China’s A-Shares Rebound as Recovery Momentum Builds, Though Consolidation Remains Necessary

Table of Contents

• You might want to know
• Main Topic
• Key Insights Table
• Afterwards...

You might want to know

• What drove the A-share rebound on October 28, and where did investors direct their money?
• Why do brokerages see further recovery potential while still advising caution in the short term?

Main Topic

China’s A-share market rallied unevenly on October 28, with all four major indexes ending higher. The ChiNext Index rose 3.40%, while the STAR Market Composite Index gained 3.20%. Trading activity expanded, and market-wide main-fund flows returned to positive territory after two consecutive sessions of net outflows. The move offered evidence that investor confidence may be stabilizing, although analysts cautioned that one session does not establish a durable upward trend.

According to Wind data, turnover across the Shanghai and Shenzhen stock exchanges reached 1.63 trillion yuan on October 28, an increase of 167.5 billion yuan from the previous trading day. Main funds recorded net inflows of 24.334 billion yuan. That reversed the net outflows of 21.925 billion yuan on October 26 and 27.828 billion yuan on October 27. The scale and direction of the change suggested that some investors were willing to return to risk assets, but the composition of trading indicated that the rebound was not driven uniformly across the market.

Technology and other high-volatility sectors led the advance. Optical chips, innovative drug contract research and development, and humanoid robotics were among the strongest areas. At the industry level, electronics attracted net inflows of 23.571 billion yuan, machinery and equipment received 10.021 billion yuan, and communications drew 8.379 billion yuan. This contrasted with the previous session, when banks were the dominant destination for inflows, attracting 9.694 billion yuan. The rotation suggested a shift toward growth-oriented exposure rather than a broad-based move into defensive sectors.

Several market observers described the rebound as a sign of a structural recovery in liquidity. Unlike the rally on the preceding Friday, when broad-market index funds saw greater trading activity, the major broad-based ETFs did not show a conspicuous increase in turnover on October 28. Stock ETFs recorded total turnover of 158.728 billion yuan, slightly below the previous session, although they had attracted net inflows for a 17th consecutive trading day. This pattern points to selective demand and sector-specific positioning rather than an indiscriminate surge across the market.

Among major broad-based products, the E Fund ChiNext ETF, ChinaAMC STAR 50 ETF, Southern China A500 ETF, and Harvest Fund A500 ETF recorded turnover of 11.607 billion yuan, 9.296 billion yuan, 5.361 billion yuan, and 5.346 billion yuan, respectively. Turnover in the E Fund ChiNext ETF increased by about 2 billion yuan from the previous session. Other broad-based ETFs saw only modest increases, while the Guotai CSI A500 ETF, Harvest CSI 300 ETF, and Southern CSI 500 ETF recorded small declines in turnover. Taken together, these figures suggest that investors were selectively adding exposure rather than substantially increasing positions across the market as a whole.

Technology-sector interest has been supported by a growing number of catalysts and by lower valuations following recent declines. Yuan Daoyu, chief analyst at Founder Securities, said that after the pullback, technology companies had become more attractive from a portfolio-allocation perspective. Within the sector, he said capital may favor businesses that can raise prices, expand production volumes, or demonstrate new technological breakthroughs. The view underscores the importance of distinguishing between individual companies and subsectors rather than treating technology as a single, uniform investment theme.

Corporate earnings disclosures are another factor shaping sentiment. The final week of October was a concentrated period for the release of third-quarter reports. Yuan estimated that, among 697 Shanghai-listed companies that had disclosed third-quarter results, around nine-tenths reported profits. While this figure does not resolve questions about future earnings growth, it has helped support confidence in the breadth of current profitability. Investors will continue to examine whether reported results meet expectations and whether earnings momentum can be sustained.

In addition to trading flows, longer-term sources of capital have been gathering pace. Since October began, more than 120 listed companies have disclosed new share-buyback or share-increase plans. Reports indicate that some companies are moving more quickly from announcements to implementation. These actions can signal management confidence and provide a potential source of demand, although their effects depend on the size, timing, and completion of the announced transactions.

Technology leaders have been prominent among companies planning larger buybacks. On the evening of October 27, Shanghai Silicon Wafer Integration (晶合集成) announced a buyback plan covering its A and H shares, with a combined upper limit of more than 1 billion yuan. The maximum amount allocated to its A-share buyback was 800 million yuan. Other companies, including ChangXin Memory Technologies (長鑫科技), Hygon Information Technology (海光信息), Eoptolink Technology (新易盛), TFC Communication (天孚通信), Pengding Holdings (鵬鼎控股), and Shenzhen H&T Intelligent Control (勝宏科技), had also recently announced plans. The maximum amount for an individual company reached 2 billion yuan.

New fund launches may add another source of demand. The first group of actively managed ETFs attracted strong interest. By October 27, 11 of the 18 products launched since October 23 had reached their 2 billion yuan fundraising target. Gong Huijing, an analyst at Wanlian Securities, estimated that if each product raised 2 billion yuan, the group could bring at least 36 billion yuan of additional capital into the A-share market. This is an estimate based on the assumed fundraising amount, not a guarantee that all capital will be invested immediately or in the same securities.

Brokerage strategy teams broadly believe the market is gradually emerging from a liquidity shock, with the conditions for a recovery accumulating. They nevertheless expect short-term volatility as investors reassess risk appetite, economic conditions, and earnings prospects. Yao Pei, chief strategy analyst at Huachuang Securities, told 21st Century Business Herald that valuations of major A-share indexes had fallen substantially. In her view, the rapid valuation decline had improved the market’s risk-reward profile, while recovering investor sentiment could help valuations move back toward more reasonable levels. She also considered high-quality A-share assets relatively attractive for allocation at current levels.

Xia Fanjie, a strategy analyst at China Securities, offered a more conditional assessment. He said the market remained in a phase defined by both a recovery in risk appetite and the need to verify corporate earnings. He expected volatility and a selective, sector-led recovery to remain important features. Xia identified three variables for investors to monitor: the pace at which additional domestic capital enters the market, changes in overseas interest-rate conditions, and further confirmation of earnings expectations through third-quarter reports.

Zheng Xiaoxia, chief strategy analyst at Hu’an Securities, also emphasized near-term uncertainty. Her team said external disruptions and the difficulty of building a shared domestic market view could continue to weigh on trading during the latter part of the month. At the same time, it argued against becoming reflexively pessimistic, saying an advance in November was possible. The team described the market as being in the latter half of a mid-stage consolidation period, which it expected to last about a week before potentially giving way to a faster rise near the end of that phase. In its assessment, that possible move could represent a significant opportunity within the year-end rally, making the current period a potential window for preparation rather than a confirmation of a guaranteed outcome.

On portfolio construction, Xia favored balanced allocations that combine offensive and defensive positions. As signs of a market bottom emerge and lower-priced stocks rebound, he said investors could gradually shift sector exposure from a primarily defensive stance toward a more growth-oriented one, while retaining balance. His three broad themes were companies that had fallen sharply but delivered strong third-quarter results, upstream energy and chemical industries that could benefit from higher international oil prices, and a continuing allocation to dividend-paying companies. Areas highlighted by the team included artificial-intelligence-related components, electronic chemicals and communications equipment; energy and minor metals; oil and gas production; coal; oil transportation; and banks.

Yuan summarized his view as “watch technology for stabilization and domestic demand for trend formation.” After the market has undergone a substantial adjustment, he said, sectors supported by both earnings and a credible investment case may stand out. His medium-term areas of interest included a rebound in oversold technology shares, with attention to financial guidance from major U.S. cloud-service providers; domestic-demand and cyclical sectors such as property and infrastructure supply chains and selected consumer products; and non-bank financial companies, whose performance can respond directly to changes in monetary policy and whose earnings and valuations may be well matched.

Zheng’s team continued to regard artificial intelligence as the most important industry trend ahead and advocated considering exposure to its supply chain during periods of weakness. Its first investment line was AI hardware and related upstream and midstream industries, including optical modules, printed circuit boards, co-packaged optics, optical fiber, liquid cooling, storage, semiconductor equipment, power equipment, and data centers. Its second line was downstream AI applications and themes that may spread across related industries, including machinery and equipment, robotics, games, and software. A third line was agricultural products and related businesses with strong company-specific drivers, including agricultural products, fertilizers, and agrochemicals.

The overall picture is therefore mixed but constructive. A-share indexes rose, main-fund flows turned positive, and technology-oriented industries attracted substantial interest. Corporate buyback plans and ETF fundraising may also contribute to the supply of longer-term capital. However, subdued turnover in many broad-based ETFs and the market’s continued sensitivity to earnings and external conditions show why analysts are not treating the rebound as a settled trend. The central distinction is between improving recovery potential and confirmation of a sustained market uptrend: the former is accumulating, while the latter still requires evidence from capital flows, earnings, and trading breadth.

Key Insights Table

Afterwards...

The October 28 rebound added to signs that liquidity conditions and investor confidence may be improving, but the next stage will depend on whether those signs broaden. Investors will be watching domestic capital flows, overseas interest rates, third-quarter earnings, and whether more sectors participate in any recovery. Buybacks and ETF inflows could offer support, yet neither removes the possibility of short-term fluctuations. For now, the brokerage consensus is to remain balanced: recognize the potential in selected growth and technology themes, preserve defensive exposure, and treat the developing rebound as a recovery in progress rather than a confirmed, uninterrupted rally.