Chinese equities saw choppy trading on Thursday. By the close, the Shanghai Composite Index slipped 0.41% to 3,875.60 points, the Shenzhen Component Index fell 0.33%, the STAR Market Composite Index lost 0.15%, and the ChiNext Index dropped 0.40%. Total market turnover reached 1.84 trillion yuan, down 16 billion yuan from the prior session, with more than 2,800 stocks declining, reflecting a cautious tone across the board. Sector-wise, biotech, agriculture, and film and television led gains, while precious metals, oil and gas, and nonferrous metals pulled back.

The Federal Reserve delivered a widely anticipated rate hike at its September FOMC meeting. Early this morning Beijing time, the Fed raised the federal funds rate target range by 25 basis points to 3.75%-4.00% on a unanimous 12-0 vote, marking the first rate increase since July 2023 and the first policy rate move under new Chair Warsh since he took office this year. The decision weighed directly on non-yielding assets such as gold, with spot bullion retreating to around $4,300. Notably, the latest dot plot skewed hawkish: the median projection for the federal funds rate at end-2026 rose to 4.1%, corresponding to a 4.00%-4.25% target range. Following the September meeting, market pricing is likely to become more data-dependent. Inflation, employment, consumption, economic growth, and even oil prices could all serve as triggers for the next shift in rate expectations. Expect heightened volatility around key data releases in the period ahead.

Innovative drugs and the CXO segment led gains today. The Hang Seng Biotech Index closed up 1.80%, while the CSI HK-Shanghai-Shenzhen Innovative Drug Industry Index rose 1.17%. Momentum in innovative drugs and CXO names remains robust, supported by a convergence of three factors: improving fundamentals, policy catalysts, and deepening overseas expansion. On the fundamentals side, mid-2026 earnings data clearly signal a profit inflection point for the sector, with leading innovative drug developers entering the harvest phase for their proprietary pipelines, driving rapid revenue growth from innovative drugs. The CXO segment is steadily recovering, aided by a rebound in global pharma R&D investment and financing, while domestic leaders maintain strong order backlogs that underpin future earnings. On the policy front, a September 14 State Council Information Office briefing delivered positive signals supporting innovative drug development, providing policy backing for streamlining the full chain from R&D and approval to commercialization and reinforcing long-term R&D confidence. Regarding overseas expansion, business development licensing deals by domestic drugmakers continue to heat up, with key players having established platform-level R&D advantages in frontier areas like bispecific antibodies and ADCs. Overall, innovative drugs are gradually entering a profit validation cycle tied to commercial product launches, while CXO sector visibility remains high. Investors interested in one-click exposure to Hong Kong-listed innovative drug and CXO leaders may track the Hang Seng Biotech ETF (520930), while the Innovative Drug ETF (517110), which spans quality A-share and H-share innovative drug assets, offers another avenue for capturing structural opportunities in the sector.

Agriculture bucked the trend with gains. The Guo Zheng Grain Industry Index closed up 2.52%. On the climate front, the current El Ni帽o event continues to intensify, with equatorial Pacific warming accelerating notably since August. Latest monitoring data from the U.S. National Oceanic and Atmospheric Administration (NOAA) shows a greater than 90% probability of a "very strong El Ni帽o" this autumn and winter. A super-strength El Ni帽o tends to trigger heat, drought, and abnormal rainfall across major global production zones, disrupting crop growth and harvests and raising global grain production shortfall expectations. CBOT wheat and corn prices have strengthened since July, hitting multi-month highs in late August, lifting the global grain price floor. Domestically, six government departments jointly stepped up compensation policies for major grain-producing areas, improving grain-growing support and supply-and-price stabilization mechanisms to reinforce national food security and bolster sector sentiment. On valuation, the grain sector currently offers attractive risk-reward, with the Guo Zheng Grain Industry Index's P/E sitting at the 30th percentile of the past decade and the 56th percentile over five years, providing ample margin of safety. Overall, the recent agricultural rally is anchored on super-strength El Ni帽o output-cut expectations, with solid long-term allocation value. Interested investors may consider the Grain ETF (159033) to seek suitable entry points.

The film and television sector rebounded into positive territory today, with the CSI Film and Television Theme Index up 1.65%. The core catalyst for the sector remains the AI-driven film and TV industry trend, with a clear long-term growth narrative. The first AI-produced long drama to air on satellite TV, "Journey to the West: The Later Chapters," debuted on Hunan Satellite TV's prime-time slot and Mango TV on August 31, gaining traction with quality AI-generated content and validating the commercial viability of AI-powered filmmaking, directly lifting related listed stocks. On the policy side, the "Micro-Drama Development Management Measures" took effect on September 1, setting standards for AI content creation, labeling, and review, curbing industry disorder and steering the sector from chaotic expansion toward high-quality, compliant development, improving the long-term ecosystem. Technologically, AI video models continue to iterate at a rapid pace, reshaping the content production chain by significantly cutting labor and time costs across scriptwriting, shooting, and post-production, while boosting output efficiency. AI also breaks traditional production capacity bottlenecks, opening new incremental space for the industry. Overall, AI empowerment coupled with regulatory normalization positions the film and TV sector for a twin inflection point of technological transformation and structural optimization, unlocking both valuation repair and growth potential over the medium to long term. Investors may track the Film and Television ETF (516620) to capture these industry shifts and expansion opportunities.

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