CSC Financial says pre-holiday A-share weakness reflected a convergence of
short-term factors; once digested, the market is likely to see a post-holiday
recovery. Near term, focus is on earnings as October marks an A-share earnings
verification period. Policy risk is skewed supportive as a new round of measures
may be forthcoming. On liquidity, market-implied probability of an October rate
hike has fallen, but 30-year US Treasury yields remain elevated. CSC expects a
post-holiday repair rally followed by an overall choppy A-share market and
recommends balanced allocations combining offense and defense.
