricing has focused on overseas inflation and liquidity changes. Middle East geopolitical conflicts pushed oil prices back to year-high levels, intensifying global inflationary pressure. High oil prices increased the fiscal subsidy burden of various countries and pushed up PPI. Combined with official expectation guidance, the market priced in the start of a Federal Reserve rate hike cycle in advance. As the rate hike landed and the Middle East situation marginally eased, oil prices and long-end U.S. Treasury yields declined simultaneously, and short-term external macroeconomic pressure was alleviated. The oil price and liquidity disturbances brought by this round of geopolitical shocks mainly affected overseas markets. Although domestic PPI rose slightly, the domestic accommodative interest rate environment and the stable RMB exchange rate meant China was not significantly impacted. Since July, the fundamentals of the technology sector have continued to maintain high prosperity. After the macroeconomic game concluded in stages, capital has the conditions to flow back into high-prosperity tracks. However, the rate hike cycle has already begun, and in each subsequent FOMC meeting the market will continue to speculate on the continuity of rate hikes. The late-October FOMC remains a key observation point; before that, whether this round of recovery rally can continue depends mainly on whether the decline in overseas interest rates and oil prices can be sustained. In terms of industry layout, continue to adopt the approach of balanced allocation, layered layout, and flexible adjustment. For the offensive direction, prioritize sub-segments in the computing power industry chain with tight supply and continuously rising product prices, focusing on optical chips, PCB manufacturing, CCL, and server complete machines; at the same time, allocate to industrial metals such as copper, aluminum, and tin, which benefit from real demand driven by computing power construction. For the defensive base position, allocate to dividend assets, relying on the low domestic interest rate environment to obtain stable dividend income and hedge against market volatility. For flexible allocation sectors, focus on domestic demand directions. Rising global grain prices support the fundamentals of the agriculture sector. The medical aesthetics and textiles and apparel sectors are at low valuation and low positioning levels, and are expected to usher in phased market opportunities based on expectations for consumption-promotion policies. Key sectors to watch include: AI computing power, non-ferrous metals, banks, insurance, transportation, agriculture, medical aesthetics, textiles and apparel, etc.