As trading days began after the holiday, the market's main concern was: After a significant drop in the third quarter, can it still perform in the fourth quarter?
From the latest views from public funds such as Wanjia Fund, JPMorgan Asset Management, HSBC Jinxin, Bosera Fund, and Guolian An, many do not believe the Q3 adjustment is a reversal in industry logic, but rather a result of trading crowding, capital rebalancing, and pre-holiday sentiment release.
In short: AI and hard technology remain the main themes, but Q4 is no longer about "buying the track and it will rise"; instead, it depends on orders, financial reports, and cash flow.
|Macro environment: Rate hikes have landed, but don't treat it as a complete relaxation
Overseas, the Fed raised rates by 25 basis points in September. The market initially worried it would be "higher and longer," but then the pricing focus shifted to "rate hikes are implemented and interest rate boundaries are clearer." Long-term interest rates have fallen, U.S. stocks have rebounded, and semiconductor stocks have recovered, all indicating a recovery in risk appetite.
However, this does not mean that overseas pressures are completely eliminated. U.S. Treasury yields may continue to fluctuate at high levels; whether further rate hikes will continue, how oil prices and geopolitical risks evolve, remain important variables. For A-shares, external factors influence the pace and sentiment more, and mid-term pricing will still return to domestic earnings and industry trends.
At the domestic level, the economy is still in a period of momentum transformation, with old models in real estate and infrastructure weakening, and manufacturing upgrades, external demand competitiveness, and operational quality improvements becoming more important. This also explains why institutions are focusing more on "overseas manufacturing" and "global competitiveness."
| Market Judgment: A volatile upward trend is expected, but a broad rally is unlikely
Public funds are generally optimistic about the fourth quarter, but their wording is quite restrained: oscillating upward, structural differentiation, and rotational recovery. The reason is clear:
In the third quarter, the technology sector adjusted more fully, with valuations and crowding declining; October entered the intensive Q3 report disclosure period, with performance validation becoming a watershed moment; Overseas, uncertainties such as midterm elections, interest rate hike disputes, and geopolitical disturbances remain; After shrinking volume before the holiday, whether trading volume can recover is also a key point to watch.
Therefore, the fourth quarter is unlikely to be a "surge in the index," but rather "whoever has performance will recover first."
This is the most fundamental change in this round of strategy. AI is not losing its potential; rather, it has moved from a "Beta market" to an "Alpha market."
Previously, the market looked at: whether computing power demand was strong, whether capital expenditures had been raised, and whether the story was attractive enough. Right now, the market is watching: whether orders can be realized, whether cloud business can be monetized, and whether cash flow can keep up.
In other words, AI companies that can make money will continue to enjoy premiums, while those that only burn money without closing the loop will be repriced.
From a segmented perspective, institutions prefer hardware chains with stronger certainty:
Optical communications, optical modules, CPO; Upstream materials such as PCB and copper-clad laminates; Storage chips, especially supply-demand improvement directions; semiconductor equipment and domestic substitution; Power supply, liquid cooling, and data center support.
The application side is certainly important in the long term, but the scarcity of A-share targets and the ongoing validation of business models make it more suitable for observation at this stage rather than blindly chasing highs.
| Balanced Allocation: Overseas manufacturing, resource products, and undervaluation recovery and supplementation
Single bets on technology carry higher risks in the fourth quarter, and public funds generally shift toward a "balanced offensive and defensive approach."
Overseas manufacturing deserves attention. Sectors such as construction machinery, power equipment, shipbuilding, and offshore engineering equipment benefit from global reindustrialization, industrialization in developing countries, and overseas power grid upgrades. Especially under the logic of "computing power equals electricity," orders for power generation and transmission and transformation equipment are highly certain.
Strategic resource products have also regained attention. Against the backdrop of geopolitical conflicts, shipping channel risk premiums, and supply constraints, assets such as non-ferrous metals, coal, and petroleum and petrochemicals are no longer just economic cyclical commodities; they also carry the attributes of great power competition and secure pricing. Copper benefits from reindustrialization and AI computing power development, while oil and coal benefit from low inventories and restocking flexibility.
In terms of undervaluation recovery, dividend assets still have defensive value, but are more biased toward individual stock selection. Whether high dividends are sufficient and cash flow sustainable is more important than simply looking at the sector.
Kingtech's Perspective | Screening opportunities in the fourth quarter with the "three forms"
Considering the current market, it is recommended to use three tables to screen the bids:
Income Statement: Has the Q3 report been delivered? Have gross margin, net margin, and orders on hand improved? Cash Flow Statement: Are AI-related companies truly converting computing power investments into revenue and cash flow? Balance Sheet: Do resource products and overseas manufacturing have supply constraints, capacity barriers, and global pricing power?
Specifically, in terms of configuration:
Offensive end: AI hardware with strong performance certainty such as optical communications, PCBs, storage, semiconductor equipment, and liquid-cooled power supplies; Balanced Side: Overseas manufacturing, especially in areas with strong global competitiveness such as power equipment, construction machinery, and offshore engineering equipment; Defensive side: high-dividend, resource-based, and low-valuation traditional recovery sectors used to hedge overseas interest rates and geopolitical fluctuations; Observation side: AI applications, humanoid robots, innovative drugs, and other directions have considerable long-term potential, but short-term focus is more on catalysts and performance validation.
The fourth quarter is not that there are no opportunities; rather, opportunities have become more "selective." AI remains the main theme, but it can no longer rely on emotion and narrative to make money; Resource products and overseas manufacturing provide a balanced configuration; Dividend and undervalued sectors are responsible for bottom-line volatility.
For investors, rather than chasing hot topics, it's better to focus on earnings reports—delivering on earnings is the toughest ticket for the fourth quarter.
