Brokerages See Structural Rebound After Holidays, AI Hardware as Core Theme

By Caixin reporters Zhao Xinrui and Li Yicheng | September 25

As the Mid-Autumn Festival and National Day holidays approach, multiple institutions have released their assessments of the near-term market outlook.

According to a compilation of brokerage research reports, the prevailing view is that some pessimistic expectations have already been priced into the market, presenting a phased recovery opportunity for A-shares. However, a full-fledged trend reversal would require the convergence of multiple conditions. Structural opportunities are concentrated in the high-growth AI industrial chain, with subsequent market movements depending on event catalysts and earnings delivery.

Divergence among institutions centers on two key areas:

1. The magnitude of the current rebound: Most institutions take a middle-ground stance, acknowledging a structural rebound but not supporting a trend reversal. Some see an offensive window opening, while others view it as only a minor repair, with the remainder of the year characterized by consolidation.
2. The allocation value of dividend-yielding assets: Some institutions regard them as defensive holdings in a volatile environment, while others argue that the risk-reward ratio for dividend stocks has declined, making them unsuitable as a core allocation.

Four key questions are drawing market attention regarding the "double holiday" period.

Question 1: What is the broader trend? Structural rebound is the mainstream view

Most brokerages agree that negative factors have been partially priced in, and the market is likely to undergo short-term consolidation and repair. However, opinions differ on whether this rebound is a minor recovery or an offensive window for the year.

Huatai Securities notes that while the tech sector has entered a repair window following the Fed's rate cut, weak domestic credit and economic data, coupled with pre-holiday caution, will constrain upside momentum. The current rebound is not a trend reversal; medium-term opportunities remain structural, with narrowing breadth.

Shenwan Hongyuan similarly judges this as only a minor rebound, with the market likely to remain in a consolidation phase for the remainder of 2026. For the tech sector to stage a major rally, it would require significant AI industry catalysts to forge a new market consensus.

CITIC Securities takes a relatively more positive view, arguing that after sufficient risk pricing and with third-quarter earnings as a catalyst, the market has entered the final offensive window of the year. Reviewing historical patterns of industrial super-cycles, the firm suggests that non-institutional heavy-hold small-cap stocks may show stronger upside elasticity in the later stages.

Question 2: How will the market behave around the holidays? Pre-holiday capital outflows suppress trading; post-holiday recovery is more likely

Focusing on the immediate "double holiday" period, several brokerages have reviewed historical data. Due to cross-holiday risk premiums and quarter-end institutional rebalancing, the market tends to see capital flight before the holidays, with a notable calendar effect of weakness before and recovery after.

Huatai Securities analyzed A-share data over the past 20 years, finding that the median return in the 10 trading days before National Day is negative, while the probability of a positive return in the five trading days after the holiday increases significantly. The firm also corrected a common perception: dividend-style stocks do not exhibit the traditional defensive characteristics before the holidays.

China Galaxy Securities notes that long holidays create a "vacuum period" during which trading is suspended but uncertainty persists. Overseas markets remain open, and geopolitical, oil price, and exchange rate developments can ferment. The first trading day after the holiday must absorb all accumulated information. For institutions, quarter-end performance assessments add pressure—locking in gains and reducing volatility is a rational choice. After the holiday, capital flows back, and third-quarter earnings expectations begin to build, leading to broad-based post-holiday gains.

Caitong Securities further breaks down the calendar effect, observing that trading volumes tend to shrink and prices adjust in the week before the holiday, often bottoming out one or two days before. A volume-driven recovery typically begins only after the holiday.

On the question of whether to hold stocks or cash over the holiday, Caitong believes downside risk is limited and that holding stocks through National Day may be more advantageous.

Question 3: How to allocate across sectors? AI computing hardware is the core theme, with increasing divergence within the sector

Institutional allocation is highly concentrated in the AI industrial chain. Brokerages offer varying sub-sector preferences based on their own logic, generally pairing AI with policy-driven themes and alpha sectors as hedges. Views on dividend stocks remain divided.

CITIC Securities believes that Hang Seng Tech valuations remain low and range-bound, with sector pricing shifting toward liquidity expectations, earnings resilience, and cash flow. The second half of the year will revolve around AI deployment progress and core business earnings certainty. The firm recommends focusing on model iterations and agent commercialization catalysts at leading internet companies, while also selecting stocks with solid earnings, cash flow, and shareholder returns.

China Galaxy Securities adopts a "tech + policy + dividend" allocation framework. In tech, it favors semiconductor advanced packaging, optical communications, and AI computing. On the policy front, it targets the "six networks" (power grid, energy storage, building materials, and engineering machinery). Dividend assets in finance, utilities, and coal serve as defensive hedges against overseas risks.

GF Securities emphasizes earnings delivery and valuation alignment, noting that the current AI rally is earnings-driven. After the correction, valuations have been sufficiently digested. The firm prioritizes high-growth third-quarter earnings stocks. Dividend assets retain defensive value but offer lower risk-reward ratios and should not be a core allocation.

Question 4: What key factors should be monitored going forward? Four critical variables determine the rebound's sustainability

Based on a synthesis of brokerage reports, four key variables are seen as central to market pricing in the coming period:

1. China-U.S. economic and trade negotiations
2. Domestic fiscal spending conversion into real economic output
3. Subsequent Fed policy signals
4. AI industry developments and third-quarter earnings verification

China Galaxy Securities places China-U.S. trade talks at the top of short-term risk appetite drivers. Signals from these negotiations will directly affect the risk premium on renminbi-denominated assets and ripple outward to export and tech sector expectations.

GF Securities focuses more on domestic fundamental constraints. The current economy shows a recovery pattern with strong production but weak consumption and investment. With fourth-quarter government and local bond issuance back-loaded, the key to domestic fundamental support lies in whether fiscal funds can be effectively converted into real economic output.

On the overseas front, while the Fed's September rate cut has been delivered, risks are not fully resolved. Soochow Securities points out that the U.S. "inflation-Treasury yield-interest rate" dilemma is a medium-to-long-term slow variable that will not be resolved by a single rate cut. Subsequent Fed officials' statements, Eurozone and U.S. PMI data, and oil price volatility from Middle East geopolitics all require ongoing monitoring.

On the industry side, both GF Securities and Soochow Securities emphasize that September through November is a dense window for AI industry catalysts. Events include AICC, the Yunqi Conference, overseas developer conferences, and Anthropic's potential IPO. Combined with overseas cloud capital expenditure guidance and third-quarter earnings reports, the real verification of AI industry orders and capex will be the decisive factor determining how far the growth sector rally can go.