The market saw a collective decline in the STAR and ChiNext indices this week, with most broad-based indices following suit in the adjustment. Looking ahead, while the ChiNext Index has temporarily fallen below its daily uptrend line and the 20-day moving average, it still has a chance to recover. Its performance in the first half of next week requires close attention.

After breaking below its daily uptrend line and the 20-day line, the STAR 50 Index staged a significant rebound. However, trading volume contracted noticeably during this process, and the downtrend expanded further this week. It is expected that the index will still need to test the low of June 2nd in an attempt to form a "double bottom," after which there may be a rebound opportunity.

For most non-STAR/ChiNext indices, they have been in a continuous adjustment phase since May 14th. The lowest points for some indices (such as the Shanghai Composite) are already near the 0.5 Fibonacci retracement level of the previous gains. It is anticipated that they will further oscillate and converge going forward, with limited downside potential.

Furthermore, since January this year, the non-bank financial sector, which had benefited from the bull market, has been adjusting against the broader trend. There are now signs of a potential bottoming and stabilization, and the sector's subsequent performance warrants attention.

Strategic Allocation Guidance

Based on the assessment that "the ChiNext follows the STAR market in adjustment, while non-STAR/ChiNext indices await convergence," the following recommendations are made: Current medium-term positions can continue to be held. New positions are best increased by waiting for the broader market to complete its adjustment and form a stable base pattern.

For the STAR 50 Index, await a rebound following the potential formation of a double bottom. For the ChiNext Index, monitor whether it can reclaim its daily uptrend line and the 20-day moving average next week. Absolute return funds and short-term positions can use these moving averages as operational benchmarks.

Sector Focus

The STAR and ChiNext markets remain the primary focus and should continue to be held as core positions. However, considering the recent heightened volatility, it may be prudent to shift a portion of allocations to high-dividend and large financial sectors.

Key Risk Factors

Domestic economic recovery may fall short of expectations, and global geopolitical uncertainties persist.