Affected by overnight weakness in U.S. tech stocks, China's A-shares opened slightly lower and trended downward, with previously strong overseas-mapping sectors leading the decline. At the close, the Shanghai Composite Index fell 0.81% to 3,954.79 points, while the Shenzhen Component Index dropped 1.14% and the ChiNext Index plunged 2.31%. Market breadth showed 3,759 gainers versus 1,548 decliners. Trading volume shrank by over 100 billion yuan from the previous day to approximately 2.35 trillion yuan, though still higher than last week's levels, indicating gradual recovery in market activity.

Sectors that had been subdued for days, including biotech, software, and media, led the gains, while previously strong performers like communications, semiconductor equipment, and AI-related concepts saw pullbacks.

This week's market action saw initial strength followed by retreat, with the 4,000-point level briefly breached then lost. On Monday, positive factors including easing trade tensions drove a gap-up opening for the Shanghai Composite, which later accelerated after breaking through the upper channel boundary. From Tuesday through Thursday morning, optimism around the U.S.-China summit pushed the index to a decade-high of 4,025 points. However, profit-taking pressure emerged at psychological resistance levels, leading to a pullback on Thursday afternoon. Friday's decline continued amid Meta's 10% plunge, bringing the index back within its broader upward channel.

Amid this volatility, investors face the dilemma of whether to adopt aggressive or defensive strategies. Our view advocates "rational offense"—targeting high-beta, undervalued opportunities in the current market phase.

Short-term technicals suggest the 4,000-point resistance remains untested, with sector rotation likely to persist. The recent breakout differs from July-August's one-way rally, as the new decade-high revealed market divergence rather than consensus. Friday's one-way decline found temporary support at the gap level, with potential for further downside tests.

Longer-term, the A-share bull case strengthens amid shifting U.S.-China dynamics and accumulating wealth effects. Macro trends show China's growing comprehensive national strength, evidenced by developments like sixth-generation aircraft and DeepSeek advancements, while U.S. trade measures appear increasingly ineffective. Equity markets, though short-term voting machines, ultimately serve as weighing machines favoring economies with stronger fundamentals.

Micro-level observations reveal this bull market's first phase, led by high-conviction tech hardware plays, hasn't yet generated broad participation. Now showing signs of sentiment diffusion, the market may be entering a more inclusive second phase.

Positioning suggestions include gradually increasing risk exposure at dips, as the uptrend that began with the 3,500-point breakout remains intact. Sector selection should focus on historically elastic but recently underperforming areas like biotech, where early rotation signs emerged Friday.

The Beijing Stock Exchange 50 Index, previously lagging, surged over 10% in three days amid regulatory signals about accelerated ETF approvals.

Biotech shone Friday, with the SSE STAR Market Biotech Innovation ETF (589720) soaring 7% and the Biotech Innovation ETF (517110) rising 3.15%. Year-to-date, the latter has outperformed the CSI Pharmaceutical Index by over 30%, with AI applications expanding valuation potential. The sector's high error tolerance for AI applications in drug discovery accelerates technological adoption—AI can generate novel molecular structures and predict drug-target interactions, significantly improving early-stage efficiency.

Industry catalysts include Pfizer's October 31 launch of global Phase III trials for 3SBio's PD-1/VEGF bispecific antibody (code: 707), marking Chinese biotech's evolution from license-outs to multinational-led late-stage development. Domestic innovation pipelines now approach commercialization inflection points, potentially creating virtuous R&D cycles.

Gold markets mirror A-shares' 4,000-point struggle, though fundamentals remain strong. U.S. regional banking stress reemerged in October with two banks reporting fraud-related provisions, reviving stagflation concerns. Geopolitical tensions from Middle East, Russia-Ukraine, and U.S.-Venezuela relations bolster haven demand, while Federal Reserve politicization risks undermining dollar credibility—all supporting gold's long-term case. The Gold ETF (518800) tracking AU9999 and Gold Equity ETF (517400) warrant attention.

Risk Disclosure: Investors should understand that systematic investment plans differ from savings products and don't guarantee returns. Equity ETFs/LOFs carry higher risk-reward profiles than mixed, bond, or money market funds. Sector/fund performance references are illustrative only, not guarantees. Individual stock mentions aren't recommendations. Views expressed shouldn't be construed as investment advice. Investors should assess risk tolerance per suitability requirements before investing. All investments carry risk.

Technical Note: MACD golden crosses emerge in select outperforming stocks.