According to the Zhitong Finance APP, Guojin Securities released a research report stating that the deeper reason for the market adjustment this week is: the current ratio of U.S. financial assets to GDP is already at a high level, the service industry is weakening, and contradictions are beginning to spread during the process of technological development. The rise of A-shares since April has been more in sync with overseas logic, and this round of adjustment is also the beginning of structural switching. The changes in the main line are accelerating, and the current high valuation of U.S. financial assets and the weakening service industry are suppressing the rapid advancement of global technology. It is normal for Chinese assets to adjust during the driving shift process, and the real bull market for Chinese assets has not yet begun.
<h2>The main points of Guojin Securities are as follows:</h2>
Adjustment is expected to slow down, but changes in the main line will continue
In a previous research report, the firm proposed a view different from the &#34;golden pit,&#34; believing that the core of the market adjustment may not be due to changes in trade relations. This week, the A-share market experienced a significant pullback, and the intensification of trade conflicts cannot explain the phenomenon where the self-controlled sectors that originally benefited from this logic experienced even greater pullbacks this week. The firm believes that the deeper reason for the adjustment is: the current ratio of U.S. financial assets to GDP is already at a high level, the service industry is weakening, and contradictions are beginning to spread during the process of technological development (for example, power shortages). The rise of A-shares since April has been more in sync with overseas logic, and this round of adjustment is also the beginning of structural switching. From the latest changes, the conversation between U.S. Treasury Secretary Janet Yellen and Vice Premier He Lifeng, as well as the alleviation of concerns about bad debts in U.S. regional banks, pushed overseas markets to rebound on Friday evening, reducing the probability of a sharp decline in the market in the short term. However, it should be noted that the downward pressure on the service industry will not be reversed, but the resistance to the recovery of manufacturing and global physical demand will ease due to the improvement in relations, and the changes in the market's main line are still ongoing. This is also the underlying logic behind the firm's earlier warning of market risks while expressing an optimistic view that &#34;the real bull market has not yet begun.&#34;
Domestic: Resilience and New Focus
From the financial data: the changes in new medium and long-term loans for enterprises in September are in line with seasonal patterns, while new medium and long-term loans for residents have shown a super-seasonal increase, indicating that the repair of terminal demand may gradually increase, which will be more beneficial for the recovery of midstream manufacturing and downstream profits; the year-on-year growth rate of M1 and M2 is further converging, and the activation of corporate funds is also continuing. The year-on-year growth rate of domestic PPI has further rebounded, with the improvement in the year-on-year growth rate of upstream industries being more pronounced, and the ongoing anti-involution is gradually showing effects on stabilizing prices. From the export data, China's dependence on trade with the U.S. has further declined, and despite the extremely low year-on-year growth rate of exports to the U.S., the overall year-on-year growth rate of foreign exports has shown a significant rebound, indicating that the recovery of physical demand in non-U.S. overseas economies may have already begun. Since 2018, the contribution rate of emerging economies' own demand to China's added value has significantly increased. With the Federal Reserve starting a rate-cutting cycle, the recovery of manufacturing activities in emerging markets may bring demand to China, which could be a highlight for the future economy. From past experience, when more export income is converted into RMB-denominated assets through foreign exchange settlement, the downward pressure on domestic prices is often alleviated. The increase in unconverted funds in recent years has put pressure on inflation to some extent; therefore, if the weakening of the U.S. service industry really leads to significant fluctuations in the financial market, it will also promote more unconverted funds to flow back domestically, providing support for the price level that the market is most concerned about
Thoughts on Gold
From a medium to long-term perspective, expectations of interest rate cuts, the pressure of a weakening dollar due to geopolitical risks, and the difficulty in reducing overseas government deficits are all factors supporting the strength of gold. This is also one of the sectors that our bank strategically favors from the perspective of physical assets in the medium to long term. However, it should be noted that when an asset experiences a rapid rise in the short term, the long-term narrative supporting it may weaken. Since mid to late August, during the rapid rise of gold, an interesting phenomenon observed is that the net inflow of funds into gold ETFs seems to correspond with the beginning of volatility in the equity market, a phenomenon that has appeared in European, North American, and Asian markets. The underlying reason may be that the importance of gold in asset allocation is being recognized by investors, and this switching process begins when adjustments occur in the equity market. When a trend forms a consensus in the short term, a phase of overheating is inevitable: currently, the implied volatility of Shanghai gold options is approaching the level seen at the end of April, with a significant positive bias, raising concerns about overheating and overcrowded trading; additionally, under the current circumstances of high overseas financial assets and instability in the financial system, significant risk events may evolve into liquidity risk shocks, and gold may not necessarily provide complete hedging in the short term during major risk events. However, from the perspective of correcting the 40/60 combination of stocks and bonds in the medium to long term, the market value of investable gold assets is still significantly lower than before 1980, and this medium-term trend will not change (from 0.5% to 1.3%).
Changes in the Main Line are Accelerating
Currently, the high valuation of U.S. financial assets and the weakening of the service industry are exerting pressure on the global technological boom. It is normal for Chinese assets to experience adjustments during the driving shift process, and the true bull market for Chinese assets has not yet begun. In the medium term, the decline in the service industry and the slowdown in the expansion of U.S. financial assets are certain; the recovery of global manufacturing and the upward trend in physical consumption are also certain; and the slowdown of capital outflow from China in this context is also a medium-term trend. Market investors only need to make structural adjustments based on medium-term trends.
The allocation recommendations provided by our bank are as follows: First, the focus on domestic industries is a short-term priority, and the domestic demand industries that have recently seen a rebound in prosperity are worth paying attention to: Food and Beverage, Aviation and Airports, Coal.
Second, in the medium term, as manufacturing activity in emerging markets recovers and investment accelerates, physical assets will continue to dominate, and it is recommended to pay attention to upstream resources (copper, aluminum, oil, gold), capital goods (construction machinery, power grid equipment), and intermediate goods (basic chemicals, steel).
Third, the process of revitalizing funds at the enterprise level is still ongoing, and non-bank financials will benefit from the bottoming and recovery of capital returns across society.
Risk Warning: Domestic economic recovery may fall short of expectations, and overseas economies may experience significant downturns

Guojin Securities released a research report indicating that the recent adjustment in the A-share market marks the beginning of a structural shift, mainly influenced by factors such as the high ratio of U.S. financial assets to GDP and the weakening of the service industry. Although the market has experienced a significant pullback, the adjustment is expected to slow down, and the main line of change is still ongoing. Financial data suggests that the recovery of terminal demand may strengthen, which is beneficial for the recovery of midstream manufacturing and downstream profits

- Guojin Securities reports that the recent market adjustment is due to high U.S. financial asset-to-GDP ratios and weakening service sectors, indicating a structural shift.  
- The A-share market's rise since April aligns with overseas trends, and the current adjustment reflects a normal phase before a true bull market in Chinese assets begins.  
- Key recommendations include focusing on domestic industries with recent improvements, while emphasizing the importance of physical assets amid ongoing recovery in emerging market manufacturing activities.

Zhitong

Guotai Junan Securities: The A-share market has adjusted. In the short term, focus on industries with recovering prosperity such as food and beverage, aviation and airports, and coal