Last Friday, the market suddenly strengthened, with a trading volume reaching 2 trillion, but there was still a slight decline in the closing session.

Today, the SSE Composite Index fluctuated back and forth, only rising by 0.2%, which basically confirms our medium-to-long-term upward trend assessment.

However, the market situation has not completely ended, but rather has shown structural differentiation.

This is because the market sentiment has completely shifted towards another side, the technology growth sector.

The Bei50 rose astonishingly by 16% to hit a historical high, while the Sci-Tech Innovation Board (STAR 100) index surged over 5% at one point during the session.

Today, the market's trading volume is 2.2 trillion, noteworthy is that the STAR Market accounts for nearly 10% of the total trading volume, hitting a new high since April 2023 on days with trading volume exceeding 100 billion.

In the segmented market, sectors rise independently, which together contributes to the current technology bull run.

So, when it comes to strategic positioning, how should we grasp it?

01

On the market, semiconductors continue the rally that started last Friday, with the semiconductor index approaching 9% at one point. Concepts like military technology, low-altitude economy, and consumer electronics remain active.

Semiconductor manufacturing leader Semiconductor Manufacturing International Corporation (SMIC) rose by over 8 points today, its market cap reaching eight trillion at one point. In the 15 trading days since September 24th, SMIC's market cap has doubled. Without this market surge, the year's yield would still be negative.

On the news front, the senior officials' speeches last Friday ignited the A-share market's enthusiasm for investing in the technology sector, and today the LPR interest rate has been cut by 25 basis points. Against the backdrop of interest rate cuts, the growth sector continues to ferment.

For a long time, the logic of localization has become a market consensus. Domestic semiconductor leaders such as Heilong Information, Cambricon, Will Semiconductor, Kingsemi Co., Ltd., etc., also have leading gains.

However, the reason why the semiconductor sector can rise rapidly is the indispensable fundamental support. Currently, 24 A-share semiconductor industry listed companies have disclosed their performance forecasts or third-quarter reports for the first three quarters of 2024, and most individual stocks are showing high growth trends. Expectations of a reversal in the semiconductor industry cycle may be further validated.

In addition, the current national policy of promoting the replacement of old with new consumer goods is favorable for boosting the demand for updating many terminal electronic devices. It also makes the market more bullish on the performance of domestic semiconductor demand during the period of incremental policies.

For example, Heilong Information, whose profit level has been increasing quarter by quarter, saw its net profit attributable to the mother increase by nearly two times in the first three quarters, with a Q3 quarter-on-quarter increase of 19%; leading high-end equipment manufacturer Naura Technology Group also saw its net profit increase by 43.19% to 64.69% compared to the same period last year.

Looking downstream, as the third-largest domestic wafer foundry company, SICC estimates a year-on-year revenue growth of 33.55% to 35.54% in the first three quarters, and the net profit has accumulated a growth rate of over 7 times.

According to data from Wisdom Choice Consulting, in 2024 Q3, the average capacity utilization rate of the main wafer factories is about 80%, up about 5 percentage points year on year and about 1 percentage point quarter on quarter; in 2024 Q4, it is expected that the average capacity utilization rate of the main wafer foundries will recover to around 81%-82%, and the foundry prices are also stabilizing and looking for potential price increases.

这一轮行情里，除了基本面，政策也发挥了巨大作用。一个是Merger重组，另一个是再贷款增持回购。

证监会主席昨日再次发声，对科技板块的影响包括：推动更多优质科技企业发行上市、并购重组等案例落地；统筹推动融资端和投资端改革，逐步实现IPO常态化，积极培育耐心资本，大力引导中长期资金入市等等。

并购重组题材的发酵，亦是点燃本轮科技行情里最重要的一股力量。

科创板里领涨的中巨芯-U，今天拉出了20cm，主要生产电子湿化学品，电子特种气体，是中芯国际的上游供应商。本月11日公布了其参股公司对英国半导体高纯石英材料制造商的并购，或将帮助其与全球领先的半导体设备厂商建立合作联系。

另一边，昨日上市公司首批增持回购专项贷款公告出炉，截至当日18时，有23家上市公司先后发布相关公告，按披露上限计，涉及贷款金额累计已超百亿规模。

In addition to central enterprises starting with middle letters, technology companies are also keeping pace. Today, storage chip manufacturer Dongxintek, which also hit the daily limit, announced that its controlling shareholder, Orienthink Group, plans to increase its holdings by 0.2-0.24 billion yuan, thus being included in the concept of increasing stake, loans, and buybacks.

Another STAR Market enterprise, Weimai Si, announced a buyback plan and adjusted the source of funds for the buyback of shares from 'excess corporate funds' to 'self-owned funds and special loan funds', with an amount ranging from 50 million yuan to -0.1 billion yuan.

Overall, in the face of a differentiated market structure, everyone is on their own. Those who can rise have multiple bullish factors, not just policy themes, but also good expectations for performance.

The narrative of the revaluation of investment value in the STAR Market is worth continuous attention.

02

In conditions of abundant liquidity, what kind of strategy can maximize profits as much as possible?

One effective strategy is to choose sectors with high elasticity.

Where is all the high elasticity?

Let's start by looking at a statistics chart below.

This chart shows the percentage change of the top 5 domestic indices from September 24th to the present, as well as from October 8th to the present.

It can be seen that the North 50 Index has the largest increase, followed by the STAR market, then the GEM, and afterwards are the Shanghai Composite, Shenzhen Component, and the traditional large cap indices such as the CSI 300.

Why can indices like the North 50, STAR Market, GEM, which focus on technological innovation, have such significant increases?

The main reason is that in a bullish market atmosphere, there is abundant liquidity, the preference for risk-taking in funds increases, and high-growth technology sectors are easily favored. These 'sectors' happen to be exactly this type.

In fact, this has become one of the rules of a bull market.

In terms of single increase, the ChiNext 50 index undoubtedly has the highest elasticity. Today's increase also exceeded 10%, becoming the most eye-catching index on the list, while the STAR Market, ranked second, has its unique side.

First of all, the STAR Market has a relatively high level of technology, with heavyweight players like SMIC, as well as many growth-oriented semiconductor companies, consumer electronics companies, software companies, biomedical companies, etc. These are all leading in the field of technology, which is related to the country's high-quality development and the realization of the Chinese-style modernization, naturally becoming a key area of technological support by the country.

Secondly, the business models of these companies have been formed, with relatively good profitability, cash flow capabilities, and relatively high research and development expenses. The certainty and sustainability of future growth are good, making it relatively easy for investors to track.

If choosing high-elasticity stock indices, the Growth Enterprise Market (GEM), the STAR Market, and the ChiNext are all options. In terms of company size, the GEM has more large companies, while the ChiNext is mainly composed of small companies specializing in unique and new technologies, with the STAR Market positioned between them.

It is also because of this characteristic that the STAR Market combines the characteristics of both.

In the STAR Market, you can see large enterprises with market caps of hundreds of billions like SMIC, Cambricon Technologies, Horizon Robotics, Beigene, which play a stabilizing role, as well as companies with market caps in the tens of billions like QuantumCTek, Anji Microelectronics Technology, Kingsemi, etc., without losing high elasticity.

Therefore, the STAR Market can enjoy the dividend of the overall market rise, and can relatively easily control risks during market retracement, being both a sharp spear and a solid shield.

We also note that in this bull market, an increasing number of investors are participating in the market through ETFs.

For the reasons, besides the excellent performance of the Star Market Index itself, various advantages between the balance of risk and return of ETFs also attract investors. Of particular note is that opening a STAR Market account requires an average daily capital of 0.5 million and more than 2 years of trading experience, with a relatively high threshold. Therefore, many investors in the market choose to use ETFs as a way to allocate to the Star Market, in a relatively simple manner to enjoy the benefits of the technology sector's rise.

In addition, related ETFs actively respond to the policy of reducing fees, effectively reducing the trading costs for investors.

On October 19, China Asset Management Co., Ltd. announced that, after consultation between the fund manager and the fund custodian, its Star 100 ETF (588190) will reduce the annual management fee rate from 0.5% to 0.15% starting from October 21, and the custody fee rate from 0.1% to 0.05%.

Data shows that 0.15% and 0.05% are already the "floor price" levels for the current ETF management and custody fees. After this reduction in fees, the Star 100 ETF (588190) will become the fund with the lowest management fee rate among similar products in the market.

03

Conclusion

Last Friday, the technology sector experienced a significant rebound.

Today, it seems that the upward momentum is still strong. Although there are fluctuations in between, indices like SSE Technology, Star Market, and the Growth Enterprise Market are all up, indicating that the bull market in technology is continuing.

As for the future direction, in the context of abundant liquidity, technology remains one of the concepts that funds are enthusiastic about, with valuations still expected to expand.

Of course, it is also important to note that after the initial increase in valuations, future trends will focus more on performance. Therefore, investors need to pay attention to Q3 financial reports, and the possible differentiated trends after the reports.

However, the good news is that the market has a relatively positive expectation for the overall performance of the Star Market. For example, in the fields of computing and electronics, as of October 19th, the pre-announcement success rates for Q3 2024 earnings were 100% and 86% respectively.

Currently, the global AI revolution is in full swing, with semiconductors, consumer electronics, software, and even biomedicine entering an upward cycle. Domestically, continuous policies are being introduced to stimulate economic growth and support the development of high-tech industries. It can be said that the overall performance growth of high-tech sectors is positive.

There is also an anticipated policy to look forward to recently, which is the fiscal scale that may be announced at the end of the month. This could be a determining factor for the market's breakthrough.

Let's all wait and see what the results will be. (End of full article)