A-Share "Bull Run" at Critical Juncture

Since the密集 release of a package of incremental favorable policies in late September, the A-share market has continued to rise, risk appetite has increased, and market trading has significantly warmed up. However, the随之而来的 wide fluctuations and sector rotation have left many investors who rushed into the market somewhat confused.

At this critical moment, several fund managers from public and private institutions have collectively spoken out, combining the structural interpretation of this round of A-share market trends and judgments on various factors such as policy and fundamentals, providing many ideas for potential market main lines in the future. They generally believe that as market activity increases, the main direction will attract a large amount of capital, continue to generate profit effects, and the market will enter a very healthy and benign slow bull state.

The repair market has come to an end.

Since late September this year, the A-share market has entered the first phase of repair market, showing a relatively fierce performance. Xu Zhibiao, director of the equity investment department of Guotai Fund, believes that its essence is the extreme compression of valuations and the shift in policy bringing an increase in risk appetite. Market volatility has risen significantly, with trend funds dominating market sentiment, making the market prone to large one-sided fluctuations in stages. At present, it is likely that the first phase of the repair market has ended, and the subsequent market trend is expected to begin to differentiate.

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In the short term, Kou Zhiwei, a partner at Chongyang Investment, believes that the market neither has the foundation to quickly go bullish nor will it turn around and fall back. The greatest impact of a series of macro policies on the market is to stabilize macro expectations. With the decline of market volatility, the market's focus will return to macroeconomic, industrial, and corporate fundamentals.

In Dong Chengfei's view, a partner at Ruijun Asset, the significant increase in A-shares is a huge "advertising effect," and equity assets have once again entered the public's field of vision. At the same time, he also said that the rapid and sharp rise indicates that the new funds have a high expectation for short-term investment returns, which is not conducive to the sustainability of the market.

Ruijun Asset believes that the main problem the market has faced in the past is the negative feedback expected during the continuous adjustment of asset prices (mainly the housing market and the stock market). The recent strong rebound in the stock market is the first step in breaking this negative feedback. If policies continue to be introduced in the future, breaking through in areas such as real estate and local debt, it can completely break the negative feedback chain.

As the fluctuation range of A-shares gradually decreases, Jin Zicai, deputy general manager of Caitong Fund and director of equity investment, said that in a market with medium to high activity, there will definitely be a structural main line with broad investment opportunities, and it will continue to generate profit effects. He believes that the overall market will enter a very healthy and benign slow bull state.

Market main lines build consensus.

In the recent 2024 fund quarterly report, the well-known fund manager Shi Cheng said that the current core issue lies in the mismatch between the fully supplied manufacturing capacity and the differentiated global demand. In this process, companies with product innovation and channel control will share the biggest dividends. If some industries are in an upward trend in the future, he believes that it will be the time for cyclical varieties to perform.As market risk appetite improves, Xu Zhibao is more optimistic about the opportunities in the growth sector, focusing on industries related to new energy, pharmaceuticals, and technology. Specifically, he believes that the stocks that are likely to perform well later are those with a 10%-20% growth potential in this year's performance, an upward trend in third-quarter performance, and a valuation of over ten times. These types of stocks are expected to welcome a "double play" and should pay more attention to leading stocks in the directions of lithium batteries, energy storage, intelligent driving, automotive parts, and pharmaceuticals. Securities, computers, semiconductors, and white liquor, which were popular sectors before, may have a certain premium. For some stocks that have doubled in the short term or set a historical high, potential risks should be paid more attention to.

For the technology mainline market represented by artificial intelligence (AI) in recent years, Jin Zicai estimates that technology is the top priority of the mainline of the A-share market and can be deployed around the AI direction. This round of the technology cycle mainly focuses on directions represented by hard technology. Although the AI industry cycle is still in the initial stage, the radiation range will definitely be very large. In terms of selecting stocks, Jin Zicai reminds that the current market is still focused on some companies in the technology sector, and the entire sector has not shown excessive prosperity. First, the essence of this round of industry is a productivity revolution centered on AI large models, which is still in the first stage, and the basic face is good, and most of the varieties are related to data centers and cloud, semiconductor businesses; second, from the customer structure, the target should be divided, and customers must fully benefit from data center-side AI investment; third, overseas investment should be mainly focused on companies on the computing side, and domestic investment can be more tolerant of performance and valuation.

Seeking ways to deal with changes

Faced with the market situation of "long drought and timely rain", the ability and determination of professional investors are also a huge test.

From the perspective of "hindsight is 20/20", Jiang Cheng, the co-chief investment officer and general manager of the equity public investment department of Zhongtai Securities Asset Management, frankly stated that from the perspective of market sentiment driving stock price increases, short-term market fluctuations are rational, but it is difficult to predict in advance.

"Everyone is guessing the market, thinking they can be one step ahead of the market, but in fact, everyone adds up to the market itself. This kind of trading thinking is similar to wanting to fly to the sky by stepping on the left foot with the right foot, wrestling with oneself, because you don't know who the opponent is, and the opponent may be yourself." In Jiang Cheng's view, this is the fundamental reason why it is easier to summarize the rotation of individual stocks and industries from the rearview mirror perspective, but it is particularly difficult to make forward-looking and precise predictions.

So-called "losing money in a bull market", Jiang Cheng said, often refers to investors entering the market at the end of a phase bull market, seemingly entering the market when the trend is the most clear, but the actual purchase cost is high. Therefore, he summarized that the most reliable way to make money is not to gamble on timing, but to "ambush" in the market for a long time. Don't try to "pulse" the market and predict the short-term performance of the market, which may be a good way to deal with it for most people. Investors should focus on accumulating excess returns. Overall, Jiang Cheng still has a relatively positive attitude towards the future market, and he maintains a relatively optimistic judgment on the long-term internal rate of return of the market.

Wang Xiaoming, the founding partner and chief investment officer of Ruijun Assets, said that there is no major adjustment to the current holdings of his institution. The holdings selected in the early stage are mainly defensive varieties, focusing on low valuation and growth. In his view, holding undervalued or reasonably valued high-quality companies is a feasible investment method whether in an adjustment market or a bull market.

Faced with market uncertainty, Fang Lei, deputy general manager and chief strategy investment officer of Xingshi Investment, suggested that current investments may need to stand from a slightly longer-term perspective, more carefully identify investment opportunities, and select those investment targets that have a larger development space in the medium and long term and have a solid basic face. Currently, the valuation of these assets is in a relatively reasonable position, and they are more likely to usher in the opportunity of a double play with the stabilization of the economy.