Since the start of this year, the A-share market has undergone multiple rounds of style rotation, continuously seeking consensus amid uncertainty. As the fourth quarter approaches, which variables deserve attention? Which sub-sectors offer more opportunities? Here is an interpretation from Wang Li, Senior Macro Strategy Researcher at Great Wall Fund.

Since the beginning of this year, A-shares have been broadly range-bound, with on-market capital rotating and structural performance highly correlated with overseas markets, overall showing an evolution from cyclicals to technology to dividend plays. From a valuation standpoint, current A-share overall valuations are not low. The PE valuations of indices including the STAR 50, the All-A Index, the Shanghai Composite Index, the CSI 300, the CSI 500, and the SSE 50 are all near the 60th percentile since 2010, at historically elevated levels. Wang Li stated that from the perspective of All-A valuation levels, there is still pressure to fall back toward the central level. Historically, when All-A valuations rise above the central level, it is either during a period of very loose liquidity (such as 2013-2015), or after liquidity repair when industries experience a "Davis double play" and corporate earnings digest valuations (such as 2019-2021 and since September 2024). Referring to the 2019-2021 experience, as the industry "Davis double play" enters its latter half, valuations still face pressure to fall back to the central level.

From the perspective of corporate earnings, the current industry profit structure is diverging, with the technology sector's market cap share and earnings contribution growing larger. Data shows that the technology sector (electronics + communications + computers + power equipment) now accounts for over 30% of market cap, and A-share earnings growth in the first half of the year was mainly contributed by technology (and cyclicals). Wang Li believes that from a PEG perspective, technology currently offers more allocation appeal. September to November is the traditional window for dense overseas AI industry catalysts in the second half of the year, and subsequent catalysts that can provide resonance are expected to increase, giving the domestic technology sector opportunities for recovery following overseas mapping. He also noted three important time points to watch: first, Anthropic's ARR disclosure before its October listing, which could boost global capital expenditure expectations and ease concerns about AI investment returns; second, the arrival of a new earnings season in October, which could further clarify next year's industry prosperity expectations; third, the dense schedule of overseas technology conferences from September to November, with attention on progress in new AI applications and new scenario implementation.

On investment pacing, Wang Li believes that in the short term one can follow the technology industry cycle and pay more attention to technology; if technology or the index reaches new highs, one can gradually shift attention to cyclicals or high-dividend sectors. In terms of direction, the technology sector can focus on AI hardware directions such as optical communications and semiconductors; the high-dividend sector can focus on banks and coal; the cyclical sector can focus on live hogs and others.

Disclaimer: The information contained in this communication comes from sources the company believes to be reliable and from the personal judgment of researchers, but the company makes no direct or implied representation or warranty as to its accuracy or completeness. This communication is not a complete statement or summary of the relevant securities or markets, and any opinions expressed may change without further notice. This communication should not be accepted by recipients as a substitute for their independent judgment or as a basis for investment decisions. The company or its related institutions, employees, or agents shall not bear any responsibility for any person's use of all or part of this content or any losses arising therefrom. Without the prior written permission of Great Wall Fund Management Co., Ltd., no one may distribute, copy, reproduce, or publish this report or any part of it in any form, and no abridgment or modification of this communication contrary to its original meaning may be made. The fund manager reminds that every citizen has the obligation and right to report money laundering crimes. Every citizen should strictly comply with relevant anti-money laundering laws and regulations. Investing requires caution. MACD golden cross signals have formed, and these stocks are performing well!