Institutions Assess Post-Holiday Market: Rebound Sustainability Hinges on Four Key Variables

As the Mid-Autumn Festival and National Day holidays approach, multiple institutions have released their assessments of the market outlook. Divergent interpretations center on two main areas:

1. The scale of the current rebound: Most institutions take a middle-ground stance, acknowledging a structural rebound but not supporting a trend reversal. Some believe the market has entered an offensive window, while others view it as only a minor repair, with the year overall characterized by consolidation and volatility.

1. The allocation value of dividend-yielding assets: Some institutions regard them as a defensive base in a volatile environment, while others argue that the risk-reward ratio for dividend sectors has already declined, making them unsuitable as a core allocation.

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

Question 1: What Is the Broader Trend?

Mainstream view: A structural rebound.

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

Question 2: How Will the Market Perform Around the Holidays?

Pre-holiday: Capital risk aversion suppresses trading. Post-holiday: Higher probability of recovery.

Looking at the upcoming holiday window, several brokerages have reviewed historical data. Due to cross-holiday risk premiums and quarter-end institutional rebalancing, capital tends to adopt risk-averse behavior before the holidays. A weaker pre-holiday and a stronger post-holiday recovery is a notable calendar effect.

• Huatai Securities, reviewing 20 years of A-share data, found that the median return for the 10 trading days before National Day is negative, while the probability of a recovery in the 5 trading days after the holiday increases significantly. They also corrected a common market perception: dividend-yielding styles do not exhibit the traditional defensive characteristics before the holiday.

• Caitong Securities, citing the National Day calendar effect, believes downside risk is limited and suggests that holding stocks through the holiday may be more advantageous.

Question 3: How Should Sectors Be Allocated?

Core theme: AI computing hardware. Divergence within sectors is increasing.

Institutional allocation is highly concentrated on the AI industry chain. Brokerages offer varying sub-sector choices based on their own logic, generally pairing policy-linked and alpha-generating themes as hedges. Views on dividend sectors remain divided.

• CITIC Securities believes that the valuation of Hang Seng Tech remains in a low-range consolidation. The pricing focus for the sector is shifting toward liquidity expectations, earnings resilience, and cash flow. The second half of the year will revolve around AI implementation progress and core business earnings certainty. They recommend focusing on:
• Catalysts from model iterations and agent commercialization by leading internet companies.
• Stocks with solid earnings, cash flow, and shareholder returns.

• China Galaxy Securities adopts a "Technology + Policy + Dividend" allocation framework. In the technology sector, they recommend positions in:
• Semiconductor advanced packaging
• Communication engineering
• Machinery
• Public utilities
• Coal

Question 4: What Key Factors Should Be Monitored Going Forward?

Four critical variables will determine the sustainability of the current rebound.

Based on a synthesis of brokerage research reports, the following four variables are seen as core observation dimensions affecting market pricing:

1. China-U.S. economic and trade consultations – China Galaxy Securities places this as the top short-term risk factor. Signals from the consultations will directly affect the risk premium on renminbi-denominated assets and ripple outward to expectations for the export chain and technology sectors.

1. Domestic fiscal spending and real economic activity – GF Securities focuses on the real constraints of the domestic fundamentals. The current economy shows stronger production but weaker consumption and investment. With the issuance of government and local government bonds delayed in Q4, whether fiscal funds can be effectively converted into real economic activity is key to determining the strength of fundamental support.

1. Federal Reserve policy signals – The Fed's September rate hike has been implemented, but risks are not fully cleared, according to Dongwu Securities.

1. AI industry catalysts and Q3 earnings verification – Both GF Securities and Dongwu Securities emphasize that September to November is a dense window for AI industry catalysts, including:

• AICC events
• Alibaba Cloud's Apsara Conference
• Overseas developer conferences
• Anthropic's potential IPO
• Overseas cloud vendors' capital expenditure guidance and Q3 earnings reports

The real verification of AI industry orders and capital expenditure will determine how far the growth sector can go.

Source: Cailianshe