This week, under the favorable conditions of trillion-yuan treasury bonds, the Central Huijin's purchase of broad-based index ETFs to support the market, and the significant Sino-US meeting, as well as the expectations of the end-of-month Politburo meeting and the financial work conference, the market transaction volume increased, foreign capital rarely bought for two consecutive days, and the three major A-share indices rebounded, showing an initial bottoming structure.

From the perspective of market style, the first three trading days saw the extreme development of thematic speculation. Under the stimulus of the trillion-yuan treasury bond, thematic speculation reached a climax, with active funds closely grouping around high-profile thematic stocks. The phrase "touching the dragon leads to a daily limit" reflects the absurd market ecology of A-shares. In contrast to the hot thematic speculation, institutional heavy stocks such as consumer goods, pharmaceuticals, and new energy accelerated their decline, presenting an extreme market split.

On Thursday, signs of a retreat in thematic speculation appeared, with Shenglong Shares and Jie Rong Technology both experiencing a quasi "sky floor" pattern at the end of the day. On Friday, Jie Rong Technology opened with a daily limit down, and Zhen Shi Tong soared and then hit a daily limit down. The birth of a new vitality must stand on the ruins of the old forces. On Friday, heavyweight stocks launched a counterattack.

Specifically, this week, the Shanghai Composite Index rose by 1.16%, the ChiNext Index rose by 2.09%, and the ChiNext Index rose by 1.74%. In addition, we also found that global stock markets fell across the board this week, while A-shares and Hong Kong stocks rose against the market. The pattern of "their strength and our weakness" may be about to change. As the saying goes, "fortunes change like the weather," and RMB assets may be on the verge of a turnaround.

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Looking at the industry breakdown, sectors such as agriculture, forestry, animal husbandry, and fishery, pharmaceuticals and biology, food and beverages, automobiles, and environmental protection led the gains, while beauty care, communications, coal, banking, and petroleum and petrochemicals were at the bottom.

From the perspective of sub-tracks, ETFs in automobiles, baijiu, pharmaceuticals, medical care, and agriculture led the gains. These are all oversold sectors heavily held by institutions and are closely related to economic recovery, with the warming of economic recovery expectations hidden behind them.

Heavy favorable news over the weekend

In last week's weekend article, we alerted everyone to the two major meetings at the end of the month: the Politburo meeting and the financial work conference. The financial work conference, held once every five years, is likely to be a turning point for new expectations in A-shares.

The Politburo meeting was held this Friday, and a press release was also issued after the market closed. Compared to previous Politburo meetings that set the tone for future economic policy arrangements comprehensively, this time only one theme of "comprehensive revitalization of the Northeast" was emphasized. Our understanding is that more policies may be included in the subsequent financial work conference.Let's take a look at the significant news from the weekend:

On October 27th local time, U.S. President Joe Biden met with Wang Yi, a member of the Political Bureau of the CPC Central Committee and Foreign Minister, at the White House. Subsequently, the U.S. Department of Transportation issued a new notice, stating that from November 9th, Chinese airlines will be allowed to operate a total of 35 weekly regular direct passenger flights between China and the U.S. (one round trip is counted as one flight, the same below). The development of things is like a wave moving forward; although competition remains the main theme, there is still hope for a phased easing between China and the U.S. during the period of increased economic difficulties in the United States.

The Social Security Fund held a 2023 domestic investment manager symposium: A-shares have entered a window period for long-term allocation value. It is necessary to strengthen counter-cyclical investment thinking and actively seize long-term investment opportunities in the capital market. On Monday, Central Huijin bought ETFs, and the Social Security Fund expressed its willingness to layout against the market, and just now, Yifangda announced a self-purchase of 200 million yuan of its own CSI 300 ETF. This indicates that large funds have started to take action one after another, and there were signs of large funds entering the market on Friday.

Following the "new housing reform," Guangzhou has become the first first-tier city to explicitly propose "exploring the policy mechanism of housing vouchers." It is expected that the construction of affordable housing and the renovation of urban villages will become an important tool for stable growth, and it can also support the housing needs of new citizens.

On Thursday and Friday, there were signs of a shift in the A-share market style. The thematic stocks that were previously held by speculative funds have begun to recede, and the stocks heavily held by institutions have started to exert their strength. Coupled with the institutions' motivation to maintain net value as the year-end approaches, it is expected that the institutions' pricing power will return. Next week, the Federal Reserve is likely not to raise interest rates, and attention should be paid to the tone set by the financial work conference. If the conference sets a tone beyond expectations, and the heavyweight stocks continue to exert their strength, the A-shares may have reached the bottom.