Chinese equities experienced a broad-based decline today, with the Shanghai Composite Index falling 0.97% to 3,941.39 points, the Shenzhen Component Index dropping 1.88%, the ChiNext Index losing 2.39%, and the STAR 50 Index down 1.37%. Total turnover on the Shanghai and Shenzhen markets reached approximately 1.79 trillion yuan, reflecting a contraction of about 242.22 billion yuan compared with the previous session.

At the sector level, only green power and military stocks closed in positive territory, while all others declined, with coal, film and television, and chemical sectors posting the steepest losses. Risk appetite was notably subdued, evidenced by over 3,900 stocks falling across the market. In terms of style, small-cap stocks exhibited notable divergence—the CSI 1000 index underperformed while the CSI 2000 and micro-cap indices limited their declines—with growth lagging value and the ChiNext/STAR boards trailing the main board. Overall, market sentiment remained fragile.

The bond market reverted to narrow-range fluctuation this week. Following a smooth passage through the late-August quarter-end period, the 10-year government bond yield drifted modestly lower from Friday's 1.693%, oscillating within a tight band of 1.68%–1.70% with low volatility. With no material shift in fundamentals or liquidity conditions, the market remains in a tug-of-war state—"capped above, supported below." We maintain a neutral-win-rate view, favoring allocation thinking over trading tactics, and advise continued attention to duration-appropriate, resilient instruments such as the National Bond ETF (511010) and the 10-Year Treasury ETF (511260).

From a fundamental standpoint, both economic data and volume support the bond market. The official manufacturing PMI for August came in at 49.8, rebounding 0.6 percentage points from July's 49.2 but still below the 50 contraction/expansion threshold, indicating fragile economic recovery momentum. Meanwhile, the Caixin China manufacturing PMI held at 51.5, remaining in expansion territory, underscoring an ongoing K-shaped divergence: traditional industries continue to face subpar financing and operational demand, while emerging sectors exhibit relatively stronger momentum. With financial demand from conventional industries yet to effectively fill the gap, the information content of a single month's PMI is limited, but an inherently weak fundamental backdrop underpins the low-rate environment. We believe the medium-to-long-term rate anchor is unlikely to rise meaningfully.

On liquidity and policy, the cross-quarter period saw broadly stable funding conditions, with the central bank's supportive stance evident through a "short-term injections, long-term withdrawals" mix—stabilizing interbank liquidity while gently correcting the excessive easing expectations previously embedded in long-end yields. In summary, we maintain that the short-term win-rate environment is favorable while the medium-term trend remains one of narrow oscillation. Weak economic repair and steady liquidity confine the scope for further rate cuts, yet the absence of definitive rate-cut catalysts caps downward elasticity. Investors may consider staying put, prioritizing duration-appropriate, resilient holdings such as the National Bond ETF (511010) and the 10-Year Treasury ETF (511260).

Today's broad-based A-share decline likely stems primarily from overseas factors. Federal Reserve Governor Kevin Warsh's hawkish stance at the Jackson Hole symposium, coupled with US-Iran tensions lifting oil prices, has heightened market expectations of Fed tightening (rate hikes), pressuring global risk assets. We believe the current panic carries an element of emotional overshoot, and investors may consider phased accumulation of broad-based core assets such as the CSI A500 ETF (159338) as a means to absorb core-asset volatility and mitigate single-stock risk amid allocation strategies.

The tightening narrative first manifested at the verbal level. At Jackson Hole, Warsh explicitly stated that current interest rate levels are "not restrictive," citing two arguments in his defense: first, credit spreads on corporate bonds and leveraged loans are near historical lows; second, credit markets show almost no signs of policy constraint—in his view, describing the current financial conditions as "restrictive" is a stretch. The market widely interpreted these remarks as leaving room for future rate hikes, and combined with oil-price gains from the US-Iran tension, the implied probability of a Fed rate hike rose from roughly 50% to 65%. Following the hawkish shift, the 10-year US Treasury yield reached approximately 4.8%, weighing simultaneously on global risk-free rates and risk appetite.

In our assessment, two deep-seated factors drive market expectations that Warsh may opt for hikes. First, he treats the 2% inflation target as "firmly fixed," with inflation having run above target for roughly 65 consecutive months, necessitating a prompt short-rate response. At his debut FOMC meeting on June 17, he declared "zero tolerance" for high inflation; his August 28 Jackson Hole speech further articulated a testable reaction function—"we must be convinced that underlying inflation is moving clearly and sufficiently rapidly toward our target; otherwise, we have work to do." Second, he seeks to abolish forward guidance, allowing short-end rates to be determined once again by the "data + central bank reaction function" rather than by market speculation over the Fed's rhetoric, thereby reinforcing a Fed-led policy framework.

In essence, market participants interpret Warsh's policy orientation as a two-layer structure: in the near term, rate hikes to deliver on the "zero tolerance" commitment and rebuild credibility; over the medium-to-long term, abolishing forward guidance, quantitative tightening, and framework reforms to reclaim the monetary authority's dominance over interest-rate pricing.

Putting it together, we believe the current A-share pullback is primarily driven by overseas sentiment, and we maintain a medium-term view of "emotional broad-based decline; phased accumulation of core assets." Investors may consider deploying capital in tranches into core assets such as the CSI A500 ETF (159338).

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