Core Insights - Recent market trends show a preference for value style, with related ETFs experiencing an influx of capital, totaling over 100 million yuan in net inflows over the first four trading days of the week [1] - Analysts suggest that the divergence between growth and value styles has reached historical highs, indicating potential for convergence, while the valuation gap between growth and value is also at a historical peak, suggesting greater upside for value stocks [1] - The Guozheng Value 100 Index employs a three-tier screening process based on low price-to-earnings ratios, high dividend yields, and high free cash flow rates, while excluding samples with low or unstable return on equity (ROE), identifying financially healthy companies with reasonable valuations [1] - Since 2013, the annualized return of the index has been 17%, with contributions from dividends and valuation recovery accounting for 5% and profit growth contributing 7%, indicating a healthy return structure [1] - The Value ETF (159263) is the first product tracking the Guozheng Value 100 Index, providing investors with a straightforward way to capitalize on value style allocation opportunities [1]

Group 1 - The report indicates that in the past 15 years (2010-2024), the probability of large-cap style outperforming in October is relatively high, with a 67% chance of outperforming the broad market index [9][4]. - Value style has a slightly higher probability of outperforming growth style, with a 53% chance of outperforming the broad market index [9][4]. - The main drivers for significant style shifts in the fourth quarter typically include policy changes, disruptions in strong sector logic, or new developments that reinforce other sector logics [4][22]. Group 2 - In terms of liquidity, the report notes that the central bank conducted a net withdrawal of 15,263 billion yuan in the week of October 6-12, with a future expectation of 10,210 billion yuan in reverse repos [26][29]. - The report highlights that the average weekly trading volume in the A-share market increased to 22,704.16 billion yuan, indicating heightened market activity [4][37]. - The net inflow of financing funds reached 473.1 billion yuan, marking a shift from previous net outflows [4][37]. Group 3 - The report identifies that financial real estate and TMT sectors have historically performed well in the fourth quarter, with financial style appearing superior in 4 out of the past 15 years [17][18]. - The report also notes that large-cap style has a higher occurrence rate, appearing in 9 out of the past 15 fourth quarters [18][21]. - The technology leader index has the highest probability of outperforming the broad market index at 62%, with an average return of 3.58% [21][22]. Group 4 - The report mentions that the market sentiment has shown increased trading activity in financing funds, with the proportion of financing transactions in the A-share market rising to 13.9% [46][48]. - The VIX index has increased, indicating a decline in market risk appetite, with the Nasdaq and S&P 500 indices also experiencing declines [48][49]. - The report highlights that the demand for funds has decreased, with no IPO financing in the week of October 9-10, and a reduction in planned share reductions by major shareholders [41][42].

Group 1 - Since May, market risk appetite has significantly increased, with domestic computing power and technology sectors leading the rally, while industries like home appliances, banking, and transportation lagged due to a lack of popular narratives [1] - The absolute value of the return differentiation between growth and value styles has exceeded the historical 90th percentile level over the past three months, indicating an extreme level of divergence [1] - Historical context shows that the last time growth and value styles reached a similar extreme was during the 924 market, where growth significantly outperformed value, but value began to gain momentum from November 2024 [2] Group 2 - As of May this year, the Guozheng Value 100 Index rose by 6.59%, while the Growth 100 Index fell by 1.30%, demonstrating the convergence of style returns [2] - Current A-share market valuations, measured by PE, PB, and total market value/GDP, indicate that while valuations are above historical averages, there is still room to reach historical peaks [2][3] - The Guozheng Value 100 Index, tracked by value ETFs, employs a "low valuation + high dividend + high free cash flow" screening criterion to identify undervalued quality companies [3] Group 3 - The historical performance of the Guozheng Value 100 Index shows an annualized return of 17.3% since 2013, with a risk-return ratio of 0.81, outperforming the annualized return of the CSI Dividend Index at 11.1% and the CSI 300 Index at 7.4% [3]

- **Barra style factors**: The report tracks various style factors including Beta, Market Cap, Momentum, Volatility, Non-linear Market Cap, Valuation, Liquidity, Profitability, Growth, and Leverage. Each factor is constructed using specific financial metrics and formulas. For example, the Profitability factor combines analyst forecast earnings price ratio, inverse price-to-cash flow ratio, and inverse price-to-earnings ratio (TTM), among others. The Growth factor incorporates earnings growth rate and revenue growth rate. These factors are used to evaluate stocks based on their historical and financial characteristics [13][14][15]. - **GRU factors**: GRU factors are derived from different training objectives, such as predicting future one-day close-to-close or open-to-open returns. Examples include `close1d`, `open1d`, `barra1d`, and `barra5d`. These factors are constructed using GRU models trained on historical data to forecast short-term stock movements. GRU factors showed strong performance, with most models achieving positive multi-period returns, except for `barra1d`, which experienced some drawdowns [20][28][32]. - **Factor testing methodology**: Factors are tested using a long-short portfolio approach. At the end of each month, stocks are ranked based on the latest factor values, with the top 10% being long positions and the bottom 10% being short positions. The portfolios are equally weighted, and factors are industry-neutralized before testing. This methodology ensures robust evaluation of factor performance across different market conditions [15][16][31]. - **Factor performance results**: - **Style factors**: Valuation, Profitability, and Leverage factors showed strong long performance, while Beta, Liquidity, and Momentum factors performed well on the short side [15][16]. - **Technical factors**: Across various time windows, low momentum and low volatility stocks generally outperformed, while high volatility and high momentum stocks underperformed. For example, the 60-day momentum factor showed a negative return of -3.11% in the last month but a positive return of 2.12% over the last six months [19][26][30]. - **GRU factors**: GRU models like `barra1d` achieved a year-to-date excess return of 5.22%, while `barra5d` and `open1d` also delivered strong multi-period returns. However, `barra1d` experienced a weekly drawdown of -1.65% [20][32][33]. - **Multi-factor portfolio performance**: The multi-factor portfolio outperformed the benchmark (CSI 1000 Index) by 1.35% over the past week. GRU-based models also showed strong excess returns, ranging from 0.68% to 1.60% over the same period. Year-to-date, the `barra1d` model achieved an excess return of 5.22% [32][33][34].

Group 1: Market Sentiment Indicators - The market sentiment index as of October 10 is 1.75, a slight decrease from 1.85 on September 26, indicating a bearish sentiment [8][11] - The financing balance ratio continues to rise, reflecting an increase in market leverage sentiment and improving trading atmosphere [27][11] - The industry trading volatility continues to decline, suggesting a slowdown in fund switching activity and a decrease in market participants' divergent views on short-term industry value [21][11] Group 2: Timing Model Insights - The model indicates a preference for small-cap value style, with a weak signal strength due to a slight decline in the 5-day RSI relative to the 20-day RSI [45][46] - The short-term trend scores for industries such as non-ferrous metals, power equipment, real estate, machinery, and electronics are notably strong, with non-ferrous metals scoring the highest at 98.31 [34][36] - The model maintains a strong signal for value style, suggesting potential for further strengthening in the future [45][46] Group 3: Industry Crowding and Performance - Recent high returns in non-ferrous metals and coal are accompanied by high fund crowding, indicating potential volatility risks due to valuation and sentiment corrections [42][41] - Industries like automotive and electronics show high crowding but lower returns, while sectors with low crowding such as pharmaceuticals and beauty care may present long-term investment opportunities as risk appetite increases [42][41] - The average crowding levels for industries as of October 10 show automotive, environmental protection, real estate, power equipment, and electronics as the highest, while agriculture, computers, defense, beauty care, and pharmaceuticals are the lowest [40][41]

Market Overview - The A-share market showed resilience despite a divergence between growth and value styles, with the ChiNext index falling by 3.86% and the CSI 300 index rising by 0.37% [2] - The value style, represented by the CSI Dividend Index, performed well, increasing by 1.79%, indicating a preference for high dividend and low valuation stocks amid rising overseas uncertainties [2] - The average weekly increase for Wind's first-level industry was 0.15%, with 55% of sectors yielding positive returns, particularly in non-ferrous metals, coal, and steel, which rose by 4.44%, 4.41%, and 4.18% respectively [2] Fund Issuance and Performance - A total of 4 funds were issued last week, including 2 equity funds, 1 bond fund, and 1 FOF fund, with total issuance of 1.13 billion units [3][4] - The Wind All Fund Index decreased by 0.62%, with the ordinary equity fund index down by 1.58% and the mixed equity fund index down by 1.52% [3][7] Global Asset Review - Global equity markets experienced significant divergence, with major U.S. indices declining due to supply chain issues and government shutdowns, while Asian markets showed mixed results [4] - Gold prices reached a historical high, surpassing $4000 per ounce, while energy commodities showed weaker performance [4][5] Domestic Fund Market Review - The average weekly increase for Wind's first-level industry was 0.15%, with the public utility sector leading with a 3.69% increase, reflecting demand for stable cash flow and low valuation amid uncertainty [13] - The healthcare sector saw a decline of 1.21% for the week and 3.22% over the past month, attributed to internal sector differentiation and short-term sentiment [13] Bond Market Review - The bond market showed mixed performance, with long-term government bonds underperforming while mid-term bonds remained stable [15] - The 10-year government bond yield was recorded at 1.846%, reflecting a slight decrease of 1 basis point from the previous week [17]

A-Share Market - The A-share market showed a mixed performance with the Shanghai Composite Index slightly up by 0.37%, while the ChiNext Index fell significantly by 3.86, indicating notable internal market differences [5][6] - Value stocks generally rose, particularly mid-cap value stocks, while growth stocks experienced a broad pullback. The average daily trading volume for the week was 2.6 trillion yuan, showing a slight increase compared to the previous period [5][6] - The market volatility increased post-National Day, influenced by rising prices of industrial and precious metals, with gold surpassing 4000 USD per ounce. The non-ferrous metals sector saw a cumulative increase of 4.35% during the week [5][6] Hong Kong Market - The Hong Kong market faced downward pressure, with the Hang Seng Index declining by 3.13% and the Hang Seng Tech Index dropping by 5.48%. Traditional value sectors showed relative resilience, while technology, consumer, and healthcare sectors experienced significant declines, with non-essential consumer and healthcare sectors falling over 6% [7] - The adjustment in the Hong Kong market was primarily driven by external uncertainties and internal sector rotations, particularly due to the tightening of US-China relations. The announcement of a 100% tariff on all brand or patented drug imports by the US significantly impacted the healthcare sector [7] - Looking ahead, the Hong Kong market is expected to be heavily influenced by US-China relations, with potential risks from increased tariffs on Chinese goods. Focus should be on dividend-paying sectors less affected by these relations, especially cyclical sectors benefiting from anti-involution policies [7]

Market Overview - The overall market has seen a decline, with the closing rating at 4.1 stars [1] - All market caps, including large, medium, and small caps, experienced a downturn [2] - Growth style stocks faced significant declines, while value style stocks remained relatively stable [3][7] Index Performance - The ChiNext index dropped over 4% after reaching overvalued levels [4] - The Sci-Tech 50 index fell by 4.7% [5] - The Hong Kong stock market also experienced declines, particularly in technology and growth sectors [11][12] Investment Style Dynamics - There is a notable rotation in market styles, with growth stocks showing high volatility and value stocks exhibiting lower volatility during corrections [14] - Indices focused on dividends, value, and free cash flow generally saw increases, with free cash flow indices rising for five consecutive trading days [8][9] Hong Kong Market Insights - The Hong Kong medical index has shown significant volatility, with a 4.9% drop recently [16] - The Hong Kong medical index has increased by 60-80% from the beginning of the year to the end of September, despite some recent corrections [30] - The Hong Kong medical index is categorized differently than its A-share counterparts, with a focus on healthcare and innovative drugs [21][25] Valuation and Future Outlook - The Hong Kong medical index reached overvalued levels in early September but has since seen a valuation correction [31][32] - The overall valuation of the Hong Kong market is currently between 3.5 and 3.6 stars, with fewer undervalued stocks compared to the previous year [33] - The market is expected to continue adjusting, with some stocks being sold to increase bond holdings in response to rising stock asset values [43]

Macro Environment - The current macroeconomic situation is characterized as "weak recovery, low inflation," with policies focused on stabilizing growth and preventing risks [5][11] - The State Council issued a plan to optimize the market allocation of factors, which is expected to enhance economic efficiency and provide a more flexible policy environment for related industries [5][11] - Policies supporting traditional industries such as automotive, steel, and construction have been introduced, alongside new initiatives for emerging sectors like new energy storage and artificial intelligence [5][11] Market and Industry Performance - In September, the bond market showed significant differentiation, with the 10-year government bond futures index slightly rising by 0.02%, while the 30-year futures contract fell by 2.28% [48][51] - The equity market favored growth sectors, with the advanced manufacturing index rising by 8.99% and technology (TMT) by 5.6%, while sectors like healthcare and finance saw declines [53][58] - The top-performing industries in September included electric equipment (21.17%), non-ferrous metals (12.79%), and electronics (10.96%), while sectors like social services and non-bank financials faced declines [58][63] Monthly Allocation Recommendations - The report suggests a balanced allocation between growth and value styles, with a focus on sectors such as TMT, pharmaceuticals, and securities [6][69] - The anticipated easing of monetary policy by the Federal Reserve is expected to enhance market risk appetite, although the crowded midstream manufacturing sector may increase short-term volatility risks [6][69]

Group 1 - The core viewpoint of the report is the innovative approach to combining investment expectations based on odds and win rates to address the issue of value and growth style rotation [1][8] - The report indicates that the growth style portfolio had a return of -0.48% last week, while the value style portfolio had a return of -0.82% [1][8] Group 2 - The estimated odds for the growth style is 1.11, while the value style is estimated at 1.13, indicating a negative correlation between relative valuation levels and expected odds [2][14] - The current win rate for the growth style is 63.24%, compared to 36.76% for the value style, based on seven win rate indicators [3][16] Group 3 - The latest investment expectation for the growth style is calculated to be 0.33, while the value style's investment expectation is -0.22, leading to a recommendation for the growth style [4][18] - Since 2013, the annualized return of the style rotation model based on investment expectations is 28.06%, with a Sharpe ratio of 1.04 [4][19]