Policy package stabilizes expectations; institutions: the foundation for the market's medium- to long-term uptrend remains unchanged.

Title context: Policy package stabilizes expectations; institutions: the foundation for the market's medium- to long-term uptrend remains unchanged. Text: In the two trading days after the National Day holiday, A-shares experienced a relatively large correction, drawing market attention. Whether market confidence remains solid has become a key focus for all parties. In response, at the symposium on the capital market and financial situation convened by the CSRC on October 10, attending market experts gave an affirmative answer: China's macroeconomy is stable and improving, the transformation of the industrial structure continues to deepen, the capital market is operating generally steadily, and the functions of the multi-tiered market are effectively playing their role. Although it faces some risks and challenges, the trend of high-quality development will not change, and there is full confidence in economic operation and the capital market. After the holiday, the market adjusted for two consecutive days; institutions say low-volume corrections are normal in a bull market In the two trading days after the holiday, A-shares underwent a relatively large correction, with the technology sector, which had risen strongly earlier, leading the decline, and market volatility increased. The market then bottomed out and rebounded, turning from losses to gains, while heavyweight sectors such as brokerages and banks strengthened, showing resilience. The GF SEC strategy team pointed out that corrections accompanied by shrinking volume are normal in a bull market. In this round, the rolling average turnover of all A-shares shrank by about 55%, which historically often corresponds to short-term rebound opportunities. Within one week after the holiday, trading volume is expected to recover to the level before the contraction, and A-shares are expected to see a "rise in both volume and price." The team also emphasized that although U.S. Treasury yields hit multi-year highs during the holiday, the U.S. technology sector clearly became "desensitized" and rose against the trend, with the Philadelphia Semiconductor Index and leaders such as Nvidia and TSMC repeatedly hitting new highs. The current upward cycle of the semiconductor industry has not yet ended. Some market participants said that the post-holiday market correction and structural divergence indicate that short-term fluctuations come more from external disturbances and the short-term amplification of sentiment, rather than substantive changes in fundamentals or the valuation center. The central bank clarifies its policy stance on the RMB exchange rate, stabilizing market expectations On October 8, the People's Bank of China released a policy stance document on the RMB exchange rate, systematically clarifying its exchange rate policy stance in the form of a dedicated article for the first time. The document made clear that China implements a managed floating exchange rate regime based on market supply and demand and adjusted with reference to a basket of currencies, and insists on letting the market play a decisive role in exchange rate formation; it does not preset a target level for the exchange rate and does not intervene in the long-term trend of the exchange rate, but only corrects short-term irrational overshooting and herd behavior. Xie Yaxuan, head of the CMSC Research and Development Center, pointed out that the RMB exchange rate framework and expectations are becoming clearer and more stable, which has three positive effects on RMB assets represented by A-shares: First, policy uncertainty facing the financial market has declined. The central bank has clearly stated it will exit normalized intervention while focusing on preventing sharp short-term depreciation from affecting financial stability, placing equal emphasis on marketization and bottom-line thinking, significantly reducing the possibility of disorderly exchange rate overshooting, which is conducive to keeping A-share risk appetite stable. Second, the autonomy of monetary policy has increased. Stable exchange rate expectations open up space for domestic growth stabilization and liquidity regulation, forming an endogenous support for A-shares. Third, it helps strengthen confidence in China's economy and enterprises. The central bank reiterated that China has no need and no intention to gain trade competitive advantage through exchange rate depreciation, and noted that as the proportion of corporate foreign exchange hedging rises, the real economy sector's sensitivity to the exchange rate has clearly declined, and the transmission of exchange rate fluctuations to listed companies' profits tends to weaken, which is conducive to the stable operation of A-shares and the enhancement of their resilience. Ming Ming, chief economist at CITIC SEC, said that this policy stance has drawn a clear regulatory bottom line, and from the perspective of the balance of payments, the current account currently maintains a high surplus while the financial account deficit is widening, so the RMB does not have the basis for long-term substantial appreciation. Market analysis generally believes that the central bank's systematic statement this time will help stabilize RMB exchange rate expectations, enhance the allocation appeal of RMB assets, and create a more stable monetary and financial environment for the capital market. Proactive fiscal policy is making efforts to boost market confidence On October 9, the Ministry of Finance released the "Report on the Implementation of China's Fiscal Policy in the First Half of 2026." The report showed that in the first half of the year, China's economy moved forward tenaciously and made progress while maintaining stability, fiscal spending was front-loaded, and key areas were well guaranteed - 606.46 billion yuan of ultra-long special treasury bond funds had been allocated, promoting 936 major projects to accelerate the formation of physical work volume; 2.07 trillion yuan of new local government special bonds were issued, supporting more than 17,000 construction projects. The report made clear that the next step will be to implement a more proactive fiscal policy forcefully and effectively, support comprehensive expansion of domestic demand, promote scientific and technological innovation and industrial innovation, continue to safeguard and improve people's livelihoods, and reasonably accelerate the issuance and use of government bonds. At the same time, incremental fiscal measures continue to land: 550 billion yuan of local government debt carryover quota will be arranged and used to support localities in expanding effective investment; 150 billion yuan of special treasury bonds for capital injection into central financial institutions will be tendered and issued. The positive signals of policy are being transformed into a stabilizing force for the market. In the rebound from the bottom on the 9th, broad-based ETFs received incremental funds entering through this channel. Over a longer period, since September, funds have continued to flow net into equity ETFs, and heavyweight sectors such as brokerages have strengthened, conveying confidence to the market. From the corporate earnings side, third-quarter earnings previews of listed companies are being disclosed one after another, and the prosperity of some industries continues. China Jushi Co., Ltd(600176.SH) expects net profit in the first three quarters to increase by 100%-110% year on year, and Amlogic(688099.SH) expects net profit in the first three quarters to increase by more than 80% year on year, with the profitability of industry leaders generally improving. The above-mentioned market participant said that as the stabilization of the exchange rate and the continued efforts of proactive fiscal policy take effect, combined with the steady recovery of corporate earnings, the internal stability of the capital market has further strengthened, and the foundation for medium- to long-term improvement remains solid. This article is reprinted from "Cailian Press"; GMTEight editor: Li Fo.