According to Zhitong Finance APP, China Securities Co., Ltd. (ASX: 601066) has released a research report stating the following.

Turnover rate: A-share turnover declined further in September. Before the Federal Reserve's interest rate meeting, market观望 sentiment was strong, and trading was sluggish ahead of the Mid-Autumn Festival and National Day holidays. The market ultimately saw three consecutive months of volume contraction, with trading volume approaching the lowest level since the current bull market began.

New issuance of equity-biased funds: New issuance of equity-biased funds improved slightly in September, edging up modestly but remaining at a relatively low level overall, as individual investor confidence remains insufficient.

Margin buying ratio: The indicator continued to decline in the first half of September, briefly rebounded in the second half, but fell again at month-end to around 8.4%. This shows that while leveraged fund sentiment saw a phased improvement, it remains subdued, and the risk of further decline warrants continued vigilance.

Implied risk premium: The indicator rose slightly in September, climbing from 2.81% at the beginning of the month to 3.05% at month-end, indicating that the cost-effectiveness of equity assets is improving.

Stock-bond yield spread: The indicator fell rapidly into negative territory in early September and remained below the zero axis thereafter, meaning the current profit-making effect is poor.

Above 60MA: From August 5 to the present, the indicator has largely fluctuated in a narrow range between 28% and 34%, falling again to around 28% at the end of September, suggesting the market remains in a weak state over the medium to long term.

Overbought/oversold: Since early August, the indicator has remained below the zero axis for an extended period, with the market oscillating downward and insufficient momentum for oversold rebounds.

Main viewpoints of China Securities Co., Ltd.:

At the end of March 2022, we launched the China Securities Co. Strategy Investor Sentiment Index, synthesized from multiple publicly traded market indicators. This index has well reflected market sentiment levels during important intervals in A-share history, with extreme highs and lows capable of leading market reversals, giving it certain predictive capability. It should be noted that this index is used to characterize market investor sentiment and is a coincident indicator; its predictive nature is primarily reflected through the predictive power of investor sentiment on the market. Since its launch, the investor sentiment index has attracted significant attention from investors, so starting from the end of April 2022, we have tracked and presented current market sentiment in monthly reports, along with historical trends and latest developments of core sub-indicators. In August 2024, we again released a special report reviewing the practical results of market timing over the nearly two and a half years since the sentiment index was published, and summarizing the performance of different market styles under different sentiment states.

A-share market before the holiday from a sentiment perspective

In the August monthly report on market sentiment tracking, we noted that "current market sentiment is at a moderately elevated level but is clearly constrained by liquidity conditions, making a broadrally difficult to form; the market is expected to remain in a mid-range oscillating pattern." The market oscillated downward in September, with the Wind All A Index falling 5.31%, validating our earlier view. In particular, the Wind All A Index fell 4.92% over the three trading days of September 23-28, contributing most of September's decline. From the perspective of the sentiment index's timing, what characteristics did the A-share market exhibit before the National Day holiday?

The market remained weak throughout September. The sentiment index continued to decline in the first half of the month, reaching a phased low of around 35 on September 15 before beginning a recovery. However, after rising to around 52 on September 22, the sentiment index fell again, failing to break above 55 and quickly dropping below 50, eventually falling below 38 by month-end. In the short term, the significant volume contraction and sentiment decline before the National Day holiday are consistent with seasonal effects, and sentiment is expected to rebound after the holiday, initiating a recovery (for seasonal effect statistics, see "A-Share Practical Application of the Investor Sentiment Index: Market Timing and Style Assessment"). In the long term, compared with August when the sentiment index failed to break above 60, in September the sentiment index failed to even break above 55 before beginning to decline, causing the sentiment index peak to move further downward. Going forward, vigilance is needed regarding the situation of incremental funds engaging in stock-game competition; one can observe whether the sentiment index can break above 55 and rise to the 60-65 range after the holiday.

We analyze each sub-indicator. Among the seven major indicators, turnover rate, equity-biased fund issuance, margin buying ratio, implied risk premium, and stock-bond yield spread data undergo 5-day average smoothing; the Above 60MA and overbought/oversold indicators were originally weekly data but are now uniformly converted to daily frequency for greater sensitivity, with the 60-week moving average effectively changed to a 300-day moving average. This convention is used by default throughout the following text.

Turnover rate: Turnover continued to decline, with the market seeing three consecutive months of volume contraction from July to September. A-share turnover declined further in September. Before the Federal Reserve's interest rate meeting, market观望 sentiment was strong, and trading was sluggish ahead of the Mid-Autumn Festival and National Day holidays. The market ultimately saw three consecutive months of volume contraction, with trading volume approaching the lowest level since the current bull market began.

New issuance of equity-biased funds: Slight rebound in September, but overall still at a low level. New issuance of equity-biased funds improved slightly in September, edging up modestly but remaining at a relatively low level overall, as individual investor confidence remains insufficient.

Margin buying ratio: Narrow fluctuation in September, declining again at month-end. The margin buying ratio indicator continued to decline in the first half of September, briefly rebounded in the second half, but fell again at month-end to around 8.4%. This shows that while leveraged fund sentiment saw a phased improvement, it remains subdued, and the risk of further decline warrants continued vigilance.

Implied risk premium: Slight rise in September, improving the cost-effectiveness of equity assets. The indicator rose slightly in September, climbing from 2.81% at the beginning of the month to 3.05% at month-end, indicating that the cost-effectiveness of equity assets is improving.

Stock-bond yield spread: Mostly below the zero axis in September, with poor market profit-making effect. The indicator fell rapidly into negative territory in early September and remained below the zero axis thereafter, meaning the current profit-making effect is poor.

Above 60MA: Continued narrow oscillation in August-September, with the market remaining weak over the medium to long term. This indicator characterizes market strength from a medium-to-long-term perspective, reflecting the proportion of stocks whose closing prices are above the 60-week moving average (300-day moving average). Historically, when this indicator exceeds 80% or falls below 20%, it often signals overheating or excessive cooling of market sentiment, with the possibility of a market reversal. From August 5 to the present, the indicator has largely fluctuated in a narrow range between 28% and 34%, falling again to around 28% at the end of September, suggesting the market remains in a weak state over the medium to long term.

Overbought/oversold: Remained below the zero axis for an extended period in August-September, indicating continued short-term market weakness. This indicator characterizes market strength from a short-term perspective. Since early August, the indicator has remained below the zero axis for an extended period, with the market oscillating downward and insufficient momentum for oversold rebounds.

Risk warnings

1) Data statistics may contain errors: Report data is exported from third-party databases such as Wind, and there may be discrepancies due to inconsistent standards across third-party databases; due to timing issues in statistics, data may be subject to volatility; since the latest daily fund issuance data has not yet been published, we have made estimates that may differ from actual values.

2) The model is based on historical data and has limited predictive capability for the future: Data statistics have lag, which may affect analysis results. The model is based on statistical analysis of recent historical A-share data and has limited predictive capability for the future; market sentiment may also be affected by policies and other unforeseeable events.