Rebirth of the Capital Legend

"It's precisely because there's no new news and no further positive news to stimulate market sentiment that I'm a little worried," Zheng Jinming continued. "The infrastructure sector has been hyped for a long time. Although there are still medium- to long-term expectations, and a number of real estate industry chain stocks in the Hong Kong stock market are still rising sharply, it's still difficult to create any expectation gaps in the short term."

This line already had a lot of bullish funds gathered.

In other words, investors who are optimistic about this core theme in the market generally have a certain amount of shares at this level.

Such an outcome...

The key point is that once the positive news is absent, market sentiment will significantly decline.

Therefore, this core theme is likely to become a theme with a serious loss effect in the market, and many profit-taking funds will leave the market to take profits, thereby suppressing the market.

In other words, this is the current position of major infrastructure projects.

It's becoming increasingly difficult to rely on this single line to drive the overall market trend.

"The infrastructure sector has indeed seen a significant short-to-medium-term increase, but it seems that the core theme that has sustained the market to its current level is not infrastructure at all," Lao Qian said. "Over the past six months, the real core themes that have formed a sustained trend, with strong institutional consistency and a large influx of institutional funds, are the consumer and financial themes, as well as the petrochemical and power sectors, which are clearly ahead of infrastructure in terms of priority."

The core driving force behind the index's return to 3000 points.

This was also driven by the large-scale buying and continuous locking up of shares by the "national team" in the financial sector.

The large-scale infrastructure sector is actually more like a passive boost following the reversal of industry fundamentals and the rapid surge in national housing prices.

Furthermore, at present, there is no consensus among various investor groups in the market regarding this line.

I think this line...

There is clearly still a lot of room for future development.

However, the current speculative sentiment surrounding this sector is still at a significant high, and there are no suitable entry points for some popular concept stocks or industry leaders.

“I agree with Lao Qian’s statement,” Zhang Xinlei said. “From a medium- to long-term perspective, the large-scale infrastructure sector is far from over. In fact, even compared with the hype surrounding the real estate industry chain in the Hong Kong stock market, we can see that the current position and hype surrounding the large-scale infrastructure sector are far from over.”

First, in terms of the industry's fundamental development direction...

In the real estate industry, once the cycle reaches an inflection point, the timeline within this positive cycle is at least three to five years.

Secondly, after the baptism of several stock market crashes last year.

In the entire A-share market, the valuations of stocks related to the real estate industry chain, and even the upstream and downstream industry chains of the real estate industry, have been severely suppressed.

Even after the general price increase over the past two or three months.

The current valuation levels of many stocks are far lower than those of stocks in the consumer and financial sectors, which are heavily invested in by the national team.

In other words, the valuations of many leading stocks in the major infrastructure sector are not even at normal levels. Compared with the rapidly developing and expanding real estate industry chain, they are still completely mismatched and are undervalued to a certain extent.

This means...

Despite the fact that the infrastructure sector has already seen significant gains recently.

However, the safety margin for its speculation and investment is still very high, making it worthwhile to continue trading around this core theme.

Actually, you can tell by looking at the stock performance of 'Oriental Yuhong,' a core leading stock heavily invested in by 'Fuxing Road.'

After doubling in value within a month or two, the stock of Oriental Yuhong has slowed down, but there is no sign of the rally ending or a significant correction. It has been maintaining a high-level sideways trend, and during this sideways trend, whenever the stock price slightly pulls back, there is always buying interest actively supporting the price.

For those in the market who want to take profits and exit, this stock allows them to do so at any time.

Looking at the chart pattern of this stock, the current pattern is not a sign of a market top at all; it's more like a consolidation phase within a trend.

Moreover, regardless of how volatile this stock has been recently.

Regardless of whether the market is rising or falling.

This stock has not shown sufficient trading volume, and there are no signs of significant loosening of its internal shareholding structure.

Since this core leading stock, which represents the speculative sentiment of the major infrastructure theme and the attitude of major funds, has not shown a reversal of its upward trend or a significant loosening of its internal shareholding during this period.

This explains the major financial groups currently involved in the large-scale infrastructure project.

I remain optimistic.

They are still actively positioning themselves, or rather, waiting for a more suitable position to increase their holdings.

If we say that Oriental Yuhong stock only represents the trend of small and mid-cap stocks within the core theme of large-scale infrastructure construction...

So, what are the trends of Conch Cement stock in both markets?

This should be able to illustrate the investment attitude of some core major institutional investors towards leading stocks in the infrastructure sector, right?

Take a look at Conch Cement stock.

It can also be seen that after the trend emerged from the bottoming pattern, it not only did not show obvious signs of slowing down or reversing, but instead showed signs of further acceleration.

Furthermore, the large-cap infrastructure stocks with "Hua" in their names, such as Huaguo Construction, Huaguo Communications Construction, Huaguo Railway Construction, and Huaguo China Construction, have shown a remarkably consistent trend in the medium to long term. They are all in a phase of bottom reversal followed by a gradual acceleration of the upward trend.

Since all the weighted stocks in the main trend are still in an upward trend phase.

Therefore, other small and medium-sized concept stocks in this main area do not require special attention to risk or caution.

I think, at this stage...

The infrastructure sector remains the most profitable sector in the market, and relatively speaking, the easiest sector to reap profits.

Other key sectors include the new energy industry chain, the smartphone industry chain, and the consumer and financial sectors led by state-owned enterprises. This excludes a few leading stocks in core industries.

Other concept-themed stocks rarely generate a sustained speculative frenzy, and the enthusiasm of retail investors for following these stocks is generally low.

These are the few core industry leaders that have attracted capital and sentiment.

Compared to other stocks in the major infrastructure sector, some small and mid-cap concept stocks that are still at low levels or have not yet been discovered by a large number of active funds do not offer sufficient value for speculation in terms of overall expectations and their current position.

Therefore, all things considered, it is still safest to develop projects based on the theme of major infrastructure projects.

Of course, while focusing on major infrastructure projects is the safest approach, there's no need to blindly chase high prices or engage in extreme high-level position increases.

“Yes, Lao Zhang’s analysis is reasonable.” He Zhong, who had already shifted his focus to the major infrastructure sector, nodded after listening to Zhang Xinlei’s words and said, “Compared to the major infrastructure sector, other market themes are indeed less certain. At the same time, most funds in the market are still focused on the major infrastructure sector. So… I think there should be no problem in continuing to rely on this core theme. Although the overall market is currently in a weak and volatile state, there will be a phenomenon of funds clustering together for safety in a weak and volatile state. And without a doubt, in the past two or three months, the major infrastructure sector has been the core theme area for various major funds in the market to cluster together for safety.”

It is often said that in market trading, one should not overly speculate or predict trends.

Given the current market trend, the infrastructure sector is the most crucial market theme, the source of market sentiment, and the place where most funds concentrate their investments.

So all we need to do is follow the choices of the majority of funds in the market and go with the trend.

As for when this trend will end.

I think that when the time really comes to an end, the market will show corresponding signals, and there will be corresponding chart patterns. At that time...

Once we see these signals, we can then adjust our trading strategy accordingly.

“That’s true.” Old Qian chimed in, “When prices rise, there’s no predicting the top; when prices fall, there’s no predicting the bottom. Following the market trend is the best trading strategy. The market trend and the potential for speculation are the combined force of various funds using different buying and selling strategies. Since this combined force is still showing an upward trend in the major infrastructure sector, there’s no reason for us not to continue going long.”

"It is said that the market will move in the direction of least resistance," He Zhong said. "Without a doubt, the direction of least resistance for the current trend of large-scale infrastructure is upward. Whether it is the industry fundamentals, the expectation of future performance explosion, or the sentiment of chasing and speculating, it does not require careful research and analysis. It is clearly in a state of accelerating improvement."

As the discussion unfolded among several core members of the 'Suzhou system' major speculative investor group.

The market trading time has now reached 11:30 a.m., and both markets are about to close for the midday break.

After half a day of intense trading, the market saw a flurry of activity.

The major indices, including the Shanghai Composite Index, Shenzhen Component Index, and ChiNext Index, showed little difference from their opening levels at the start of trading. The Shanghai Composite Index maintained a narrow range of fluctuation and closed down 0.11% at midday. The Shenzhen Component Index and ChiNext Index performed slightly worse than the Shanghai Composite Index, closing down 0.35% and 0.53% respectively.

Amidst a slight decline in several major indices.

Throughout the morning trading session, the overall trading volume in the market continued to shrink.

This indicates that all types of funds in the market, whether buying or selling, are being quite cautious.

Besides index performance and trading volume...

Regarding the performance of the major market themes, sectors related to the major infrastructure construction theme, such as real estate, construction and decoration, building materials, steel, and cement, continued to maintain a good upward trend, consistently leading the gains among all industry sectors in both Shanghai and Shenzhen stock exchanges. Meanwhile, sectors dominated by the "national team," such as consumer goods, finance, and petrochemicals, which are home to core large-cap blue-chip stocks in both markets, generally maintained a sideways trend with reduced trading volume.

There was neither a clear downward trend with increasing volume nor a proactive upward trend with increasing volume.

It seems that apart from the national team's main funds, including those involved in locking up positions, other active market funds rarely get involved in these key areas.

Of course, this is during the process of extreme reduction in volume.

These core sectors, which comprise the vast majority of blue-chip stocks in the market, still maintain a relatively stable internal shareholding structure. There has been no large-scale proactive selling, and the corresponding core blue-chip stocks have not shown any obvious abnormal fluctuations in their trading activity.

Unlike these low-volatility, low-volatility, low-volume, weighted main lines.

In the market, the technology sector, which has historically attracted a large amount of speculative capital, continues to perform relatively weakly.

Electronic information, 5G, film and television media, internet software, internet applications, semiconductors, and other technology-oriented sectors are all experiencing net outflows of funds from major investors. Moreover, these sectors, whether they are industry leaders or small-cap concept stocks, lack attention from major investors and retail investors.

Even though a few concept stocks saw decent gains in the morning.

That was only formed under the stimulus of its own positive news, and its initiative was extremely weak.

As for the new energy industry chain and the smartphone industry chain, which were previously linked to the major infrastructure construction theme, these two related themes are...

In this morning's market movement...

The upward momentum of these two main lines is no longer as strong.

Moreover, most of the related industry sectors and concept sectors that followed these two main themes maintained slight gains by the midday closing time.

However, overall, the main funds showed a net outflow.

In particular, the new energy industry chain, where the hype surrounding positive news is nearing its end, has seen a clear loss-making effect in sectors other than lithium batteries, such as automobile manufacturing, auto parts, auto accessories, and charging piles.

Even within the lithium battery sector.

Within the sector, many stocks exhibited highly divergent price movements.

With the exception of a few stocks such as Tinci Materials, Do-Fluoride Chemicals, Tianqi Lithium, Ganfeng Lithium, and Lead Intelligent Equipment, most other stocks lacked the initiative to rise.

Similarly, the same applies to the main sectors of the smartphone industry chain.

Apart from the relevant stocks in the Apple concept sector, the market has maintained a certain increase and is still attracting some follow-up funds.

Other related stocks, and corresponding concept sectors.

They all lost their initiative and began to experience varying degrees of financial losses. (End of Chapter)