CICC has pointed out that looking to the future, after the policy expectations are reversed, attention needs to be paid to the transmission of policy implementation to the improvement of the fundamentals. In its latest 2025 outlook, the bank believes that the market driving force in 2024 will mainly be reflected in valuation repair. Whether the transition from valuation-driven to fundamental-driven success in 2025 is crucial. At the same time, the bank also believes that after a long period of market correction, the domestic residents' asset allocation demands and the global funds may have more proactive marginal changes.

Since late September, the stock market has been on the rise. Despite recent external shocks, A-shares have shown resilience, performing significantly better than other domestic assets.

Since the latter half of September, with the release of positive signals from macro policies, investors' expectations and sentiment have improved. The major A-share indices have experienced the fastest rise since 2000, entering a period of consolidation after rapid gains. Since October, external overseas investors have been focused on Trump's trade policies, impacting global and domestic assets. Particularly since the certainty of the US presidential election results on November 6th, with Trump winning the presidency and the Republicans likely to control both houses of Congress, Hong Kong stocks, RMB exchange rates, domestic commodities, and government bond yields have all fluctuated to varying degrees.

The Hang Seng Index has dropped below the 20,000 point mark, offshore RMB exchange rates have exceeded 7.25, 10-year government bond yields have fallen below 2.1%, and domestic commodities in the black series have fluctuated downward. In comparison, A-share markets have mainly shown upward fluctuations in broad-based indices and are approaching the previous highs. As of November 12th, the CSI 300 index has risen by 5.0% in November, while the chinext and SSE Science and Technology Innovation Board 50 Index, which lean towards growth styles, have risen by over 8%. The bank believes that the resilience of A-shares compared to other assets may be an important explanatory angle from the perspective of funds.

A-share funds are relatively active, providing support to market performance.

Since late September, as the market has warmed up, A-share funds have become active, with a single-day trading volume of 3.48 trillion yuan on October 8th, reaching a historical high. The turnover ratio was 8.6%. Since then, the market has mainly been in a state of fluctuation, but the trading volume has remained active. From October 9th to now, the daily trading volume of A-shares has exceeded 2 trillion yuan, with the turnover ratio based on free float market value exceeding 5%, marking the most active phase of the market since 2015. And there is differentiation in the movements of various internal investors.

The margin balance has increased significantly and trading activity has improved.

Normally, the margin balance is positively correlated with market performance. The A-share margin balance has long been stable in the range of 4-5% of free float market cap. Since the market rise at the end of September, the margin balance has also increased significantly. On October 8, the margin balance increased by 107.5 billion yuan in a single day. Even though the CSI 300 index entered a correction phase after October 8, the margin balance continued to rise against the trend, and has accelerated since November. As of November 11, the margin balance has recovered to 1.83 trillion yuan, higher than the level in 2021, but there is still a gap compared to 2015 in terms of absolute size and proportion of A-share free float market cap. Since the middle and late September, the margin trading volume as a proportion of the total A-share trading volume has continued to rise, peaking at 12%, indicating a higher risk preference and active trading sentiment in the market, which may also be an important support for the recent activity in small and medium cap styles.

Individual investors have a strong willingness to enter the market, with the number of new accounts in a single month reaching the third highest in history.

The central number of new A-share accounts has been declining since 2023, but has recently shown significant improvement. In October, the number of new A-share accounts on the Shanghai Stock Exchange rebounded to 6.85 million (vs. 1/1.83 million in August/September), reaching the third highest level in a single month in history (the top two were in April and June 2015), indicating a more proactive willingness of individual investors to enter the market. According to data disclosed by the China Securities Regulatory Commission at the end of 2022, the proportion of transactions by individual A-share investors has dropped to around 60%, still the largest category of investors in the A-share market, and the bank predicts that the recent transaction proportion may increase.

The stock positions of private equity funds are still at low levels.

According to the statistics of private equity fund products on the China Resources Trust platform, historically, some private equity equity positions have been in line with market performance. At the end of August, the stock position was at a historically low level of around 48%. In September, the stock position increased by 7.1 percentage points to 55.6% on a month-on-month basis, but the stock position is still significantly lower than the historical levels (vs. 65.3% of some private equity stock positions in July 2023), and lower than the historical average (vs. historical average of 67%). Private equity fund positions are relatively flexible, and low positions mean that if the market performance continues to improve, there is potential for a turning point to the long side.

Public fund and northbound funds are not the main drivers of the rise, with ETFs seeing large inflows in the earlier period and recent outflows.

In terms of public funds, the stock positions of actively oriented equity funds in the third quarter increased slightly from the second quarter's 86.3% to 86.8%, but after excluding price factors, the equity positions showed a slight decline. In addition, the bank's statistics show that the average equity positions of some outstanding public fund products have been declining since 2023.

On the aspect of northbound funds, based on the disclosed data by the exchange on the northbound fund holdings and average prices from September 30, it is estimated that from August 16 to the end of September, the net inflow of northbound funds was 81.6 billion yuan, with an inflow scale smaller than historical equivalent increase. Also, looking at the total amount of northbound fund trading/A-share turnover, this indicator has been steadily declining since mid-June to around 11% currently, significantly lower than the levels of the past two years. Additionally, during the surge from September 24 to October 9, stock ETF purchases became an important source of net inflow funds, totaling approximately 287.2 billion yuan. Since October 10, ETFs have turned into net outflows, with nearly half of the previous net inflows already outflowed.