Zhongtai: A-share rebound offers ample odds but uncertain win rate; structurally focus on tech elasticity and non-bank recovery.

Zhongtai released a research report stating that from a trading perspective, focus on tech elasticity, phased recovery in non-bank financials, and verification of medical and pharmaceutical prosperity. (1) The odds for an A-share rebound are relatively ample, but the win-rate side is not particularly solid; it is advisable to first capture this round of rebound through trading opportunities. (2) Structurally, for tech stocks the odds are the core focus; in addition to valuation-earnings matching, the chip structure (share of turnover in the top 5%) is also an important observation indicator. (3) Non-bank financials have low valuations and upward revisions to forward earnings, creating trading opportunities in a market-stabilization environment; medical and pharmaceutical valuations have also been significantly digested, with confirmation of sub-sector directions awaited from Q3 reports. Zhongtai's main views are as follows: Indices fell in October, with marginal stabilization at month-end As of October 29, most major indices recorded declines. Among them, the Shanghai Composite fell 4.96%, the CSI 300 fell 7.25%, and the CSI 2000 fell 12.81%, while the STAR Composite Index and the ChiNext Index fell 17.87% and 19.70%, respectively. The daily average turnover of all A-shares was RMB1,604.9 billion, a month-on-month decrease of RMB226.6 billion from September. In terms of rhythm, A-shares showed a downward trend throughout the month, with marginal stabilization at month-end. In October, amid geopolitical and AI industry disruptions, risk-aversion sentiment rose at home and abroad; at month-end, domestic policy support, rising visibility of industry prosperity during the earnings season, and gradual correction of market expectations. (1) In October, amid geopolitical and AI industry disruptions, risk-aversion sentiment rose at home and abroad. At the overseas level, geopolitical risks continued to ferment, with tanker attacks in the Strait of Hormuz occurring intensively and hitting a single-month record high, the US side deploying a third aircraft carrier, and the Houthis and Saudi Arabia forming a retaliatory cycle of mutual airstrikes; WTI crude oil futures rose to a high of US$103.92/barrel, a new high since the US-Iran conflict. The overseas AI industry faced dual pressure from credit risk and commercialization expectations; cloud service provider CoreWeave's bond yields rose sharply at one point during the month, market concerns about circular financing rose again, and Anthropic, at its latest investment briefing, provided ARR (annual recurring revenue) and performance guidance, both below expectations. In addition, riots occurred in many places in France. Risk-aversion sentiment heated up, capital flowed back to US dollar assets, and US Treasury yields fell sharply. (2) At month-end, domestic policy support, combined with rising visibility of industry prosperity during the earnings season, led to a gradual correction of market expectations. At the policy level, intensive capital market stabilization policies began to be gradually implemented. Recently, departments including the National Financial Regulatory Administration and the CSRC stated at the Financial Street Holdings forum that they would make every effort to safeguard the safety and stability of the capital market. At the industry level, a number of tech companies concentratedly disclosed production and operation conditions and order progress, covering AI computing power chips, storage, high-speed interconnect, innovative drugs, interventional devices and other directions, and simultaneously disclosed dividend and buyback information, which, together with the high-growth data in the third-quarter reports, marginally stabilized expectations for the growth sector. In October, the direction of "low valuation, high dividend, certain cash flow" demonstrated defensive advantages (1) Tech sector: adjusted across the entire chain, among the biggest decliners. On the one hand, the overseas AI narrative showed divergence, expectations strengthened for a marginal decline in the growth rate of global AI capital expenditure, and the contraction in risk appetite was mapped to the domestic market; on the other hand, crowding within the sector remained at a moderately high level, and the chip structure continued to adjust. (2) Cyclical sector: sharp internal divergence, with "oil up, gold down." Petroleum and petrochemicals, which directly benefit from rising oil prices, rose against the trend, while precious metals and base metals, priced on tightening global liquidity, retreated significantly. Building materials and steel remained constrained by the slow improvement in demand from real estate and infrastructure. (3) Dividend and consumer sectors: the defensive attributes of dividend assets were fully realized. Although fundamental support for the consumer direction was weak, it was catalyzed by policy expectations on the one hand and inflows from defensive market funds on the other, resulting in relatively resilient performance. A-share outlook: wait for overseas disruptions to fade (1) The policy bottom is clear, but the stabilization goal leans toward preventing the spread of liquidity risk. Current policy support signals are becoming clearer; relevant departments have repeatedly released signals of stabilizing the market and expectations, and the pace of policy funds entering the market has also accelerated, providing bottom support for the market. Judging from the participating departments, the tone of statements, and the pace of fund deployment in this round of policy, compared with the two policy windows of "924" and April 2025, there are marginal differences in the covered entities and the speed of advancement; we understand that the focus of this round of policy lies more in preventing local liquidity pressure from spreading to a broader range, mitigating credit risk that may accumulate in stock pledges and margin financing and securities lending, and maintaining smooth market operation. (2) The main constraining factors come from overseas. First, the sharp decline in US Treasury yields this month mainly reflects rising global safe-haven demand; this kind of safe-haven-driven rate decline has a weaker transmission effect on risk assets than a decline driven by monetary easing, and once safe-haven sentiment recedes, yields may quickly swing back. Second, the overseas AI industry chain has shown some divergence at the level of earnings and order expectations, and the market's judgment on the pace of earnings realization on the numerator side is still being corrected; convergence of expectations may go through a rather tortuous process. Recently, the business guidance of some leading overseas AI manufacturers has deviated from market expectations, and coupled with divergent performances among US tech giants during the earnings season, volatility in tech growth indices such as the Nasdaq has widened, and the overseas semiconductor sector has also seen a significant retreat from its stage highs. Risk warning: downward economic pressure exceeding expectations, policy intensity falling short of expectations, and risks of untimely data updates