The market is entering a correction phase again.

A-share major indices fluctuated lower, with the Shanghai index down 0.61% to 3266 points, the Shenzhen Component Index down 0.12%, and the Chinext Price Index down 1.18%. The total trading volume for the day was 1.85 trillion yuan, a decrease of 215.5 billion yuan from the previous trading day.

On the market, the active themes are still those stimulated by news.

On the market, Hongmeng concept stocks rose, Jiangsu Hoperun Software hit the limit up in the afternoon; the Zhipu AI sector remained active, with Doushen Education hitting the limit up for 3 consecutive days; General aviation sector, AI phones, glass substrates, and Huawei Ascend and other sectors led the gains.

In addition, real estate stocks rebounded, with Bright Real Estate, Shanghai Industrial Development, and other stocks hitting the limit up. The reason is that the "9·29 New Policy" has been implemented for a full month, and Shenzhen and Shanghai have presented impressive performance reports. In particular, the Shenzhen property market rebounded rapidly, with both first-hand and second-hand transactions doubling; the Shanghai property market also showed strong growth momentum, with second-hand housing transactions easily surpassing 0.02 million sets, and the number of new customers at real estate agencies increasing by 40% compared to the previous month.

For sectors without news-driven momentum, such as insurance stocks and medical services, there was a weakening trend. Previously speculative themes like semiconductors, batteries, and medical instruments were among the top decliners.

After the first week of consolidation following National Day, the market was given an opportunity to increase positions, and a big rebound came on October 18.

Can I still get on this time?

01

Why the drop?

To answer this question, we first need to clarify the main reasons for this decline.

In summary, there are roughly three:

First, there is a certain 'vacuum period' in policies, with no quick emergence of indicators of economic improvement. Without new stimuli, funds may be taken or profits realized, or they may choose to temporarily rest.

Secondly, it's the U.S. election. Currently, the probability of Trump being re-elected is still very high, and his advocated high tariff policy will have a bearish impact on our exports, thus becoming an obstacle to economic recovery.

Third, it is waiting for the upcoming conference, the scale of finance will be at what level, this is the most important, and also the main reason for the market not going up. Because Trump is bearish indeed, but the conference may also form a hedge, as long as the scale of finance greatly exceeds expectations, it can completely digest the bearish sentiment. However, the conference has not yet started, the exact size of the finance, no one knows, so there is a need for risk aversion among on-site funds, choosing to sell, while off-site funds are waiting for the results, choosing to stay put.

Yesterday, news from foreign media, whether it is a 10 trillion essay or if Trump is re-elected, the domestic issuance scale will increase, causing a brief excitement in the A50 futures, but ultimately there was no significant rebound. Combined with the big rebound on October 18, the index lacks the momentum to rise again, instead returning to the speculative concepts before September 24, seemingly confirming the above views.

Now that the reasons have been identified, the answer is not difficult to come by.

From an overall perspective, if you want the index to surge again, the 'medicine' cannot stop, and 'money' cannot be lacking. Here, the 'money' of course refers to fiscal policy.

To be more specific, in the coming year or the next few years, how many trillions does the country intend to use to stimulate the economy, 2 trillion, 5 trillion, or 10 trillion, or even more?

Whether this money comes from borrowing or is printed, as long as there is 'money', the market will move in a positive direction.

In fact, the daily trading volume now is considerable, mostly above a trillion, on multiple trading days even reaching the level of 2 trillion, which was unimaginable before September 24, enough to illustrate that the funds have been mobilized, as long as there are no major bearish factors, they will not move, with bullish news, the profit effect will kick in, and they will accelerate entry.

It can be said that everything is ready, only lacking the financial boost.

02

The best observation window.

I have always believed that Hong Kong stocks serve as a good observation window, because the pricing of Hong Kong stocks is still in the hands of foreign capital. As globally allocated and relatively rational funds, their movements can reveal some things that are not normally seen in the domestic stock market.

For example, in recent meetings held by foreign investment banks, including Morgan Stanley and Goldman Sachs, they have consistently discussed several core issues, starting from the surface and delving deeper. At the surface level, they are very concerned about the upcoming meetings in China, with very high expectations for the fiscal scale.

This is related to their long-standing investment philosophy, such as their emphasis on economic indicators, focus on corporate fundamentals, emphasis on financial data, and so on. During periods of economic downturn, they are most concerned about two government departments, one being the central bank responsible for providing money, and the other being the finance ministry responsible for spending money.

In past U.S. economic crises and stock market plunges, these two departments came out to stabilize market confidence. Whenever these two departments come out and say that they will do whatever it takes to rescue the market, capital will rush to buy low, then the stock market will rebound, and everyone will make a lot of money.

Obviously, they view the Chinese market in the same way.

You can completely consider foreign capital as relatively conservative, or more nicely put, cautious investors. In reality, they are opportunistic, and will only withdraw when they see the opportunity for profit.

So, you can understand that they have never been very interested in the various themes that are popular in the domestic market.

In fact, foreign capital acknowledges this recent uptrend, as seen from the trading data showing an increase in foreign trading in Hong Kong stocks. Those who pay attention to overseas financial news will notice that various financial platforms have significantly increased discussions on the Chinese stock market.

However, their attitudes remain mixed. Hedge fund managers are very excited, with some even shouting "buy everything", while conservative long-term funds tend to adopt a wait-and-see approach, preferring to wait for evidence they like, such as improved economic data.

During Monday's macro exchange meeting at Goldman Sachs, it was mentioned that they have observed a shift in the pessimistic narrative of the past three years in this round of economic stimulus policies. In other words, they believe in the determination to stimulate the economy from higher up, but more evidence is needed to confirm this.

This is why long-term funds for trading Hong Kong stocks are still relatively scarce based on the data, as the main participants continue to be hedge funds focused on trading.

It is worth mentioning hedge funds here; they are fundamentally no different from our speculative funds, as both primarily focus on trading activities.

Since September, the Hang Seng Index has already risen by 20%, reaching a peak of 30%. Profits are quite substantial at this point. Without further stimuli, hedge funds will have a need to realize profits.

It can be foreseen that long-term foreign capital will not buy Chinese stocks on a large scale until after the election is undecided and the convention has not been held.

Without the participation of patient capital, relying solely on thematic speculation, the stock market is likely to be in a state of overall adjustment and thematic speculation.

03

Can I get on the bus?

In a bull market, there is a saying that as long as the bull is there, every pullback is an opportunity to get on the bus.

This time, this is most likely the case.

First, there are some favorable conditions, such as loose global liquidity;

Secondly, there is a necessity, which does not need explaining. If you don't understand, just look at the economic data yourself, then go out and experience it to understand.

There are two very important points. One is that the risk has indeed been released a lot, asset prices are very cheap, doing stimulus at this time will have much lower costs, and the effects will also be relatively more pronounced; The other point is that by stimulating a bull market, many problems can be solved, especially debt issues, which do not need to be explained further as those who understand, do.

We often say that A-shares are a policy-driven market, where policies and intentions are clearly reflected, at least much more than the stock markets of developed countries. In that case, why at this point, are there still people doubting the intentions above and the motives of the policies?

Furthermore, besides a bull market, are there any other methods that can quickly take effect now?

Once the bow is drawn, the arrow will be released. Even if, as a last resort, this time it returns to 2700 points again, it will be a major blow to investor confidence. So I believe that regardless, the authorities will maintain the healthy development of the stock market, at the very least, the national team will step in to buy again and stabilize the market.

From this perspective, corrections and consolidations are not bad things, but rather may provide everyone with a new opportunity to get on board.

If in the next 1-2 weeks, the index experiences a continuous sharp decline, then one can bet on an oversold rebound. Firstly, there is a technical need for a rebound, and secondly, with such large daily trading volumes now, if it falls too much, there will naturally be hot money looking to buy the dip.

What needs attention are two things; one is the position, that is, how much funds one can put up and how much cost one can bear; the other is the symbol, if it involves news-driven thematic speculation, one may not need to be concerned about whether the index is at 3300 or 3000 points. However, for some sensitive to market indices such as large caps, blue-chip stocks, or direct investment in indices, one needs to pay attention to the overall market changes.

As long as it is within the range of bearing all losses, and a significant market correction occurs, it may be considered to get on board. However, going solo, going all in impulsively, then chasing highs and lows, is not recommended.

Because whether it is the best opportunity to buy the dip, only time will tell. Blindly going all in is no different from handing over the control of profits to the market and keeping all the risks for oneself, which seems very foolish.

04

Conclusion

The recent market trend, the general rise has undoubtedly come to a temporary end, only structural market trends persist.

Beijing Stock Exchange, STAR Market, ChiNext, semiconductors, software, low-altitude economy and others take turns to rise and fall, demonstrating the structural market trends. Such structural market trends are clearly good or bad, the advantage, of course, is the rapid rise, taking advantage of the abundant liquidity to speculate wildly has become the norm. If there are concepts to speculate, speculators will jump in. Even if there are no concepts, new concepts will be created and speculated upon, as seen in last week's construction sector in Chengdu.

The downside is that the rotation happens too quickly, making it difficult for ordinary investors to keep up with the pace, and they might inadvertently become the victims.

Prudent investors can choose not to participate, wait until the dust settles after the two major events in November before making a decision; for investors with a higher risk appetite, under the premise of weighing the risks, they can participate in speculative themes.

In the next one to two weeks, the Shanghai Composite Index is likely to fluctuate back and forth between 3000 and 3400. If it truly approaches 3000 points again, hopefully you will not hesitate.