On the second trading day of October, major A-share indices declined, with growth indices such as the ChiNext Index and STAR 50 Index experiencing significant pullbacks, while dividend-related sectors rose against the trend.
In the ETF sector, the Building Materials ETF rose over 2%; High Dividend ETF, Coal ETF, Shenzhen Value ETF, Oil & Gas Resources ETF, Energy ETF (sponsored by GF Fund), Dividend State-Owned Enterprises ETF, Low Volatility Dividend 50 ETF, Securities ETF Pioneer, S&P Dividend ETF, Oil & Gas ETF, Central SOE ESG ETF, S&P Biotechnology ETF, Dividend Value ETF, Agriculture & Animal Husbandry ETF, Dividend ETF, CSI 300 Dividend ETF, and CSI Dividend ETF gained over 1%.
The Battery 50 ETF and Integrated Circuit ETF fell over 7%; Battery ETF, STAR Chip ETF, STAR Chip Design ETF, ChiNext New Energy ETF (Huaxia), New Energy Vehicle ETF, STAR Information Technology ETF, New Energy ETF, New Energy Vehicle ETF, and Chip ETF dropped over 6%.
Some analysts pointed out that the technology sector is currently overvalued, and with the upcoming concentrated disclosure of third-quarter earnings reports, market risk aversion sentiment may begin to rise. Some funds are choosing to cash in on their profits, and the shift in capital also highlights structural opportunities.
From the perspective of market turnover, although trading volume slightly contracted, it remained above RMB 2.5 trillion, indicating that market activity has not experienced a systemic cooling. Balanced allocation may help better mitigate risks.
In the first three quarters of 2025 just passed, the Shanghai and Shenzhen indices successively broke through last October's highs driven by inflows of new capital, reaching new peaks for this round of the uptrend. Specifically, the SSE Composite Index rose 15.84%, the SZSE Component Index increased 29.88%, the CSI 300 Index climbed 17.94%, the ChiNext Index surged 51.20%, and the STAR 50 Index gained 51.20%.
Across industry sectors, more sectors rose than fell. Among SW Level-1 industries, nonferrous metals led with a 67.52% increase, followed by telecommunications at 62.61%, and electronics at 53.51%. The power equipment, machinery, media, and other sectors also performed well.
On the downside, coal led the declines with a 7.90% drop, followed by food and beverage at -5.06%, and oil and petrochemicals at -3.12%. More individual stocks rose than fell, with 77.02% of listed companies posting gains, and the median gain was 18.82%.
In terms of ETF performance, Hong Kong-listed pharmaceuticals led the gains in the first three quarters of this year. The Hong Kong Innovative Drug ETF, Hong Kong Innovative Drug 50 ETF, Fuguo’s Stock Connect Medical ETF, and Hang Seng Innovative Drug ETF all doubled in value. Communication ETFs, Gold Stock ETFs, and ChiNext Artificial Intelligence ETFs posted significant gains, while Energy ETFs, Coal ETFs, and Liquor ETFs recorded notable declines during the year.
Historically, from 2015 to 2024, the Shanghai Composite Index saw an equal number of gains and losses in October, with a tendency towards weakness in recent years. The Shenzhen Component Index had a win rate of 70%, with declines observed only in bearish years such as 2018, 2022, and 2023, while other years showed gains. The ChiNext Index had a win rate of 60%.
Based on data over the past two decades, the Shanghai Composite Index rose in October during 11 individual months, representing approximately 55% of occurrences, but the average gain was only about 0.29%.
October is the month with the second-highest correlation between stock prices and earnings after April. The validation of earnings for supporting success rates deserves attention.
As of October 10, 32 companies have released earnings forecasts for the first three quarters. Among them, 28 companies forecast growth, one forecast profitability, bringing the total proportion of positive forecasts to 90.63%. Conversely, one company projected a decline, and another expected losses.
From an industry perspective, stocks expected to achieve more than doubled earnings growth in the first three quarters were mainly concentrated in basic chemicals, steel, and non-ferrous metals. By sector, among those expected to double their earnings, six were listed on the Main Board, two on the ChiNext, and one on the STAR Market.
Guosheng Securities expects that the key areas worth watching in the third-quarter report involve four categories: 1) Non-ferrous metals (precious metals, industrial metals, minor metals) benefiting from external interest rate cuts and emerging demand; 2) Steel, coal, chemicals, and photovoltaics achieving price stabilization amid anti-domestic competition pressures; 3) Industries maintaining steady volume growth, such as automobiles, lithium batteries, electricity, and logistics; and 4) AI-related sectors (computing power-related) driven by synchronized domestic and overseas demand.
Huaan Securities expects short-term market volatility overall, with rapid industry rotation. Against the backdrop of an extended upward trend in the medium to long term and a clear new cycle of growth-industry prosperity, accurately capturing short-term rotations will be challenging. Therefore, adhering to the right direction in the medium to long term will be increasingly important. It is recommended to continue focusing on the following two most critical main themes in the medium to long term:
The core mainline in the medium to long term is the establishment of a new growth industry prosperity cycle. The pivotal role of AI computing power infrastructure is clear, with significant advantages in application-driven diffusion. Specific areas of focus include pan-TMT, computing power (CPO/PCB/liquid cooling/fiber optics), applications (robotics/gaming/software), and military industry. Growth-oriented styles have demonstrated sustained relative earnings advantages, providing strong support for the emergence of a new growth industry prosperity cycle. This industrial cycle is epitomized by AI computing power infrastructure, where performance has already been realized and exhibits momentum. Therefore, the computing power sector represents the most central direction, aligning with institutional preferences for investing in high-growth trends. AI applications represent the field most capable of absorbing internal valuation expansion. As an indicator of GEM (Growth Enterprise Market) sentiment and influenced by numerous potential catalysts, the military industry also warrants attention.
The second mainline is areas with robust fundamental support, primarily including power equipment (wind power/energy storage/batteries/power supply equipment), non-ferrous metals (rare earth permanent magnets/precious metals), and machinery equipment (construction machinery). Among these, power equipment benefits from high export activity in wind power, surging overseas energy storage demand, breakthrough progress in solid-state batteries, and improvements in both quantity and quality of power supply equipment driven by data center construction. Rare earth permanent magnets in non-ferrous metals present an offensive and defensive advantage amid changes in U.S.-China relations, with notable interim earnings reports. Gold continues to see record price highs as global uncertainty trends upward and the Federal Reserve's renewed interest rate cuts drive another round of real interest rate declines. Construction machinery within machinery equipment is experiencing a recovery in a new prosperity cycle, propelled by strong overseas demand, and is currently at an early stage of this trend.
