The A-share market suddenly surged again on Friday, catching many investors off guard.

From the morning's initial decline to the comprehensive surge in the afternoon, with the growth rate of the ChiNext even reaching as high as 12% at one point, over 5,000 stocks rose across the board, and the total turnover soared to 2.13 trillion yuan, the situation is so strong that it truly feels like going back to the days before the holiday.

According to Wind data, on October 18th, the ChiNext and the CSI 300 index both experienced multiple intraday surges of over 100 times, with some varieties eventually rising by dozens of times. Among them, the SSE Science and Technology Innovation Board 50 Index Options surged 424 times to 1,300 in October and then fell back to a 123-fold increase.

This kind of doomsday lottery-like options market, as seen in the first round of frenzy at the end of September, indicates investors' significant optimism about the current A-share market. Their risk appetite has also increased compared to before, although the significant volatility risks and small scale suggest it is not the market mainstream.

According to Industrial and Commercial Bank of China data, the ICBC Securities Transfer Indexes were 0.43 and 0.42 on October 17th and October 18th respectively, indicating a clear trend of funds flowing back into the stock market, showing market recognition for the start of the second wave of the bull market.

So, how to allocate investments in order to catch up with the market quickly?

01 When the bull market arrives

When investing in A-shares, when the bull market is likely to come, if you want to increase your success rate and profit potential, there are three very important principles:

First, believe early.

Because in many past bull market cycles in A-shares, the initial stages have mostly been sharp rising trends with high slopes, and relatively short durations. This has led to most people not believing at the beginning, hesitating, and then by the time they decide to act, the market has likely already surged significantly. When they enter the market shortly after, the market fluctuations begin to diverge, and they will likely face more passivity compared to early entrants.

Professional investors and speculative institutional investors who have always closely monitored market trends and immediately acted without hesitation upon seeing signals, often truly enjoy the biggest gains. They quickly accumulate a substantial safety cushion, and are able to calmly handle fluctuations in subsequent market movements.

Secondly, look for the most resilient.

As analyzed previously, bull markets generally unfold in several stages, wherein the themes directly benefiting in the first stage and the speculation themes in the second stage tend to witness the most significant surges. The steadfast large blue-chips often only become the focus of funds after all themes have been speculated upon at least once, gradually initiating a supplementary upward trend.

Within this context, it is often the most resilient concept sectors that are most favored.

The author has analyzed the recent three rounds of volatile rebound trends in the A-share market. By comparing the large-cap SSE 50 and the core asset CSI 300, to the growth-oriented GEM and STAR market segments, it is very clear that the sectors with greater flexibility have greater upside potential.

Since the "924" market trend (until 10.18), the SSE 50 has accumulated an increase of 16.76%, CSI 300 has increased by 22.18%, GEM has risen by 35.89%, while the STAR market surged by 42.19%, significantly outperforming others.

Of course, in a long-term slow bull market, this situation may be different. Some large-cap blue-chip stocks may gradually rise and surpass, while the GEM and STAR markets, after a sharp rise, may occasionally show slightly lower gains, such as during the slow uptrend from October 2022 to May 2023.

Looking at segmented concept sectors, in the current market surge, stocks related to the hottest sectors such as stock trading software, HW concepts, innovation in information technology, AI, semiconductors, etc., have collectively risen by over 50%. Most of these stocks are from the GEM and STAR markets.

The main direct reason for this is the benefit from the fact that these two markets generally consist of small-cap companies that are easily pushed up, and the mechanism of a 20% daily trading limit provides them with greater flexibility compared to the main board.

The third point is to dare to increase positions.

Warren Buffett has a famous saying: Good opportunities don't come often. When pie falls from the sky, use a bucket to catch it instead of a needle. This means, when a bullish market is confirmed, you must be bold, open as many positions as possible, rather than using small positions to test the market and waste time.

During the '924' market, on the first day of the bull market, many veteran investors claimed to be fully invested and leveraged. The next day, various depositors moved their money, even giving up fixed deposit interest just to enter the market earlier. There were even cases of investors applying for various loans and then illegally entering the market.

Brokerage margin trading data also shows that since the start of this market rally, investors' financing scale has skyrocketed from 1.3 trillion yuan to nearly 1.6 trillion yuan, indicating that investors are not satisfied with fully investing their own funds but also engaging in leveraged operations.

According to statistics, among the stocks with net inflows exceeding 100 million yuan in financing balance last week, stocks in the electronics sector topped the list with 18 stocks. Among them, Montage Technology, Semiconductor Manufacturing International Corporation, and Shenzhen Huaqiang all had net inflows of over 0.3 billion yuan.

Even semiconductor manufacturing international corporation with a market cap of 700 billion witnessed a rare 20% daily limit up.

Here, the author does not advocate blindly entering the market and buying randomly, let alone leveraging up to trade stocks irregularly, especially using borrowed funds to enter the market illegally. The author just wants to illustrate that in the early stage of a bull market, being willing to take action and add positions can indeed help you quickly catch up or even outperform the market, allowing yourself to accumulate more safety margin in the subsequent market trends. This is also a common consensus in the market.

What are some highly elastic directions to invest now? The Translation Trade.com

Recently, it is evident that various departments are actively holding a variety of conferences, continuously bringing confidence to the market, as well as a plethora of hot topics that can be speculated upon.

Within these opportunities, there are many opportunities with great flexibility for investments, especially in two key areas - large-scale consumption and hard technology sectors.

In the past two years, stimulating consumption has always been a major focus for the country, continuously providing strong stimulus policies. However, due to the impact of macroeconomic factors, the effect of the consumption cycle still needs time to take effect, leading to investors lacking confidence in the consumer sector of the market, with the valuations of related listed companies being continuously suppressed.

On October 18, 2024, at the Financial Street Forum Annual Meeting, PBOC Governor Pan Gongsheng once again mentioned "promoting reasonable price increases as an important consideration," emphasizing the increase in residents' income levels to stimulate the consumption market. This clearly indicates the country's unwavering determination to stimulate the consumer economy.

In reality, many leading consumer companies have shown signs of performance improvement.

In addition to the traditional basic consumption areas of essential needs, signs of recovery have also emerged in the third-quarter financial reports of many companies in fields such as home appliances, consumer electronics, medical beauty, cosmetics, as well as the education and entertainment industries.

Within the domain of hard technology, due to the multitude of thematic concepts aligning with the direction of national strategic development needs, they have gained favor from market funds, thus presenting relatively more opportunities. For instance, concepts such as low-altitude economy, chip semiconductors, artificial intelligence, new energy, and innovation are frequently the most followed sectors in the daily performance and top gainer lists.

These sectors also see the most frequent emergence of explosive stocks, with many even holding strong amidst the current market correction, maintaining a strong upward trend. For instance, Shijiazhuang Changshan Beiming Technology, during this bull market period, saw its stock price soar from 7 yuan to 25 yuan, a staggering increase of 2.5 times, with almost no significant pullback along the way.

Relatively speaking, the STAR board also showed the most significant rebound in this wave of market. In addition to significantly outperforming the vast majority of other indices as a whole, the performance at the individual stock level is even more impressive, with many stocks seeing gains of over 80%, even semiconductor manufacturing international corporation and montage technology, these super giant companies, have shown strong doubling.

For these GEM and STAR Market companies, many people always feel that in the current economic background and after the current market has risen significantly, the potential for further increase may have been significantly exhausted, and the attractiveness is not enough.

There is some truth to this, but everyone should not underestimate the country's determination to boost the stock market this time.

It should be noted that in the past few years, many A-share companies have been in a seriously undervalued state of oversold, and now that they have risen sharply, most of them have only made some valuation adjustments, and many are far from reaching their historical highs.

And this round of A-share bull market clearly infused with national will, is likely to reach new heights in the future.

Of course, at this point in time, it may not be as soon as many people imagine within a few months or a year. After all, as strong as the U.S. stock market, the magnitude of the increase in the first dozen years was not too high, and the real outbreak was only after 2020.

For example, NVIDIA, which went public on the US stock market as early as 1999, basically followed the fluctuations of the US stock market in the first 15 years, remaining unknown until the boom of the mobile internet and global gaming industry in 2015, especially in 2019 when it embarked on its road to glory.

Another example is Tesla, which went public in 2010, went through years of darkness and low stock prices, almost facing bankruptcy several times during this period, and even being questioned by investment banks as a fraudulent company, until 2019 when Tesla's vehicles were mass-produced, truly taking off.

In fact, in the A-share market, there are also many core high-quality seed companies like these, although their potential may not be as great, but the growth space is enough to make them worth looking forward to.

Of course, not all individual stocks among these companies will experience substantial growth in the end, especially for ordinary investors lacking professional research capabilities and investment experience. Therefore, in such situations, investing in ETFs may be a good option.

In practice, when the market arrives, tracking ETFs within the ChiNext and STAR Market actually perform as well as, if not better than, most individual stocks. Additionally, they can help in diversifying risks and provide peace of mind.

On Friday, the ChiNext 100 Index rose by 8.63%, leading the broad-based indexes. The ChiNext 100 Index ETF (588030) surged by 9.06%, with a daily turnover of 1.226 billion.

Data shows that there has been a net inflow of 2.091 billion funds into the Star 100 Index ETF (588030) since this month. The latest share of Star 100 Index ETF has surpassed one hundred billion, ranking first in its category, and is also one of the few Star sector ETFs with over one hundred billion shares in the market at the same period.

To access the Star Market, an average daily capital of 0.5 million and trading experience of over 2 years are required. Many investors have been blocked from entering, but they can strategically position themselves in the Star Market through ETFs, achieving almost the same effect.

03 Epilogue

It can be said that the logic behind the policy and market bottom of A shares now is rock solid.

The highly anticipated second wave of the bull market is highly likely to begin. In the upcoming period, technology sectors that combine growth, certainty, and resilience will be the core focus with numerous opportunities. For investors who are unsure about individual stocks, choosing Star-themed ETFs is a good option.

This time, everyone should not miss out. (End of the full article)