Most major indices declined last week, with the Beijing Stock Exchange 50 Index showing resilience against the trend, while the ChiNext and STAR boards experienced more significant pullbacks. In terms of Shenwan primary industry sectors, media, banking, and agriculture, forestry, animal husbandry, and fishery performed well, while electronics, non-ferrous metals, and building materials were relatively weak.

US non-farm payroll data exceeded expectations, yet inflation remains the core focus. Overseas, data from the US Bureau of Labor Statistics showed non-farm payrolls increased by 162,000 in August, significantly higher than the average monthly gain of just 31,000 over the previous 12 months. The unemployment rate held steady at 4.1%, with the number of unemployed remaining largely stable at around 7 million. Overall, August US non-farm payroll growth greatly surpassed market expectations, and the unemployment rate remained stable even as labor force participation rebounded, fueling market expectations for a September rate hike by the Fed. Looking ahead, there appears to be little divergence between the market and the Fed regarding the resilience of the US job market. The focus of monetary policy hinges on whether inflation can continue its gradual downward trend. If core inflationary pressures remain mild, the Fed could potentially maintain a wait-and-see stance at its September meeting. Domestically, the formal disclosure of A-share 2026 interim reports is complete, revealing faster earnings growth with technology and resources acting as dual drivers. Specifically, second-quarter corporate earnings growth accelerated, with AI and resources serving as the core engines. Structural characteristics were further amplified, with domestic demand and midstream sectors facing pressure amid price increases, while upstream bargaining power within the AI sector strengthened. In the first half of the year, earnings growth for all A-shares excluding financials, petroleum, and petrochemicals continued its upward trend, benefiting from volume and price growth driven by AI investment expansion and net margin improvements in resource products amid supply disruptions. Mid-cap growth stocks posted outstanding results, further reinforcing the economic recovery trend. However, structural characteristics remain pronounced. The rise of AI and energy-chemical sectors coincides with pressure on domestic demand and midstream earnings. The breadth of profit expansion may also constrain the height of overall prosperity improvement, with slowing inventory turnover adding further pressure.

The "Golden Autumn Rally" has room to extend, with a focus on emerging technology, advantageous manufacturing, and major financials. Looking forward, we believe the "Golden Autumn Rally" still has space to extend, with the core driver being the marginal convergence of uncertainty expectations, boosting market risk appetite. Specifically: First, market risk has significantly declined. The contraction in both trading volume and volatility indicates a marked reduction in selling pressure, with capital outflows largely easing. Second, the impact of external risk shocks has basically peaked, and panic sentiment is receding. While this does not mean negative factors have been systematically resolved, current issues such as overseas stock market deleveraging, rising US Treasury yields, and Middle East conflicts have all recently shown signs of abating. Third, the supportive stance of domestic economic and capital market policies creates a favorable pricing environment. For instance, the National Development and Reform Commission held a national investment promotion work meeting, clearly stating efforts to "intensify and accelerate efforts to stabilize investment work," while financial departments and the Ministry of Housing and Urban-Rural Development collectively introduced "property market stabilization" measures. These initiatives are conducive to driving the A-share market's "Golden Autumn Rally." In terms of direction, as the rally broadens and market capitalization preferences shift downward, a balanced strategy can be considered, covering emerging technology, advantageous manufacturing, and major financial sectors. Notably, the capital repricing of the overseas AI chain could present new overseas mapping opportunities for the A-share AI sector. 1) Emerging technology and materials: Within the overseas chain, greater emphasis should be placed on segments with new technologies and enhanced value. For domestic substitution, attention should be on upstream components and materials, including domestic chips, communication equipment, non-ferrous metals, and non-metallic new materials. 2) Advantageous manufacturing: Chinese companies are facing global demand and participating in global competition, forming new growth momentum and competitive advantages. Machinery and pharmaceuticals are worth attention. 3) Financials and high dividends: The importance of stable returns is increasing, with brokerages, banks, and high-dividend sectors worthy of focus.

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