Broker Morning Meeting Highlights | Rising Expectations of a Fed Rate Hike in December; A-Shares Oversold and Awaiting a Turnaround

On the previous trading day (October 30), the Shanghai Composite Index fell 1.44% to 3,599.02 points, the Shenzhen Component Index fell 2.73% to 10,833.78 points, and the ChiNext Index fell 4.13% to 2,413.63 points; combined turnover of the two markets was RMB1.674468 trillion; 892 stocks rose, 4,602 fell, and 83 were flat, with 45 hitting the daily limit up and 11 hitting the daily limit down. Guotai Haitong believes the Fed's "hawkish pause" in October makes another 25bp rate hike in December highly likely; Guotou Securities believes last week's "failed rebound" and fully bearish moving-average alignment mean selling pressure has not truly cleared; CITIC SEC believes four allocation approachesincluding steady-return and expectation-unfolding strategiescan be used to navigate the current market; Zhongtai believes the October PMI decline is seasonal and fiscal strengthening has yet to physical; Huafu Securities believes the November Shenzhen APEC meeting is expected to advance implementation of China-US economic and trade arrangements. Guotai Haitong: Macro | Fed's "Hawkish Pause," Rate Hikes May Continue Within the Year We expect that after the Fed's short-term rate-hike pause, it will most likely continue raising rates in December. The Fed's "standing pat" in October is, in our view, a short-term "hawkish pause." The reasons for pausing are: first, the Fed believes short-term financial conditions have already tightened; second, the Fed faces a balance between the economy and inflation, with recent employment data having weakened somewhat; third, energy prices are a fast-moving variable, and the Fed needs to remain flexible. We expect a 25bp hike in December is still highly likely: on one hand, the US federal funds rate futures market currently prices December hike expectations at around 80%; on the other hand, short-term supply-and-demand shocks to inflation (energy and AI demand, etc.) show no signs of reversing, inflation is unlikely to decline smoothly in the short term, and rate hikes may still be needed to combat inflation. However, there remains considerable uncertainty over Fed monetary policy in 2027; we believe that if geopolitics ease and a divided government emerges after the midterm elections, a turning point for a liquidity reversal may arrive. Guotou Securities: Financial Engineering | Failed Rebound, Awaiting a Turnaround Last week A-shares played out a "failed rebound" script: early in the week, shrinking volume and slow declines; on Wednesday, a large volume-driven bullish engulfing that briefly looked like stabilization; but on Thursday and Friday, consecutive broad-based declines on heavy volume gave back all the repair gains. None of the nine major broad-based indices closed higher for the weekthe Shanghai Composite lost the 3,600 level, the ChiNext Index fell 10.08%, and the STAR 50 plunged 13.72%; only the SSE 50 edged down 0.56%, with dividend and heavyweight stocks the sole safe haven. Technically, the moving-average systems of all nine major broad-based indices remain in full bearish alignment, and some indices further triggered stop-loss signals on Friday, implying current selling pressure may not have truly cleared. In terms of oversold extent, the low-frequency and ultra-low-frequency thermometers for mainstream broad-based indices are all below 10, and the high-frequency thermometer is only 13, overall close to freezing point. In other words, the possibility of an oversold rebound is building, but a trend reversal is still some distance away. Last week's style divergence was pushed to an extreme: on one side, the three main lines of banks, coal, and oil & petrochemicals steadily held the flag; on the other, the hard-tech chains of the STAR Market and ChiNext were squeezed from both directions by overseas long-end rates and shifts in the AI fundamental narrative. Facts show that current oversold technical conditions have not provided much impetus for the market's own trend reversal; apart from waiting for the unfavorable positioning structure to digest over time, the truly anticipated medium- to long-term turnaround may still lie in fundamentals. CITIC SEC: Strategy | Actively Adjust Structure, Four Allocation Approaches We propose four allocation approaches to navigate the current market. First, a steady-return strategy, centered on industries with high dividends or supply-clearing potential, focusing on supply changes when demand signals are chaotic. Second, an expectation-unfolding strategy, similar to "2022 airlines and hotels"identify sectors where the market is unanimously bearish on fundamentals and positioning is extremely low, realize gains at the point of eventual policy change, and play only the valuation-repair trade. Third, an overseas rate-decline strategy, taking the correction of North American AI investment and financing expectations and the corresponding decline in overseas long-end rates as the macro premise; after the market revises EPS expectations, watch whether non-AI manufacturing going global and resource stocks can emerge from short-term demand suppression. Fourth, a track-heat plus positioning-clearing strategy, similar to finding "2022 household energy storage and inverters"use the better-than-expected demand explosion in new areas as the timing to bottom-fish tech, seeking areas where institutions and active capital can resonate, rather than simply betting on "inorganic" themes. We believe all four strategies have the potential to generate relative returns and suit capital with different return-risk preferences; market funding pressure determines which strategy prevails at any given stage. Zhongtai: Macro | Fiscal Strengthening in Place, When Will Infrastructure Accelerate? In October 2026, China's official manufacturing PMI was 49.3%, versus 50.1% previously; non-manufacturing PMI was 49.7%, versus 50.2% previously; composite PMI was 49.7%, versus 50.7% previously. The October 2026 official manufacturing PMI decline was largely affected by seasonal factors such as the National Day holiday. Historically, in recent years except 2024, the October manufacturing PMI in 2022, 2023, and 2025 fell by an average of 0.8 percentage points from September of the same year; this October's decline was in line with that, consistent with seasonal patterns. First, domestic and external demand slowed in tandem, but structural highlights stood out. The October official manufacturing PMI new orders index fell 1.1 percentage points from September to 49.4%, and the new export orders index fell 1.3 percentage points to 48.7%, both dropping below the boom-or-bust line. Meanwhile, demand from new growth drivers represented by equipment manufacturing and high-tech manufacturing remained in expansion, mainly driven by strong AI capital expenditure demand at home and abroad and the intensive rollout of domestic "six networks" projects. In October, the PMI new orders index for the computer, communications, and electronic equipment industry stood above 53%; the equipment manufacturing PMI new orders index rose 1 percentage point from September to above 51%; and the high-tech manufacturing PMI new orders index remained in expansion territory. The construction PMI fell 2.3 percentage points to 48.0%. Among them, the civil engineering construction PMI rebounded from September but remained below 50%. Since October, the Ministry of Finance has arranged the use of RMB550 billion of local government balance limits to supplement local fiscal resources; RMB800 billion of new policy-based financial instruments were also fully deployed by October 28. The use of these funds narrowed the decline in the civil engineering construction PMI. But judging from the construction PMI trend, it will still take some time for broad fiscal strengthening to physical. Overall, most October 2026 official PMI indicators fell from the previous month, but structural highlights stood out, with both production and demand in new growth drivers strong. After the package of policies landed since late September, whether broad fiscal strengthening can accelerate the formation of physical is an important variable affecting the domestic demand trend. We believe that, as stabilizing growth carries greater weight among policy objectives, relevant measures are expected to be implemented faster, and the contribution of infrastructure physical to the economy is gradually rising. Huafu Securities: International Relations & Policy | What to Expect from the Shenzhen APEC? The 33rd APEC Economic Leaders' Meeting will be held in Shenzhen on November 18-19, 2026, drawing widespread attention from global capital markets; interactions among the Chinese, US, and Russian heads of state and progress in regional economic and trade cooperation are important observation points for this summit. This article reviews APEC's development history and focuses on the implementation of existing China-US economic and trade consensus, trilateral diplomatic contacts among China, Russia, and the US, and possible progress in Asia-Pacific free trade area cooperation. On trade and economics, implementation of the pause arrangements on tariffs and related restrictive measures, tariff cuts on non-sensitive goods, and progress on Shenzhen Agricultural Power Group and Boeing aircraft purchases are worth watching. On critical minerals, the two sides may form more specific arrangements around export licensing approval efficiency, license validity periods, and supply guarantees for eligible enterprises. On artificial intelligence, AI risk management is also expected to further clarify liaison channels, incident notification, and regular consultation mechanisms. 2026 marks the 20th anniversary of APEC members agreeing to study the long-term prospects of an Asia-Pacific free trade area; the Shenzhen APEC summit is expected to further clarify the direction of regional cooperation and promote rule comparison and policy coordination among existing free trade arrangements, with specific progress to watch in trade digitalization, services regulatory cooperation, and customs clearance facilitation.