Market Overview - The Shanghai Composite Index closed at 3939.81 points, down 0.81%, while the Shenzhen Component Index and the ChiNext Index fell by 0.92% and 1.16%, respectively [1] - The total trading volume in the Shanghai and Shenzhen markets was approximately 1.946 trillion yuan, marking three consecutive days below 2 trillion yuan [1] - The market exhibited a "structural consolidation + general pullback" characteristic, with about 1277 stocks rising and over 4100 stocks declining [1] Sector Performance - **Strong Sectors**: - AI applications and e-commerce saw strength due to Alibaba's "Qianwen" launch and expectations for the Sora application, with stocks like Xiaohongshu, Pinduoduo, and Kuaishou performing well [1] - The beauty care sector, including companies like Shierjia and Bawei, experienced late-session gains [1] - The semiconductor sector showed localized activity, with Longxun shares hitting the daily limit [1] - **Weak Sectors**: - The coal sector faced significant pressure, with Yunmei Energy and Baotailong hitting the daily limit down [1] - Battery stocks, including Huasheng Lithium and Haike Xinyuan, saw declines exceeding 10% [1] - The non-ferrous metals sector collectively adjusted, with Hainan Mining hitting the daily limit down [1] Global Interest Rate Dynamics - Recent market sentiment shifted from expecting potential rate cuts by the Federal Reserve in 2024 to a possible delay until mid-2026, driven by internal policy disagreements and concerns over persistent inflation [2][3] - The structural stickiness of U.S. inflation, influenced by high fiscal deficits, tariffs, and labor costs, limits the scope for monetary easing [2][3] - The anticipated delay in rate cuts has led to a decrease in the probability of a December rate cut to below 50%, resulting in an upward shift in long-term interest rate expectations [2][3] Japanese Fiscal Stimulus Impact - Japan's decision to implement a large-scale fiscal stimulus of over 17 trillion yen aims to counteract a 1.8% economic contraction in Q3, marking the first negative growth in six quarters [3][5] - The increase in Japanese government bond yields has implications for global interest rates, as Japan is a major net creditor and significant holder of global bonds [3][5][6] - The rise in yields may trigger a reallocation of funds back to Japan, impacting global risk assets and increasing borrowing costs [3][7] A-Share Market Reaction - The recent pullback in A-shares reflects a localized pricing adjustment to the new consensus of prolonged high interest rates, particularly affecting high-beta sectors like batteries and non-ferrous metals [2][10] - Despite the pullback, there was no significant panic selling, with evidence of structural inflows into the market, indicating a divergence from typical panic-driven sell-offs [11][12] - Net inflows into financing exceeded 7.6 billion yuan on Tuesday, signaling a relative optimism among investors [13][14] Investment Strategy Recommendations - In the current environment of high global interest rates, the focus should be on optimizing portfolio structure rather than short-term price movements [22] - Investors are advised to manage positions carefully, reducing exposure to high-beta and high-valuation stocks while increasing allocations to high cash flow and dividend-paying companies [23][25] - Attention should be given to sectors with defensive attributes and those closely tied to domestic demand and structural upgrades [25][27]