In the first trading week of October, the A-share market accelerated its performance, with market volatility intensifying and major indices undergoing high-level adjustments in the latter half of last week. From a synthesis of institutional views, it is considered a normal phenomenon for the market to undergo a phased adjustment after a short-term surge in gains. Historical patterns indicate that sustained skyrocketing is unsustainable; only after consolidation through fluctuations can the market progress more steadily.

From the perspective of news, domestic policies are still in an intensive implementation phase. On October 12, Finance Minister Lan Fuan stated at a press conference held by the State Council Information Office that a package of targeted incremental policy measures will be introduced in the near future. Both domestic and foreign institutions unanimously believe that the press conference conveyed positive signals, leading to good market expectation management, which is beneficial for the stable and long-term development of the A-share market.

Fiscal policy sends positive signals

Enhancing the enthusiasm of all market participants

On October 12, the State Council Information Office held a press conference where Finance Minister Lan Fuan and others introduced the situation related to "increasing the counter-cyclical adjustment strength of fiscal policy to promote high-quality economic development."

Regarding this press conference, CITIC Securities commented that fiscal policy is the core policy variable of market attention in this round, and the policy stance of the Ministry of Finance is overall beyond expectations. In the short term, the clear incremental policy resolves risks and enhances the enthusiasm of all market participants; in the long term, there is still a considerable debt-issuing space for central finance, sending a positive signal in terms of fiscal policy.

CITIC Securities believes that the strong counter-cyclical fiscal policy relay is conducive to stabilizing the policy expectations that have fluctuated recently and improving market sentiment. In the long term, the shift in policy thinking is more important than the magnitude of the policy.

UBS Global Financial Markets China Head Fang Dongming believes that the Ministry of Finance has sent a clear and positive signal, and it is expected that the scale of specific fiscal tools will be announced successively. The upcoming package of targeted incremental policy measures includes clear investment directions such as supporting local governments in resolving government debt risks, supporting large state-owned commercial banks to further increase core tier-one capital, real estate, and livelihood aspects, responding to market expectations.

Fang Dongming stated that currently, the stock market recovery has a monetary multiplier effect, and the non-positive price cycle is expected to be improved. There is still a large room for policy maneuver, and fiscal policy continues to echo with the financial market. We look forward to further follow-up and implementation of specific fiscal policies, as well as substantial support and care for private enterprises and entrepreneurs.

The market trend will shift to be driven by fundamental verificationSpecific to the A-share market, CITIC Securities believes that the A-share market, previously affected by fluctuations in policy expectations, has experienced intense multi-air combat after short-term pulse-like rises and falls. The main feature behind this round of pulse-like market movements is the concentrated entry of incremental funds dominated by retail investors, while on the product side, the subscription of passive funds represented by ETFs has significantly increased.

CITIC Securities judges that the current market is in the transition phase from a major reversal of expectations to a major turning point in the market trend. Although the pace of entry of incremental funds from outside the market has slowed down, the scale of potential market entry funds is still large. The market trend will gradually shift from being driven by capital sentiment to being driven by fundamental verification, and the market characteristics will shift from pulse-like rises and falls to stabilization and slow growth.

Regarding the intensified fluctuations in the A-share market last week, China Merchants Securities believes that it is mainly a normal adjustment after pulse-like rises, and the overheated market sentiment has been somewhat calmed. There is not much room for the A-share market to adjust downwards, and after the market returns to a rational and reasonable level, continuous policy efforts will promote economic stability, and the market will also return to the upward channel.

"The significance of each fluctuation and consolidation lies in digesting the previous gains and calming the market's excited sentiment. At the same time, it is also a process of allowing the market to straighten out its thinking and gradually reveal the medium and long-term main lines in the fluctuations, which is beneficial to the medium and long-term development of the market trend." said the strategy team of Industrial Securities.

Everbright Securities stated that looking back at the past, after the market rises rapidly in the short term, the market usually turns to fluctuate upwards. Under the positive stance of fiscal policy, there is still an opportunity for the overall market index to rise, but investment opportunities may gradually shift from systematic gains to individual stock excess returns. The choice of investment structure in the future may be more critical.

In terms of specific allocation, CITIC Securities suggests that investors still focus on low price-to-book ratio and domestic demand repair as the main lines. In terms of revaluation of the low price-to-book ratio style, industries such as real estate, banking, non-bank finance, and construction materials are the most clear main lines; in terms of valuation repair of the domestic demand plate, consumer internet that is both offensive and defensive can be focused on.

Dongwu Securities stated that as market sentiment tends to be rational, the fluctuation range of A-shares may decrease. It is recommended to grasp market opportunities from three main lines: First, sectors with strengthened industry trends or industry policy expectations are expected to usher in more catalysts, with high elasticity in directions such as low-altitude economy, autonomous driving, vehicle-road coordination, semiconductor equipment, and intelligent terminals empowered by AI innovation; Second, since the third quarter of this year, A-share mergers and acquisitions have entered an active period again, and the market's enthusiasm for mergers and acquisitions transactions is expected to increase, and representative participants such as central and local state-owned enterprises are worth paying attention to; Third, the direction of exceeding expectations in the third quarter report is worth exploring, and the performance of high-growth directions led by technology hardware may exceed expectations.

Huaxi Securities suggests that investors moderately balance their allocation, focusing on the large consumer plate benefiting from policy efforts, such as food and beverages, automobiles, home appliances, and pharmaceuticals; high-quality growth themes, such as intelligent driving and artificial intelligence; and restructuring and merger and acquisition themes. Everbright Securities also believes that the market style in October may be relatively balanced. By scoring various industries under a balanced style, Everbright Securities believes that industries such as black home appliances and communication equipment have larger price elasticity, and industries such as cement, insurance, and liquor in the pro-cyclical category are also worth paying attention to.