Zheshang: Intensive earnings disclosures in late October; recommend focusing on three themes: oversold technology, high-growth pharmaceuticals, and consumer sub-sectors.

Zheshang released a research report stating that late October enters a period of intensive earnings disclosures, with a relatively high correlation between fundamentals and stock price movements. The prosperity levels of upstream cyclical varieties are clearly divergent: non-ferrous metal prices and coking coal/coke prices moved in different directions, steel prosperity declined marginally, and petroleum and petrochemicals fluctuated at high levels. Among midstream cyclical products, cement in the building materials sub-sector showed relatively high prosperity. In midstream manufacturing, prosperity in the new energy sub-directions of photovoltaics and wind power rebounded. In the TMT sector, the semiconductor sales cycle is trending upward, and prosperity in the computer sub-sector is also rising. In downstream consumption, the PPI for the wine, beverage, and refined tea manufacturing industry rose year-on-year for the month, while home appliance exports and pharmaceuticals (traditional Chinese medicine, innovative drugs) showed high prosperity. Combining this with the October sector rotation monthly report, it is recommended to focus on three clues: first, oversold technology directions such as semiconductors, computers, and new energy (photovoltaics, wind power); second, high-prosperity pharmaceuticals (traditional Chinese medicine, innovative drugs); third, sub-sectors within the consumer cycle, such as cement in building decoration, and home appliances and baijiu in food and beverages benefiting from El Nio. Zheshang's main views are as follows: 1. Upstream cycle 1) Non-ferrous metals: divergent price movements for metals continue; 2) Coal: the PPI for coal mining and washing declined, and coking coal and coke prices moved in different directions month-on-month; 3) Petroleum and petrochemicals: the PPI for oil and natural gas extraction rebounded significantly, while crude oil prices fell month-on-month. 2. Midstream cycle 1) Steel: the PPI for ferrous metal mining and processing declined year-on-year, and industry prosperity declined marginally; 2) Basic chemicals: PPI year-on-year growth was flat, with major product prices showing mixed movements; 3) Building materials: the price index rebounded slightly, and industry prosperity remains at a low level; 4) Transportation: export freight rates remain high, while express delivery volume and revenue growth declined significantly. 3. Midstream manufacturing 1) Light industry manufacturing: prosperity in building materials and home furnishings rebounded month-on-month, and the white cardboard price index was flat week-on-week; 2) Automobiles: PPI year-on-year growth in the automobile manufacturing industry rose slightly, while new energy vehicle sales growth declined; 3) Machinery and equipment: excavator output growth declined, while sales growth rebounded significantly; 4) Power equipment: lithium battery prices fell slightly week-on-week, while photovoltaic prices rebounded somewhat. 4. TMT 1) Electronics: the semiconductor index declined somewhat, but the overall sales cycle is still trending upward; 2) Computers: cumulative year-on-year growth in total profits of the software industry rebounded; 3) Telecommunications: cumulative year-on-year growth in China Telecom Corporation's business volume was basically flat; 4) Media: the year-on-year growth of China Film Group's cumulative box office revenue over the past 12 months declined marginally. 5. Downstream consumption 1) Food and beverages: prosperity in the food and beverage manufacturing industry is still fluctuating in a low range; 2) Agriculture, forestry, animal husbandry, and fishery: year-on-year growth in China's breeding sow inventory declined further; 3) Home appliances: home appliance export sales growth rebounded significantly in August; 4) Commerce, retail, and social services: total retail sales of consumer goods fell year-on-year in August; 5) Beauty and personal care: cumulative sales of color cosmetics/perfume/beauty tools over the past 12 months rose slightly year-on-year; 6) Pharmaceuticals and biologics: the CPI for traditional Chinese medicine rose slightly, and prosperity for innovative drugs is growing rapidly. 6. Finance and real estate 1) Real estate: cumulative year-on-year sales area of commercial housing in China and cumulative year-on-year completed real estate development investment both trended downward; 2) Securities: margin financing and securities lending balances remain generally high; 3) Insurance: cumulative year-on-year growth in premium income declined slightly. 7. Utilities NYMEX natural gas prices fell slightly in the short term and are significantly lower than at the beginning of the year. 8. Risk warnings The degree of economic recovery is weaker than expected; the pace of Federal Reserve rate cuts is slower than expected; geopolitical conflicts intensify.