Today's A-share market was both a pleasant surprise and a shock.
The pleasant surprise was that the market almost opened with a full board of stocks hitting their upper limits, breaking a trillion yuan in trading within 20 minutes, and reaching a daily turnover of 3.48 trillion yuan, with an unprecedented level of market trading activity; the shock was that the main board opened high and then fell back, with the Shanghai Composite Index (SCI) rapidly adjusting and causing market concerns at one point.
Fortunately, the SCI still closed up significantly by 4.59%, and the ChiNext board even soared by 17.25%, showing a very strong deep V shape, with more than 2,000 stocks across the market rising by more than 10%, reflecting investors' confidence in future gains.
Today, ETFs were undoubtedly the most attractive in the market, with over 70 ETFs achieving a 20CM (20%) limit-up close, setting new records for the main board ETFs, dual-creation ETFs, and the STAR 50 ETF.
Sharp rises and falls are a characteristic of a bull market, and such an exaggerated surge in the market is within the expected and understandable range.
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It is said that this morning, investors were so busy with bank-to-broker transfers that the powerful bank-to-broker system experienced noticeable lag. However, because they saw a significant correction in the Hong Kong stock market and a limit-up opening in the A-share market, a large amount of funds that had just arrived were hesitant to act.
But this is also good, as these funds have arrived and will definitely not enter the market to watch the show; they provide important support for the subsequent market. In particular, there are quite a few of them that are active and long-term institutional funds that missed out and are looking for opportunities to get on board.
As the manic period of making money by running blindly comes to an end, the choice of how to get on board becomes increasingly important.
01
The crazy bull market is not over yet.We have mentioned before that in the past several distinct bull market cycles of the A-share market, the increase of the Shanghai Composite Index (SSE Composite Index) from the low point to the peak, apart from the roughly 50% increase during 2019-2021, all others had at least a twofold increase, with a time span of basically more than one year. A typical characteristic was the leveraged bull market from May 2014 to June 2015, during which the SSE Composite Index rose by as much as 1.8 times, with a time span of 12 months.
Looking at the current market, the SSE Composite Index has risen from 2689.7 points to today's closing at 3489.78 points, which is less than a 30% increase. The ChiNext Index has risen from around 1528 points to today's closing at 2550 points, which is about a 67% increase.
Compared to previous bull markets, these increases are not significant. It's just that the recent rapid rise has been alarming, that's all.
However, do not overlook the fact that the market has been oversold for too long and by too much. So far, the SSE Composite Index has not yet recovered to its 2021 high, and even with such a significant increase, the ChiNext Index is still more than 1000 points, or over 40%, away from its 2021 high.
There are many industry leaders in the A-share market that have fallen by 80% from their 2021 highs, for example, from 10 yuan to 2 yuan. Even if the stock price has doubled now, it has only returned to the position of 4 yuan.
If the logic of this industry has not been destroyed and their normal market and demand are still there, then in the new cycle of a super bull market, 4 yuan will definitely not be its limit. Even if it cannot return to 10 yuan, it is quite possible to rise from the low point to 6-8 yuan, which is a 2-3 times increase.
Of course, this increase cannot be achieved overnight. It will require time to gradually realize the space, and the premise is that these series of major policies are implemented, and the economic situation can meet expectations or at least not lag behind.
Now, it has been confirmed that the policy strength to boost the stock market is unprecedented. Although the fundamentals still require more time and data to wait for verification, it does not prevent the stock market from taking the lead in the bull market.
This logic can also be supported from the valuation level.
Now, the PE/PB valuation of many industry leaders compared to the median of previous years still has a certain gap.For instance, in the food and beverage sector, such as spirits and beer, as well as condiments, the stock price of Moutai has recently surged by nearly 40%, but its latest price-to-earnings (PE) ratio stands at 26.9 times, merely returning to a normal range. Haidilao's stock price exceeded 210 yuan at its peak in 2021, and even after a significant increase of nearly 50%, it is now only at 51.8 yuan, merely returning to the knee level (this does not represent a recommendation, but serves as a vertical comparison).
Similarly, in the discretionary consumption sector, various "五官科" (five senses) companies like "牙茅" (Tooth Moutai) Tongce Medical, "眼茅" (Eye Moutai) Aier Eye Hospital, and "医美茅" (Medical Beauty Moutai) Aimeike, have seen only a small proportion of recovery compared to their stock price highs in previous years.
The core leaders in major industries such as photovoltaics, energy, real estate, and internet technology are in a similar situation. These industries have a strong demand, and although they have been suppressed by economic factors in recent years leading to a decline in performance, once the consumer economy is stimulated, the previously suppressed demand will also be released. The opportunity for performance recovery is certain; it's just a matter of time.
Today's market trend suggests a shift from a crazy bull market to a structured slow bull market. However, after this round of significant increases, A-shares and Hong Kong stocks are still likely to continue their bull run, but it will no longer be like the rocket launch of the past week. Instead, it will be a structured market that drives an overall slow bull market, and then the volatility will become greater.
02
A More Suitable Way to Board the Market
In just a few days, the ChiNext board has accumulated a 67% increase, and thousands of individual stocks have also seen an increase of over 60%, which is indeed too exaggerated and unhealthy.
It can be anticipated that in the market transition from a crazy bull to a slow bull, there will inevitably be a divergence, and the difficulty of selecting individual stocks will also increase. If one misstep occurs in short-term operations, it is very likely to incur losses even in a bull market.
At this time, choosing a rational investment strategy begins to become important.In recent days, various investment groups and social media circles have been filled with posts from stock investors who are trying every means to secure bank loans or borrow money, even resorting to online lending, in order to invest all their funds in the stock market. Some investors have also opened up financing through brokerage firms, going all-in with leveraged investments.
After a surge in many individual stocks, such reckless gambling behavior with leverage is the most dangerous.
In fact, there is no need to use leverage on such a large scale; there are plenty of opportunities in the slow bull market to come.
The bull market in A-shares can be divided into several stages, and we are currently only in the second stage where capital begins to enter the market. The third stage, which is "the market seeking backup themes, such as eliminating low-priced stocks, net asset value stocks, or gradually shifting from high to low and flowing back to blue-chip stocks and high-quality industry leaders," has not yet arrived.
Especially for blue-chip stocks and high-quality industry leaders, the relative increase in their prices is not significant at present, and the certainty of subsequent catch-up gains is very high.
Especially in areas such as finance, energy, infrastructure, consumer goods, and medical healthcare, they will gradually become the main recipients of funds seeking shelter after the market's most frantic speculation begins to transition into a rational investment phase.
For these stocks, what is another very important supporting factor? —— The large-scale herding of funds has not yet begun to "make things happen."
During the bull market periods of A-shares in the past, herding funds have been the biggest driving force behind the creation of stock market gods, such as the aforementioned industry leaders, where a large amount of public and private funds have created super large white horses with tens of times the value over a few years.
The herding of funds in the US stock market is even more terrifying, creating super myths like Tesla and Nvidia, whose market value has increased by hundreds of times in a few years.
However, the past three years have been a process of large-scale disintegration of herding funds, and even banks have once suffered from herding disintegration and plummeted. But the pattern of fund herding, which is prevalent worldwide, will inevitably continue to appear.The current market is merely at the initial stage of a bull market where capital is fully invested, and the true consolidation of high-quality assets has yet to begin. This will only gradually emerge after the recent surge in high-elasticity growth stocks and concept stocks.
Of course, due to the varying impacts of macroeconomic factors on different industries, it is undoubtedly time-consuming and labor-intensive to specifically explore potential targets at the individual stock level, and the accuracy is not high.
Therefore, in my view, for conservative investors, one of the efficient investment tools to seize this round of market opportunities is undoubtedly direct investment in index funds.
Index funds are characterized by low costs, small errors, high efficiency, risk diversification, and ease of management, making them suitable not only for inexperienced, new market entrants but also as a configuration tool for mature investors.
For example, those who are optimistic about the core assets of A-shares can allocate through the CSI 300 ETF index (561930), which has the lowest fee rate and quarterly assessment dividends. The CSI 300 Enhanced ETF (561990), which combines the advantages of ETF and index enhancement, is also a powerful tool for one-click allocation of A-share core assets.
Aggressive investors who are optimistic about the 20CM Sci-Tech Innovation Board and Growth Enterprise Board can research the Dual Innovation ETF (588300), ChiNext Large Cap ETF (159991), and STAR 50 ETF Enhanced (588450), using ETFs to reduce investment thresholds, diversify risks, and capture overall opportunities in sci-tech innovation and entrepreneurship.
With a bull market on the horizon, those tracking high-growth technology sectors, such as the Semiconductor Equipment ETF (561980), Battery ETF (561910), and Cloud Computing ETF (159890), are full of elasticity.
For those without a securities account or who cannot purchase in-venue funds due to trading halts, they can consider purchasing ETF-linked funds outside the venue. As long as there are no purchase restrictions, investors can buy linked funds.
03Conclusion
To invigorate the economy, one must first invigorate expectations, and one of the best ways to do this is by invigorating the stock market. A significant rise in the stock market not only indicates that investors have ample confidence in future expectations, but it also creates a substantial wealth effect, genuinely increasing the wealth of stock-owning households, stimulating investment and consumption, and promoting a truly vibrant economic cycle. Therefore, the state's policy stance on invigorating the stock market has been very clear and resolute.
Although in the short term, the A-share and Hong Kong stock markets may experience technical adjustments due to excessive surges, there is still a large potential for long-term growth. If investors are concerned about not being able to grasp individual stock selections well, it is suggested that they might consider focusing on index funds such as the SSE 300 ETF (561930) or the STAR Market ETF (588300) to improve efficiency and diversify risks.
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