This year the A-share market has shown a volatile pattern, especially after the technology sector surged in the first half and then saw clear swings in the third quarter, while market style also changed.

As the fourth quarter begins, where will the market go? Will the technology rally continue? Will domestic-demand sectors rebound or reverse? A reporter interviewed four well-known private fund investors: Ding Ying, founder and chairman of Command Capital; Pan Huanhuan, founder and general manager of Hengli Fund; Kou Zhiwei, partner at Chongyang Investment; and Fang Lei, deputy general manager of Xingshi Investment.

They believe that in the fourth quarter the A-share market may remain in a positive, volatile state, with a relatively high probability of further warming, and technology companies with certain performance and growth prospects are still the main axis of future investment.

Ding Ying, founder and chairman of Command Capital; Pan Huanhuan, founder and general manager of Hengli Fund; Kou Zhiwei, partner at Chongyang Investment; Fang Lei, deputy general manager of Xing Investment.

First three quarters: structural行情 stands out

China Fund News: What gains and losses did you have in operations in the first three quarters? How do you judge the market trend in the fourth quarter?

Ding Ying: As of the close on September 24, the Shanghai Composite Index had fallen 2% from the start of the year, with very clear structural divergence. The communications and electronics sectors rose nearly 40%, while commerce and retail and automobiles fell about 20%. In summary, the gain was in direction—treating AI computing power and domestic substitution as the main axis—and the loss was in rhythm: the third-quarter technology pullback was deeper and faster than expected, and we were not decisive enough in cutting positions. We expect the index to remain volatile and consolidate in the fourth quarter, with structural opportunities better than in the third quarter. Profit in the technology direction is moving up, exports are a hard support, and the rate hike has already landed. But note that August retail sales grew only 0.4%, real estate development investment is still negative, and in the fourth quarter we may not see a market strengthened by domestic demand.

Pan Huanhuan: In 2025 the market experienced a broad rally. At the start of the year we judged that this year would see volatile adjustment during a bull-market continuation period, and we continued to favor the continuation of prosperity in AI computing power-related industries; this judgment was verified by the market. But the extreme degree of K-shaped divergence in the first three quarters, and the高度 of prosperity in the AI industry chain, exceeded our expectations, and our response was insufficient. As we enter the fourth quarter, we believe external turbulence may continue, the domestic economy is expected to stabilize at the bottom, overall GDP growth will pick up again, fiscal efforts will accelerate, and countercyclical adjustment policies will gradually land. Overall, we are relatively optimistic about the A-share market.

Fang Lei: Since the start of the year, our portfolio has been relatively balanced, focusing not only on investment opportunities brought by industrial trends such as AI, but also on China's core assets with medium-term investment value. In the fourth quarter the market may remain in positive volatility, market style may continue to be balanced, and we can focus on investment opportunities supported by corporate earnings within industrial trends, as well as opportunities for valuation repair in China's core assets.

Third-quarter technology stock volatility: valuation "repaying debt," but the logic has not changed

China Fund News: How do you view the volatility in the technology sector in the third quarter, and can the strong trend continue?

Kou Zhiwei: From a fundamental perspective, in the third quarter investors focused on whether huge AI capital expenditures can achieve a reasonable ROI. In the first half, the improvement in frontier model Agent capabilities and the explosive demand in Coding scenarios led to a severe global shortage of computing power. But this supply-demand imbalance was caused by a mismatch in the pace of capital expenditure and demand. By the third quarter, frontier model iteration slowed, the penetration dividend of Coding scenarios peaked, and frontier model makers were forced into a price war. Objectively speaking, the development of any emerging industry cannot be linear, and the AI industry is the same; its development trend has not changed. But after May and June priced in exponential growth expectations and stock prices returned to linear ARR growth, the fragility of the market's trading structure became the main contradiction.

Pan Huanhuan: The third-quarter adjustment cannot be judged as the bursting of a technology bubble, but rather a rhythm adjustment. Its industrial prosperity has not declined; instead, the certainty of the long-term narrative is strengthening. We expect the technology sector will most likely fluctuate upward in the future, but the difficulty of investing may increase. Changes in technology routes and the evolution of the competitive landscape will lead to "reshuffling" within the sector. If research cannot keep up, even following the right trend may lead to boarding the wrong ship.

Ding Ying: The essence of the earlier decline was digesting valuations. AI capital expenditure is still rising, semiconductor net profit in the interim report grew several times, but stock prices rose too fast in the first half, and crowding in optical modules, copper-clad laminates, and PCBs once reached historical extremes. We expect technology will most likely strengthen in a differentiated way in the fourth quarter, rather than across the board. The screening method is simple: can prosperity in 2027 continue to improve compared with this year? If it can improve, a decline is an opportunity; if it cannot improve, a rebound is a window to reduce positions.

Fang Lei: Since the third quarter, volatility in the technology sector has been driven by both fundamentals and liquidity. On the one hand, AI has not yet produced new large-scale application scenarios, and market concerns about whether the AI industry chain has seen excessive financing have increased; on the other hand, in the first half funds chased the AI industry chain to an extreme, and global technology stock volatility in July triggered a stampede in funds. Looking ahead, the extreme行情 of technology standing out alone in the A-share market may be hard to repeat, and divergence within technology may intensify. At this stage, it is necessary to focus on leading companies that truly have innovation capabilities, core technologies, and high certainty of growth.

Excellent domestic-demand leaders have room for valuation repair

China Fund News: How do you view the recent recovery in the broad domestic-demand sectors (real estate, pharmaceuticals, consumption)? Is it a temporary rebound or a turning point?

Fang Lei: The three major domestic-demand sectors—real estate, pharmaceuticals, and consumption—all benefit from stock market style balancing and capital return, but the specific reasons for the recovery differ somewhat: real estate is more of a rebound driven by policy-driven valuation repair, pharmaceuticals is a rebound from fundamental delivery, and consumption is more of a rebound to the left of the fundamentals. From a medium-term perspective, the broad domestic-demand sectors have basically passed the most difficult stage, and excellent leading companies have room for valuation repair. In the process of policy-driven fundamental repair, top excellent companies are expected to benefit first, and it is currently necessary to increase attention to the broad domestic-demand sectors.

Pan Huanhuan: The recovery in the broad domestic-demand sectors, viewed by segment, has different reasons, but the commonality is that after the third-quarter technology adjustment, rebalancing of capital allocation drove an overall repair in the sectors. The difference is that the recovery in the real estate sector is a comprehensive reflection of valuation levels, a slower pace of industrial decline, and policy expectations. The supporting factors for the recovery in the pharmaceutical sector are more sufficient, including明显 improvement in fundamentals, valuations bottoming, institutional allocation at a low level, and a benign turn in industrial policy, among short-, medium-, and long-term logics; consumption is more about valuation repair. By comparison, the pharmaceutical sector has a relatively high probability of ushering in a turning point, while real estate and consumption need further tracking of industrial policy and fundamental changes.

Ding Ying: The rise in the real estate sector stems from the "stock stage" positioning and policy expectations; sales and investment are still negative, so it is a rebound. In the pharmaceutical sector, innovative drug BD, CXO orders, and the medical insurance direction are all improving, with performance support, so the quality of the turning point is higher. For consumption, a fundamental improvement requires an improvement in income expectations.

The technology sector remains the main axis of investment

China Fund News: What is your current position? What are the main allocation directions, and what is your planned operational approach for the fourth quarter?

Pan Huanhuan: We believe the probability of further market warming in the fourth quarter is relatively high, but we are currently in the second half of a bull market, and the amplitude of volatility will also increase, with hot mainlines switching frequently. In operations, on the one hand we will continue to maintain a high position, with balanced allocation across technology, pharmaceuticals, dividends, commodities, and other industries, focusing on sectors with undervalued value and event catalysts; on the other hand, we will maintain a relatively high proportion of convertible bonds. This year CSI convertible bonds have corrected significantly, valuations are reasonable, and there are more convertible bond opportunities in a volatile market.

Ding Ying: Currently securities positions exceed 90%, which is high-level operation. In terms of structure, Hong Kong stocks account for 53% and A-shares 40%. Hong Kong has a group of AI application and "hard tech" assets whose valuations are cheaper than A-share companies and which can also allow us to share in global capital reallocation opportunities. We are relatively focused on Hong Kong-listed targets in the AI for Science direction. Our approach is not to change the main axis, only to adjust the rhythm. Total position will not be reduced, and extra ammunition will be concentrated on directions that can multiply growth over the next five years. Cheapness is not a reason to buy; growth space is.

Fang Lei: At present the portfolio maintains a balanced allocation, taking into account two types of investment opportunities. First, technology growth sectors driven by industry, such as the AI industry chain and semiconductors; these industries are in a window of technological breakthroughs and demand explosion. But the overall valuation of the technology sector is not low at present, and it is necessary to focus on leading companies that truly have innovation capabilities and core technologies. Second, traditional core assets, which are generally undervalued at present; policy efforts will further solidify the foundation for profit improvement, and we can focus on traditional leaders with continuously improving supply-demand patterns and deep adjustments, as well as manufacturing companies with global competitiveness.

Kou Zhiwei: In the fourth quarter, we are not pessimistic about the market. Under an "asset shortage" pattern, the probability of systemic risk in the market is not high. But objectively speaking, cheap sectors are not prosperous, and prosperous sectors are not cheap, making stock selection increasingly difficult. We expect market style divergence to淡化, and light index, heavy stocks is a wise choice. We still pay close attention to the technology sector, but we prefer to dig for opportunities in some non-consensus sub-tracks, and look for companies whose own competitiveness continues to improve in industries hit by AI in the short term.

What determines A-shares is the industrial cycle and profits

China Fund News: How do you view the impact of external markets such as a Federal Reserve rate hike?

Ding Ying: On September 17 the Federal Reserve announced a 25 basis point rate hike, which the market had long priced in, and it is more like the landing of a negative factor. We do not believe this is the starting point of a new tightening cycle—U.S. inflation rising is largely driven by oil prices and geopolitical disturbances. High U.S. Treasury yields are a reflection of external constraints, not a reversal of direction. What determines A-shares is their own industrial cycle and profits. We will not reduce positions because of a rate hike, nor will we add leverage during a rate hike window.

Kou Zhiwei: The Federal Reserve rate hike is a result, a confirmation of the relationship between the economy and the supply and demand of funds. At present, AI has replaced real estate as the most important variable affecting the U.S. and even the global economy. We need to find more growth-oriented opportunities to offset the impact brought by AI.

Fang Lei: A Federal Reserve rate hike may suppress risk appetite and valuations of risk assets, thereby affecting the A-share market. But the subsequent impact of a Federal Reserve rate hike on A-shares may weaken, and the trading logic in the fourth quarter may gradually return to earnings-driven and industrial narratives.

Pan Huanhuan: The market had already expected the Federal Reserve rate hike in advance, and after the event landed uncertainty was eliminated, and suppressed risk appetite rose somewhat. Later, as long as market expectations such as the Federal Reserve entering a long rate hike cycle do not form, the impact will be relatively limited.

Watch third-quarter reports, the Central Economic Work Conference, the AI industry chain, oil prices, and inflation

China Fund News: What aspects need special attention in the fourth quarter?

Ding Ying: First, third-quarter reports. October is a watershed, and we can see which companies can obtain valuation premiums in 2027 compared with 2026. Second, oil prices and imported inflation, which will affect the profit margins of mid- and downstream manufacturing and will also indirectly determine whether the Federal Reserve will continue to raise rates. Third, whether AI applications can truly monetize. Fourth, liquidity—directions with high crowding need to guard against trading contraction.

Fang Lei: In the fourth quarter I will pay relatively more attention to several aspects: first, the degree to which third-quarter report results are delivered; second, the tone set by the December Central Economic Work Conference for next year's economic work and policy; third, whether there are new changes in the overseas AI industry chain; fourth, the pace of Federal Reserve rate hikes and the upside space for long-end U.S. Treasury yields.

Pan Huanhuan: Many aspects have a relatively large impact on financial markets and deserve special attention, including the policy direction of overseas central banks such as the Federal Reserve, changes in U.S. Treasury yields, geopolitical conflicts and commodity price trends, progress in AI capital expenditure and application-side industries, the degree to which domestic fiscal efforts are delivered, the new tone of the Central Economic Work Conference, and industrial verification of new real estate policies.