Morgan Stanley Investment Management has observed that external pressures on the market have recently reached elevated levels. Given that these factors are likely to become clearer this week, the firm anticipates that the market's reaction may enter a phase of diminished sensitivity. This is particularly true for high-performing assets, where the impact is expected to be minimal.

Domestically, the August CPI showed a modest recovery, signaling mild reflation, though this is not the core factor driving the market. Price increases remain concentrated in the upstream sector. Looking ahead, the firm focuses on four key directions: First, segments within AI hardware facing supply constraints, with optical communications, storage, and liquid cooling benefiting from long-term agreements and supply bottlenecks, offering the strongest certainty. Second, the resource price increase chain, encompassing copper, coal, shipping, and certain chemical products, benefiting from reflation and supply restrictions. Third, the overseas expansion theme, supported by August exports surging 25.0% year-on-year and a trade surplus of $119.09 billion, with exchange rate pressures expected to ease year-on-year. Finally, high-dividend stocks are recommended as a portfolio stabilizer.

Morgan Stanley Investment Management noted that the Shanghai Composite Index repeatedly failed to break above the 3950-point level last week, maintaining a narrow trading range. On Friday, it gapped down, losing the 3900-point mark and briefly testing the 3850-point level during the session. In terms of style, large-cap stocks outperformed small and mid-cap issues, while growth and small-cap names faced pressure. The ChiNext Index rose slightly, buoyed by computing hardware. Most major sectors declined, with technology, advanced manufacturing, cyclicals, financials, healthcare, and consumer goods all experiencing pullbacks. Average daily turnover was approximately 1.88 trillion yuan, continuing to decline from the previous week, alongside a decrease in margin financing balances.

Overseas, the 10-year U.S. Treasury yield remained elevated, and Brent crude oil rose approximately 9% for the week. The recent pullback in A-shares was driven by renewed overseas inflation concerns and rising interest rates. Escalating tensions in the Middle East pushed oil prices higher, fueling U.S. inflation worries. August PPI data exceeded expectations, amplifying these concerns and keeping the 10-year Treasury yield at high levels. Domestically, the market entered an earnings vacuum period following the conclusion of the interim reporting season, lacking fresh catalysts. However, the underlying industry trends remain intact—optical communications and storage hardware are consistent with overseas performance, supported by their strong momentum.

Morgan Stanley Investment Management stated that the U.S. August CPI only exceeded expectations in the core month-on-month figure, primarily due to a few high-volatility components such as education and communication services, which appear to be one-off in nature. Nevertheless, rate hike expectations have rapidly intensified, with the implied probability for September rising above 87% and the market pricing in more than two rate hikes for the year. The Fed's policy meeting is scheduled for this Wednesday. If the central bank holds rates steady but adopts a hawkish tone, it will continue to create significant market disturbances in the future.