0914 Morning Brief | Rate Hike Probability Nears 90%+; Oil Prices Retreat—Can A-Share Markets Seize a Recovery Window?

IC: Long positions increased by 1,544 contracts; short positions increased by 1,488 contracts. IH: Long positions decreased by 507 contracts; short positions decreased by 257 contracts. IM: Long positions increased by 4,593 contracts; short positions increased by 3,096 contracts. CITIC Futures’ net short position stands at approximately 25,743 contracts—down roughly 2,436 contracts from the previous day. Top 20 Institutions: Net short position across the four major index futures totals ~20,877 contracts (IF: 5,862 + IC: 1,680 + IH: 5,635 + IM: 7,700). Net long positions increased by ~7,877 contracts on the day; long-position additions outpaced short-position additions across all four products. Another perspective: CITIC Futures added 4,593 long IM contracts in a single day—a rare magnitude of commitment. This occurred amid the Shanghai Composite plunging intraday below 3,900 points to a low of 3,852, with over 4,800 A-share stocks falling. Institutional players chose to add longs—not shorts—indicating broad recognition of a ‘policy bottom.’ Clear evidence of state-backed stabilization via broad-based ETFs is also visible (e.g., Huaxia SSE STAR 50 ETF turnover surged to ¥5.559 billion; E Fund ChiNext ETF turnover hit ¥4.037 billion). Yet net short positions remain above 20,000 contracts—signaling persistent disagreement between bulls and bears. A definitive directional signal awaits the Fed’s September 16 interest-rate decision. VI. Another Perspective Oil prices, rate hikes, and optical modules—three seemingly distinct threads converging on one core tension. Last week’s dominant market tension was: surging oil prices → rising inflation expectations → soaring rate-hike probability → global asset pressure. But Friday brought a pivotal shift: oil prices plunged 2.37% in a single day, with Brent crude retreating to ~$104. What does this mean? First, oil is the root cause of current stress. Brent rose from ~$96 to $109 within a week, then fell back to ~$104. If it continues declining Monday, rate-hike expectations may ease marginally, granting global risk sentiment some breathing room. The Middle East consultation scheduled for September 14 is a critical inflection point. Second, China’s tech sector is increasingly pricing independently of external markets. This week, the communications sector rose +6.87%; the ‘Big Three’ optical module stocks saw net inflows of ¥18.3 billion—not a correlated move driven by overseas indices, but one propelled by domestic AI-computing demand logic. Hard data underpinning this includes: 2,185 EFLOPS disclosed at the China Computing Power Conference (up 177% YoY); Inspur Information’s ¥9-billion private placement; and Sungrow’s price hikes. Third, index-futures data reveals institutional accumulation at the bottom. CITIC’s single-day addition of 4,593 long IM contracts—and the top 20 institutions collectively adding longs across all four products—signals not mere optimism, but conviction that “the downside is exhausted.” Combined with heavy-volume, policy-driven ETF buying, the existence of a clear ‘policy bottom’ is now unmistakable. In one sentence: Oil is the variable; technology is the theme; the bottom is the consensus. The Fed’s rate decision may ultimately prove a ‘sell-the-news’ event—following capital flows beats following panic. VII. Today’s Watchlist 📌 Key Observations Today: Optical Module Chain: Zhongji Xunshuang, NewEase, TFCOMM—Can the ¥18.3 billion net inflow this week sustain? Their performance remains the near-term directional anchor. MLCC / Passive Components: Fenghua Advanced Tech (rose limit-up Friday), Sanhuan Group—supported by price hikes, import substitution, and AI-computing demand—the most robust fundamental logic. Photovoltaic & Energy Storage: Sungrow’s 5–15% price hike provides catalyst; monitor follow-on strength across inverters and energy storage supply chains. Nonferrous Metals: Can the sector stabilize after Friday’s 3.98% plunge? Stocks like Zijin Mining and Luoyang Molybdenum will determine the index’s near-term resistance level.

Recently, I’ve re-examined oil prices, U.S. Treasuries, AI, gold, copper, and the Hong Kong stock market together. My current framework is actually quite simple: Over the next year, the most important task isn’t predicting where any given index will land—but rather identifying which macroeconomic regime the market is trending toward. I. Where Are We Now? Several variables are currently entangled. High oil prices impede rapid disinflation; persistent inflation limits the Fed’s flexibility to pivot; and elevated interest rates suppress global asset valuations via higher Treasury yields. Meanwhile, AI remains deep in a high-capital-expenditure cycle—data centers, chips, and power grids are all expanding. Yet the larger the capex, the more sensitive it becomes to financing costs and ultimate returns. So the dominant risk chain is starkly clear: if oil prices rise further, inflation reignites, the Fed holds rates high, corporate funding costs climb, and high-capex sectors—including AI—begin cooling. The key question then becomes whether this cooling stops at tech—or spills over into credit markets and the broader economy. That’s why I’m reluctant to issue blanket calls like “bullish on commodities” or “bullish on tech.” While rising oil prices initially benefit resource stocks, excessively high or prolonged levels ultimately harm the economy. Commodity bull markets themselves can even sow the seeds of the next recession. II. Four Potential Pathways Ahead Path One: The Ideal Soft Landing. Oil prices gradually retreat; inflation continues falling; the Fed halts hikes; U.S. 10-year Treasury yields peak; growth merely slows—not tipping into outright recession. Under this scenario, I’ll first watch oil prices, then core inflation, then whether the U.S. 10-year yield sustains a downward trend, and finally confirm whether employment, consumption, and PMIs show clear deterioration. If these signals unfold sequentially, growth assets should regain leadership—semiconductor equipment, internet tech, copper, and grid infrastructure would all fare well, while gold might temporarily underperform. Path Two: Prolonged High Rates (Mild Stagflation). Oil stays persistently elevated; inflation proves sticky; yet the economy remains resilient enough to deny the Fed reason to ease meaningfully. This environment is especially punishing for high-valuation assets: corporate profits may still grow, but valuations get relentlessly compressed by high rates. Here, I’ll focus on whether oil remains structurally high, whether inflation spreads into wages and services, and whether the U.S. 10-year yield sustains its elevated level. Under this path, I’d favor gold, resources, grid infrastructure, upstream energy, and cash-flow-stable assets—while maintaining cautious exposure to tech. Path Three: AI Bubble Deflation—Without Escalating Into Systemic Financial Crisis. The earliest warning sign won’t be stock prices—but cloud providers’ capital expenditure guidance. If hyperscalers begin cutting data-center investments, semiconductor orders, memory demand, GPU procurement, and equipment bookings will soon follow—confirming an actual cyclical downturn. Next, credit spreads become decisive: if tech stocks crash but corporate bonds and bank lending remain stable, it resembles the 2000 tech bubble unwind; if credit markets deteriorate too, the situation escalates significantly. During pure AI-cycle contraction, gold typically benefits; copper and semiconductor equipment bear initial pressure; grid infrastructure tends to hold up relatively well. China’s domestic semiconductor equipment sector retains an independent logic—import substitution—so industry-wide weakness doesn’t necessarily translate into parallel declines for leading local players.

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