How should we view the A-share market performance on August 6, 2025?

Banks currently lack high-quality projects for lending, as their traditional major borrowers—real estate developers and local government financing vehicles (LGFVs)—are no longer viable. Regulatory guidance now urges banks to vigorously support industrial upgrading and encourages increased lending to manufacturing enterprises. Potential measures may include fiscal interest subsidies combined with low-cost funding provided by the central bank, making loans more attractive to enterprises and thereby stimulating loan demand. The dominant theme in August, as previously noted, will largely follow U.S. equity market trends—specifically AI computing hardware and AI applications. The guidance explicitly highlights long-term loan support for digital infrastructure such as 5G networks, industrial internet, and computing centers, as well as long-term financing for critical technology breakthroughs—including integrated circuits, industrial machine tools, servers, and foundational software. More notably, an OpenAI engineer posted late at night suggesting this week “will be very exciting,” hinting that GPT-5 may launch imminently. Market participants are intensely focused on this development; if GPT-5 is indeed released, it would serve as a powerful catalyst for the AI application sector. In terms of AI computing hardware, CPO and PCB stocks are consolidating near highs, while segments such as liquid cooling and power supplies have drawn fresh capital inflows and appear relatively active. Compared to other computing hardware subsectors, liquid-cooling-related stocks remain at relatively lower valuations and price levels—making them attractive candidates for catch-up gains amid investors’ ongoing search for undervalued opportunities. Additionally, the General Office of the State Council issued a notice stating that tuition and childcare fees for senior kindergarten classes in public kindergartens will be gradually waived; private kindergartens may offset part of these costs. This policy may eventually extend to junior and middle kindergarten classes. Fiscal support will cover not only tuition but also teachers’ salaries. The funds required for this fee waiver—and earlier birth subsidy programs (approximately RMB 100 billion)—could be offset by reinstating certain temporarily suspended tax levies, such as VAT on treasury bond and financial instrument interest income, or potentially future taxes like those on overseas stock trading profits or institutional fund dividend income. A word of caution for job seekers: avoid small fund management firms primarily focused on bond investments, as they face heightened policy-related risks. The industries implicated by these two policies are highly likely to attract rapid buying from algorithmic (quantitative) trading strategies tomorrow. However, today’s market turnover already reached a record high of RMB 1.6 trillion. Even abundant liquidity cannot sustain simultaneous sharp rallies across all positively impacted sectors—some profit-taking after upward moves is inevitable. Therefore, investors are advised against impulsive chasing of highs. Those holding related stocks should assess both individual stock performance and overall sector strength, and act flexibly. Over the past few years, the global chemical industry has undergone profound adjustment and faced severe hardship. International giants such as Dow and BASF saw their share prices slashed—either “ankle-cut” (down ~80%) or “waist-cut” (down ~50%). Similarly, representative A-share chemical indices peaked in 2021 and subsequently plunged nearly “ankle-cut” at their worst; they currently hover near “waist-cut” levels. This bleak picture stems from two core factors: first, widespread overcapacity resulting from prior industry-wide expansion, leading to severe supply-demand imbalance; second, sharp increases in key energy and raw material prices—including crude oil, coal, and natural gas—which significantly raised production costs and sharply compressed corporate profit margins. Yet deep corrections often sow the seeds of reversal. Currently, the adverse factors weighing on the industry are easing at the margin. Prolonged weakness has substantially dampened expansion ambitions among industry leaders, leading to more cautious capital expenditures. Meanwhile, efforts to phase out outdated capacity have intensified—helping alleviate oversupply pressures.

Dow Chemical's Q3 2025 Earnings Report (October 27, 2025)

The stock had languished for a full year, dropping two tiers; yet it surged 13% following its Q3 2025 earnings release—does this reflect any fundamental change? ・ First, revenue remained weak: the Q2 guidance for this quarter stood at $10.2 billion. ・ Second, GAAP EPS turned positive only due to two non-recurring items; operating profit failed to cover interest expenses. ・ On the positive side, the reported loss was narrower than expected, indicating that cost-cutting and capital expenditure reductions have begun delivering results. Has the chemical industry reached a cyclical trough? ・ On the supply side, Dow believes capacity control is underway across regions—including China: “We've got speculation on the closures of about 13 million metric tons from a combination of additional capacity in Asia, Japan and Korea to the tune of about 5 million tons and China from the [anti-evolution] policies to the tune of about 7 million tons.” ・ On the demand side, Dow views overall demand as still weak—with no meaningful improvement versus last quarter. It hopes monetary easing (interest rate cuts) will stimulate construction starts.