China Securities Co., Ltd. Sentiment Index Monthly Report: A-shares fell back on shrinking volume in September, sentiment dropped below 38 before the holiday, and is expected to recover after the holiday.

China Securities Co., Ltd. released a research report stating that turnover rate: In September, A-share turnover rate further declined. Before the Federal Reserve's interest rate meeting, the market was in a strong wait-and-see mood. Before the Mid-Autumn Festival and National Day holidays, market trading was sluggish. The market ultimately shrank for three consecutive months, with volume energy approaching the lowest level since the current bull market. New issuance of equity-biased funds: In September, new issuance of equity-biased funds improved slightly, rebounding modestly, but overall remained at a relatively low level, and individual investor confidence was still insufficient. Financing purchase ratio: The indicator continued to decline in the first half of September and rebounded at one point in the second half, but declined again at the end of the month to around 8.4%. This shows that although leveraged fund sentiment improved in stages, sentiment remained low, and the risk of further decline still needs to be watched. Implied risk premium: The indicator rose slightly in September, from 2.81% at the beginning of the month to 3.05% at the end of the month, indicating that the cost-effectiveness of equity assets is improving. Stock-bond yield spread: The indicator fell rapidly and turned negative in early September, and thereafter remained basically below the zero axis, which means the current money-making effect is poor. Above 60MA: From August 5 to now, the indicator has basically fluctuated in a narrow range between 28% and 34%, and at the end of September it once again fell to around 28%, which means the market remains in a weak state over the medium and long term. Overbought/oversold: Since early August, the indicator has long remained below and near the zero axis, with the market fluctuating downward and insufficient momentum for oversold rebounds. China Securities Co., Ltd.'s main views are as follows: At the end of March 2022, we launched the China Securities Co., Ltd. Strategy-Investor Sentiment Index, synthesized from multiple publicly traded market indicators. This index has well reflected the market sentiment level during important periods in A-share history, and its extremely high and extremely low points can lead market reversals, giving it certain predictive ability. It should be pointed out that this index is used to characterize market investor sentiment and is a synchronous indicator; its predictive nature is mainly reflected through the predictive nature of investor sentiment toward the market. After the investor sentiment index was launched, it received attention from a large number of investors. Therefore, starting at the end of April 2022, we began tracking and presenting current market sentiment in the form of monthly reports, and provided the historical trends and latest movements of the core sub-indicators of sentiment. In August 2024, we once again launched a special report reviewing the practical results of market timing over the nearly two and a half years since the sentiment index was released, and summarized the performance of different market styles under different sentiment states. Viewing the pre-holiday A-share market from the perspective of sentiment In the August monthly report on market sentiment tracking, we pointed out that "current market sentiment is at a moderately high level, but is clearly constrained by liquidity conditions, making it difficult to form a broad upward market, and it is expected to remain mainly in a mid-range fluctuation market." In September, the market fluctuated and declined, with the Wind All A Index falling 5.31%, validating our earlier view. In particular, during the three trading days from September 23 to 28, the Wind All A Index fell 4.92%, contributing most of September's decline. From the timing of the sentiment index, what characteristics did the A-share market show before the National Day holiday? The market remained weak throughout September. The sentiment index continued to decline in the first half of the month, and after falling to a stage low near 35 on September 15, a repair rally began. However, after the sentiment index rose to around 52 on September 22, it fell again, failed to break through 55, and even quickly dropped below 50, then fell below 38 again by the end of the month. In the short term, the obvious shrinkage in volume and decline in sentiment before the National Day holiday are consistent with seasonal effects, and sentiment is expected to rebound after the holiday, launching a repair rally (for seasonal effect statistics, see "A-share Practice of the Investor Sentiment Index: Market Timing and Style Judgment"). In the long term, compared with August, when the sentiment index failed to break through 60, in September the sentiment index even failed to break through 55 before beginning to decline, causing the high point of the sentiment index to move further down. Going forward, it is necessary to be alert to a situation of stock-game competition for incremental funds, and we can observe whether the sentiment index can break through 55 and rebound to the 60-65 range after the holiday. We analyze each sub-indicator. Among the seven major indicators, turnover rate, equity-biased fund issuance, financing purchase ratio, implied risk premium, and stock-bond yield spread are smoothed using a 5-day average; the two indicators above 60MA and overbought/oversold were originally weekly data, but for greater sensitivity they are now uniformly converted to daily data, and the 60-week moving average is effectively changed to a 300-day moving average. The following defaults to this standard. Turnover rate: The turnover rate continued to decline, and the market shrank continuously for three consecutive months from July to September. In September, A-share turnover rate further declined. Before the Federal Reserve's interest rate meeting, the market was in a strong wait-and-see mood. Before the Mid-Autumn Festival and National Day holidays, market trading was sluggish. The market ultimately shrank for three consecutive months, with volume energy approaching the lowest level since the current bull market. New issuance of equity-biased funds: A slight rebound in September, but overall still at a low level. In September, new issuance of equity-biased funds improved slightly, rebounding modestly, but overall remained at a relatively low level, and individual investor confidence was still insufficient. Financing purchase ratio: Narrow fluctuations in September, declining again at the end of the month. The financing purchase ratio indicator continued to decline in the first half of September and rebounded at one point in the second half, but declined again at the end of the month to around 8.4%. This shows that although leveraged fund sentiment improved in stages, sentiment remained low, and the risk of further decline still needs to be watched. Implied risk premium: A slight rise in September, improving the cost-effectiveness of equity assets. The indicator rose slightly in September, from 2.81% at the beginning of the month to 3.05% at the end of the month, indicating that the cost-effectiveness of equity assets is improving. Stock-bond yield spread: Basically below the zero axis in September, with poor market money-making effect. The indicator fell rapidly and turned negative in early September, and thereafter remained basically below the zero axis, which means the current money-making effect is poor. Above 60MA: Continued narrow fluctuations from August to September, and the market remains weak over the medium and long term. This indicator characterizes the strength of the market from a medium- and long-term perspective, reflecting the proportion of stocks in the market whose closing price is above the 60-week moving average (300-day moving average). Historically, when this indicator exceeds 80% or falls below 20%, it often means market sentiment is overheated or too cold, and a market reversal may occur. From August 5 to now, the indicator has basically fluctuated in a narrow range between 28% and 34%, and at the end of September it once again fell to around 28%, which means the market remains in a weak state over the medium and long term. Overbought/oversold: Long remained below and near the zero axis from August to September, indicating that the market remained weak in the short term. This indicator characterizes the strength of the market from a short-term perspective. Since early August, the indicator has long remained below and near the zero axis, with the market fluctuating downward and insufficient momentum for oversold rebounds. Risk warnings 1) There may be errors in data statistics: The report data are exported from third-party databases such as Wind, and there may be deviations caused by inconsistent standards among third-party databases; moreover, due to statistical timing issues, the data may fluctuate; because the latest daily fund issuance data have not yet been published, we have estimated them, and there may be errors compared with actual values. 2) The model is based on historical data and has limited ability to predict the future: Data statistics are lagging and may affect the analysis results. The model conducts statistics and analysis based on recent historical data of A-shares and has limited ability to predict the future; market sentiment may also be affected by policy and other unforeseeable events.