In the previous week, A-shares listed on the Shanghai and Shenzhen Stock Exchange experienced gains. The SSE Science and Technology Innovation Board 50 Index and ChiNext Index both rose by over 1.5%. Among the Shenwan first-level industries, 27 rose while 4 declined. In terms of sectors, electronics, mechanical equipment, and computers were among the top gainers, while general, real estate, and steel sectors were among the top decliners. The numbers suggest that in the past week, the market saw more gains than losses, signaling a notable improvement in market sentiment. Tech stocks, particularly in areas such as robotics, semiconductor chips, and electronic components, performed very well thanks to supportive industry policies and a rebound in market demand.

In the Chinese market, the latest PMI data for October dropped by 0.7% compared to the previous quarter, falling into the contraction territory. This indicates a slight downturn in the economic conditions on the Chinese mainland, suggesting that the ongoing recovery needs further consolidation. Despite the decline in the manufacturing sector, the market expects stable and continued economic improvement. The expectation index for production and operating activities in October stands at 55.6%, an increase of 0.1% from the previous quarter. The index has remained in expansion mode for four consecutive months, indicating that businesses are confident in the market's recovery and growth.

In terms of financial policies, China recently held the Central Financial Work Conference, outlining an overarching plan for the next phase of financial initiatives in the country. The conference underscored the policy of ensuring that the financial sector supports the real economy and a commitment to provide financial support for new technologies, new sectors, and new markets. The author believes that the country's future policies will maintain a focus on providing financial support and tangible benefits for the real economy, thus gradually boosting market vitality and propelling economic growth. The conference also reiterated the need to activate the capital market and better support the expansion of domestic demand. Important policies to stabilize the capital market are expected to be rolled out in the near future. Recent fiscal policy measures have also demonstrated strength, indicating a commitment to prudent growth policies. This is beneficial for addressing fiscal challenges across various regions in the country, repaying government-related debt, and promoting economic recovery. In a nutshell, the execution of a host of policies to stabilize and support the market is fostering favorable conditions for growth. The Chinese economy will likely continue its steady upward trend in the fourth quarter, which will help restore market confidence.

In the global market, the latest U.S. economic data have shown remarkable resilience. For instance, GDP in the U.S. rose at a 4.9% annualized pace in the third quarter, ahead of the 4.5% estimate. Personal consumption expenditure (PCE) grew by 4.0% for the third quarter, marking a 3.2% increase from the growth rate in the second quarter. Durable goods orders jumped 4.7% in September, surpassing expectations for a 1.7% increase. The sustained strength of U.S. economic activity may raise concerns about the Fed's tightening. At its September meeting, the Fed made the decision to leave the interest rates unchanged, which is consistent with market expectations. This marks the second consecutive meeting at which the Fed opted to skip another rate hike. However, it's worth noting that the Fed kept open the possibility of a future hike. The meeting statement shifted the description of the economy from “moderate expansion” to “strong growth in the third quarter”. It also acknowledged that inflation levels remained high and stated that it would keep monitoring upward pressure on inflation. Jerome Powell, the Fed chair, said the process of getting inflation sustainably down to 2 percent has “a long way to go”, suggesting that the interest rates are likely to remain high for some time. Meanwhile, ongoing conflicts in the Middle East, tensions between Russia and Ukraine, and the persistent risk of war continue to cast shadows over the capital market. Given the risk of regional conflicts, high-interest rates, and elevated inflation levels, the author believes the near-term outlook for the U.S. stock market remains less optimistic.

Moving forward, the U.S. stock market continues to face pressure on short-term risk assets due to factors such as persistent high-interest-rate and upward inflationary risks. In the Chinese market, however, positive economic factors are building up. Policies promoting national economic stability and market resilience are set to gradually stabilize the market. Although the Chinese stock market has limited room for adjustment, a stabilizing rebound is expected in the medium to long term. As for investment strategy, we should focus on industries related to domestic substitution, key focus of state policy, and technological innovation, such as intelligent driving, robotics, and consumer electronics.