CICC says China's A-shares may get a strong start after the holiday, names two themes
In short
China International Capital Corporation (CICC) said in a research report that China's A-share market may see a strong start after the holiday, as investor confidence could recover in October. It advised investors to focus on two themes: high-growth sectors such as optical communications and semiconductor equipment, and cyclical sectors whose fundamentals are improving, such as chemicals, petrochemicals and construction machinery.
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China International Capital Corporation (CICC) said in a research report that China's A-share market may see a strong start after the holiday. The report said A-shares had been weak before the holiday under the influence of several external factors, while during the holiday more overseas markets rose than fell, and recent domestic economic data had been fairly stable. CICC said third-quarter reports after the holiday are expected to provide some earnings support, and it expects investor confidence to recover in October. [ 1 , 2 , 3 ]
On sector allocation, CICC recommended two main themes. The first is high-growth sectors. The report said hardware segments of the AI industry chain have generally posted high earnings growth, but may diverge as the narrative changes. Segments with low barriers and fast capacity build-out carry greater risk, it said, while areas with high certainty of demand and capacity bottlenecks that are hard to ease are expected to keep benefiting. CICC suggested watching optical communications, semiconductor equipment and industries related to upstream power bottlenecks. [ 1 , 2 , 3 ]
Outside the AI industry chain, CICC said innovative drugs, especially CXO, and power grid equipment show high prosperity overall. [ 1 , 3 ]
The second theme is cyclical improvement. CICC said fundamentals in a growing number of sectors are recovering from the bottom of the cycle, and suggested using a capacity-cycle view to focus on areas where supply and demand are improving, such as chemicals, petrochemicals and construction machinery. It said nonferrous metals have good fundamentals across segments, but investors should watch the effect of Federal Reserve tightening risk on their financial attributes. [ 1 , 3 ]
Yicai, CLS and Jiemian carried the report on the morning of October 8 in near-identical wording. [ 1 , 2 , 3 ]
Why it matters
The report sets out where a major Chinese investment bank expects market support to come from after the holiday, including third-quarter earnings reports. Its sector picks were carried by three business outlets on the morning trading resumed.
Key facts
- CICC said in a research report that A-shares may see a strong start after the holiday. [ 1 , 2 , 3 ]
- CICC said A-shares were weak before the holiday under the influence of several external factors. [ 1 , 2 , 3 ]
- During the holiday, more overseas markets rose than fell, and recent domestic economic data were fairly stable, the report said. [ 1 , 2 , 3 ]
- CICC expects third-quarter reports after the holiday to give the market some earnings support and investor confidence to recover in October. [ 1 , 2 , 3 ]
- In the growth theme, CICC suggested optical communications, semiconductor equipment and industries tied to upstream power bottlenecks. [ 1 , 2 , 3 ]
- Outside the AI industry chain, CICC said innovative drugs, especially CXO, and power grid equipment show high overall prosperity. [ 1 , 3 ]
- In the cyclical-improvement theme, CICC pointed to chemicals, petrochemicals and construction machinery, and said nonferrous metals have good fundamentals but face risk from Federal Reserve tightening. [ 1 , 3 ]
Confirmed by several sources
- CICC said A-shares may see a strong start after the holiday. [ 1 , 2 , 3 ]
- CICC recommended focusing on two main themes, beginning with high-growth sectors including optical communications and semiconductor equipment. [ 1 , 2 , 3 ]
- CICC said innovative drugs, especially CXO, and power grid equipment show high prosperity outside the AI chain. [ 1 , 3 ]
- CICC's second theme is cyclical improvement, including chemicals, petrochemicals and construction machinery. [ 1 , 3 ]
Still unclear
- Whether A-shares will actually open strongly after the holiday. This is a forecast in CICC's research report; the documents do not report market performance after the holiday.
- Which AI hardware segments CICC considers at higher risk. The report refers only in general terms to segments with low barriers and fast capacity build-out, without naming them.