Recently, major indices have generally declined, showing a pattern of large-cap resilience and growth weakness: the Shanghai Composite Index edged slightly lower, while the Shenzhen Component Index and ChiNext Index posted larger drops; the STAR 50 and CSI 300 also adjusted in tandem, and the China Securities All Index drifted slightly downward.

In terms of structure, capital rotated from high-level assets into lower-level ones: real estate, coal, beauty care, pharmaceutical and biotech, and oil and petrochemicals gained, while non-ferrous metals, communications, power equipment, machinery and equipment, and electronics led the declines.

This decline did not stem from a deterioration in fundamentals, but rather from three threads converging in the same window: first, the positive effects of the China-US leaders' meeting entered the realization phase. As the meeting progressed, the market's focus shifted from "whether they will meet" to "what can be delivered." Since some positives had already been priced in, upward momentum weakened after the event was realized. Second, escalation and de-escalation in the Middle East alternated. Escalation pushed up oil prices and inflation concerns, while de-escalation signals caused oil prices to give back gains. Oil prices remained in a wide, high-level range without forming stable expectations, and along the chain of "oil prices—sticky inflation—Fed turning hawkish—rising US Treasury yields," it became the core variable weighing on global risk assets. Third, the pre-holiday effect. With the Mid-Autumn Festival and National Day connected, this week is the last week before the Mid-Autumn Festival, with only four trading days, and combined with third-quarter-end institutional assessments, funds tended to reduce positions and lock in gains. Historically, A-shares typically see significantly lower volume before long holidays, and with reduced absorption capacity, high-level assets retreated and declines were amplified.

In summary, the capital picture after these three factors overlapped is this: funds did not leave the market, but rather flowed from crowded tech hardware and resource sectors into real estate, pharmaceuticals, coal, and other sectors supported by policy and low valuations. Although the market before the holiday is in a phase of low-volume consolidation and event-driven high-low rotation, the medium-term outlook is not pessimistic but requires a second confirmation. Direction depends on the evolution of three threads: first, whether the meeting's outcomes can translate into earnings growth. If tariffs are substantially reduced and tech controls are marginally relaxed, structural opportunities may emerge in the export chain (light manufacturing, auto parts, basic chemicals, etc.) and tech hardware. Second, whether the Middle East situation can be de-escalated in stages. If oil prices fall, inflation expectations cool, and US Treasury yields decline, global risk appetite will be repaired. Third, whether trading volume can expand again after the holiday and whether third-quarter earnings can take over as the new pricing mainline. Before volume and delivery signals appear, the index is likely to remain range-bound, and structural opportunities may outweigh index opportunities.

In terms of investment approach, consider balanced dividend-tilted strategies, focus on lagging sectors, and selectively watch tech opportunities. Specifically: (1) Policy and valuation repair direction: watch the real estate chain, consumer services, pharmaceuticals (innovative drugs), etc., but note the risk of policy falling short of expectations; (2) Dividend direction: watch coal, oil and petrochemicals, banks, etc., to hedge against US Treasury and dollar fluctuations; (3) AI computing hardware and optical interconnect direction: watch optical modules, PCBs, copper-clad laminates, advanced packaging, the memory price increase chain, etc. Industry prosperity has not been broken, and watch for layout windows after interest rates fall and crowding decreases.

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