Analysts Advise Holding Stocks Through Holiday, Expect Q4 Rebound

Market Overview: Rally Fades in Late Trading

On September 22, China's A-share market experienced a rally that lost momentum by the close. During intraday trading, the Shenzhen Component Index briefly rose over 1%, while the ChiNext Index and the Sci-Tech Innovation Composite Index both gained more than 2% at one point. However, gains were pared by the end of the session.

Closing figures:

• Shanghai Composite Index: +0.06% (5,952.13 points)
• ChiNext Index: +0.01% (3,399.93 points)
• Sci-Tech Innovation Composite Index: +0.30%
• Shenzhen Component Index: -0.05%
• Beijing Stock Exchange 50 Index: -1.07%

Market breadth:

• 2,374 stocks advanced
• 64 stocks hit the daily upward limit
• 3,030 stocks declined
• 5 stocks hit the daily downward limit

Trading volume expanded, with total turnover reaching 2.15 trillion yuan, an increase of 105.5 billion yuan from the previous session. Notably, after nine consecutive trading days (September 7–17) with turnover below 2 trillion yuan, the market has now recorded turnover above 2 trillion yuan for three straight sessions since September 18.

Sector and Stock Performance

Leading sectors (by Shenwan primary industry classification):

• Media: +1.79%
• Computer: +1.41%
• Home Appliances: +1.24%
• Coal and Comprehensive sectors also rose over 1%

Underperforming sectors:

• Transportation: -1.17%
• Steel: -0.95%
• Building Materials: -0.92%

Active themes: AI office applications, virtual humans, and cybersecurity stocks were notably active, while tungsten hexafluoride, shipping, and superhard materials saw adjustments.

Media sector highlights: Zhidu Co., Xinhua Winshare, Yinlimedia, and Inner Mongolia Xinhua all hit daily limits. Zhidebuy rose over 9%, Baina Qiancheng gained over 8%, and Longban Media and BlueFocus both rose over 6%.

Computer sector highlights: Xuanji Information, Yanhua Smartech, Nansoft, and New Silkroad Network hit daily limits. Union Optech and Hongjing Technology rose over 8%.

Reason for the Reversal

Long Jiangwei, fund manager at HSBC Qianhai Fund, attributed the afternoon pullback to pre-holiday effects as the Mid-Autumn Festival and National Day approach. "Market sentiment has turned cautious, with investors increasingly inclined to take profits on rallies," he said.

Capital Flows Reflect Caution

With the "Double Holiday" (Mid-Autumn Festival and National Day) approaching, investors face the perennial question: hold stocks or hold cash?

Margin trading data (as of September 21):

• Total A-share margin balance: 2,622.962 billion yuan
• Net margin selling in September: 12.529 billion yuan
• Of 15 trading days in September: 7 saw net buying, 8 saw net selling

September 22 main capital flows:

• Net outflow from Shanghai and Shenzhen main capital: over 11 billion yuan
• This ended two consecutive days of net inflows

Margin changes by sector (September month-to-date):

• Net increases: Communications (+2.190 billion yuan), Machinery Equipment (+1.963 billion yuan), Building Materials (+1.815 billion yuan)
• Net decreases: Pharmaceutical & Biotech (-4.014 billion yuan), Nonferrous Metals (-3.706 billion yuan), Non-bank Financials (-2.638 billion yuan)

Top margin net buying (stocks): CATL (1.364 billion yuan), Suiyuan Tech-U (883 million yuan), China Jushi (876 million yuan), Feilong Auto (778 million yuan), Muxi Co.-U (740 million yuan)

Top margin net selling (stocks): Changxin Technology (2.252 billion yuan), China State Shipbuilding (1.189 billion yuan), Lens Technology (1.088 billion yuan), Montage Technology (1.052 billion yuan), BOE A (935 million yuan)

Main capital flows by sector (September 22):

• Only 6 of 31 Shenwan primary sectors saw net inflows
• Media: +2.609 billion yuan (largest inflow)
• Computer: +2.315 billion yuan
• Coal: +116 million yuan
• Transportation: +88 million yuan
• Largest outflows: Communications (-3.274 billion yuan), Pharmaceutical & Biotech (-2.414 billion yuan), Machinery Equipment (-2.258 billion yuan)

Individual stock main capital flows:

• 72 stocks saw net inflows exceeding 100 million yuan (top: BlueFocus 1.066 billion yuan, China Great Wall 1.037 billion yuan)
• 105 stocks saw net outflows exceeding 100 million yuan (top: Sinoma Science & Technology 1.074 billion yuan, Zhongji Innolight 926 million yuan)

Analyst Views: Hold Stocks Through the Holiday

Pan Xinyi, research director at Yuanrong Private Fund's equity division, noted that the market remains in a rotational consolidation phase without a clear leading theme. "Investors with strong trading skills may consider small-cap thematic speculation, but for most, anchoring on sectors with high earnings visibility and core targets, while maintaining patience through this consolidation, may be the better choice."

Historical Perspective

Data from the past 10 years (2016–2025) shows the Shanghai Composite Index has risen in the five trading days after National Day with a 60% probability, including gains in 2016, 2017, 2019, 2020, 2022, and 2025.

Institutional Recommendations

Chen Xuan, General Manager, Feixuan Brothers Investment: "Hold stocks through the holiday, but control positions. Downside risk is limited, and the risk of missing a rebound by exiting is greater than the risk of holding through negative news. Historical data supports a post-holiday recovery. The Shanghai Composite Index may break through and stabilize above 4,000 points before the holiday."

Xu Jinfeng, Chief Strategy Analyst, Caitong Securities: "Given the National Day calendar effect, downside risk is limited. Holding stocks through the holiday may be more advantageous."

Long Jiangwei, HSBC Qianhai Fund: "The market is entering the third-quarter earnings season. Capital is beginning to pre-position around earnings expectations, leading to greater sector divergence and faster thematic rotation. In the short term, the Shanghai Composite has stabilized and rebounded around 3,900 points. Tech growth sectors—AI computing, semiconductors, optical communications—are outperforming amid policy catalysts and industrial景气. The focus remains on rebalancing between these high-growth areas and undervalued sectors. Overseas liquidity expectations remain an important external variable. Over the medium to long term, domestic economic recovery expectations provide support, but upside requires sustained volume."

Zhang Yusheng, Chief Strategy Analyst, Everbright Securities: "The market is expected to continue its recovery trajectory. Domestic pro-growth policies are intensifying, with multiple policy dividends being released. Market risk appetite should see sustained improvement. Under the combined effect of multiple positive internal and external factors, the market is likely to extend its rebound."

Wang Jun, Chief Strategy Analyst, BOC International: "In the short term, ahead of the National Day holiday, capital is in a wait-and-see mode. The market is likely to continue consolidating and bottoming out, with a rebound expected in the fourth quarter."

Suggested Portfolio Allocation

Zhang Yusheng recommends three balanced allocation directions:

1. Hard technology track: Semiconductors, AI, advanced manufacturing—sectors with core technology barriers, strong growth certainty, and valuation flexibility.
2. Policy chain: Align with key policy priorities, covering consumption, real estate, infrastructure, and related sub-sectors.
3. Bottom-up cyclical sectors: Agriculture & forestry, pharmaceuticals, non-bank financials—sectors driven by their own fundamentals rather than macro policy stimulus, offering potential excess returns during market consolidation.

Long Jiangwei suggests:

• Short-term focus on policy-driven, high-industry-景气 sectors: semiconductors, optical communications, AI computing
• Also consider high-dividend defensive sectors on pullbacks
• The overall market will continue to exhibit structural rotation characteristics