Zhongtai Securities: A-shares rebound with sufficient odds but poor win rates structurally focus on technological flexibility and non-bank recovery

The Zhitong Finance App learned that Zhongtai Securities released a research report stating that it focuses on technological flexibility, phased restoration of non-bank banks, and verification of the pharmaceutical industry from a transactional perspective. (1) The odds conditions for a rebound in A-shares are quite adequate, but the winning ratio side is not particularly solid. It is recommended to seize this round of rebound by trading opportunities first. (2) Structurally, technology stocks are centered on odds. In addition to the degree of matching between valuation and performance, chip structure (top 5% of turnover) is also an important observation indicator. (3) Non-bank financial valuations are low, long-term performance is improving, and there are transactional opportunities in a stable market environment; pharmaceutical valuations have also clearly been digested, awaiting confirmation of the segmentation direction in the 3rd quarterly report.

The main views of Zhongtai Securities are as follows:

The index fell in October and stabilized marginally at the end of the month

As of October 29, most major indices recorded declines. Among them, the Shanghai Stock Exchange Index fell 4.96%, the Shanghai and Shenzhen 300 fell 7.25%, the China Securities 2000 fell 12.81%, and the Science Innovation Index and the GEM Index recorded declines of 17.87% and 19.70% respectively. Overall A had an average daily turnover of RMB 1604.9 billion, a decrease of RMB 226.6 billion compared to September. In terms of pace, A-shares showed a downward trend throughout the month and stabilized marginally at the end of the month.

In October, risk aversion at home and abroad heated up due to disturbances in the geopolitical and AI industry; at the end of the month, domestic policies were underpinned, the visibility of the industry sentiment increased during the earnings season, and market expectations were gradually revised.

(1) In October, risk aversion at home and abroad heated up due to disturbances in the geopolitical and AI industries. At the overseas level, geopolitical risks continued to ferment. Attacks on oil tankers in the Strait of Hormuz occurred intensively and set the highest record in a single month. The US side deployed a third aircraft carrier, the Houthis and Saudi Arabia formed a retaliation cycle of mutual air raids. WTI crude oil futures prices rose to a high of 103.92 US dollars/barrel, a new high since the US-Iran conflict; the overseas AI industry faced double pressure from credit risk and commercialization expectations. The cloud service provider CoreWeave's bond yield rose sharply during the month, and market concerns about circular financing rose again. Up, give ARR (Annual Recurring Revenue) and performance guidelines were presented, both of which fell short of expectations. Furthermore, riots have occurred in many parts of France. Risk aversion heats up, capital flows back to US dollar assets, and interest rates on US bonds have dropped sharply.

(2) At the end of the month, domestic policies were backed up, compounded by an increase in the visibility of the industry during the financial reporting season, and market expectations were gradually revised. At the policy level, intensive capital market stabilization policies have begun to be gradually implemented. Recently, the General Administration of Financial Supervision, the Securities Regulatory Commission and other departments stated at the Financial Street Forum that they will make every effort to maintain the safety and stability of the capital market. At the industrial level, a number of technology companies focused on disclosing production and operation conditions and order progress, covering the direction of AI computing power chips, storage, high-speed interconnection, innovative drugs, interventional devices, etc., and simultaneously disclosed dividend and repurchase information, in line with the high growth data of the three quarterly reports, which marginally stabilized growth sector expectations.

In October, the direction of “undervaluation, high dividends, and determined cash flow” showed defensive advantages

(1) Technology category: The whole chain was adjusted, and the decline was the highest. On the one hand, overseas AI narratives are divided. Expectations of a marginal decline in global AI capital expenditure growth are increasing, and risk appetite is being reflected domestically. On the other hand, internal congestion in the sector is still above average, and the chip structure continues to be adjusted.

(2) Major cycle categories: severe internal segmentation, “oil rises and gold falls”. Directly benefiting from rising oil prices, petroleum and petrochemicals bucked the trend, and precious metals and basic metals, which were priced due to tight global liquidity, retreated sharply. Building materials and steel are still hampered by slow improvements on the demand side of real estate and infrastructure.

(3) Dividends and consumption categories: The defensive properties of dividend assets are fully realized. Although fundamental support for the consumer direction is weak, on the one hand, it is catalyzed by policy expectations, and on the other hand, it is affected by the inflow of defense capital from the market. The performance is relatively resistant to decline.

A-share outlook: waiting for overseas disturbances to subside

(1) The policy basis is clear, but the goal of maintaining stability is biased to prevent the spread of liquidity risks. Currently, policy support signals tend to be clear. Relevant departments have repeatedly sent signals of stabilizing the market and stabilizing expectations, and the pace of policy capital entering the market has also accelerated, providing bottom support for the market. Judging from the participating departments, statements, and capital investment pace, compared with the “9/24” and April 2025 policy windows, there is a marginal difference in coverage and speed of progress; we understand that the focus of this round of policy is more on preventing local liquidity pressure from being transmitted to a wider range, mitigating the credit risk that may accumulate in stock pledges and financing and securities lending processes, and maintaining the smooth operation of the market.

(2) The main limiting factors come from overseas. First, the sharp decline in US bond interest rates this month mainly reflects a rise in global safe-haven demand. This decline in interest rates driven by risk aversion is less effective than the downward trend driven by currency loosening, and once risk aversion subsides, there is a possibility that yields will quickly rebound. Second, there are certain differences in the overseas AI industry chain at the level of profit and order expectations. The market's judgment on the pace of cashing out profits at the molecular side is still being revised, and expectations have converged or experienced a tortuous process. Recently, there is a deviation between the operating guidelines of some leading overseas AI manufacturers and market expectations. Combined with differences in the quarterly earnings performance of US tech giants, it has led to increased fluctuations in technology growth indices such as NASDAQ, and the overseas semiconductor sector has also clearly retreated since its peak.

Risk warning: The downward pressure on the economy exceeds expectations, the strength of policies falls short of expectations, and the risk of untimely data updates