Rebirth of the Capital Legend

Similarly, several other popular concept stocks belonging to the same main theme and sector as Shuguang Shares have also fallen back to their previous intraday lows after a brief rebound.

Even within the main line of the new energy industry chain, the lithium battery and charging pile sectors are the two strongest performing areas.

Popular stocks such as Tinci Materials, Tianqi Lithium, Ganfeng Lithium, Lead Intelligent Equipment, Power Source, and Penghui Energy have all fallen back to their intraday lows. On their real-time trading screens, active buying has been consistently suppressed by selling, and the net outflow of major funds has been increasing as the trading time progresses.

Of course, this phenomenon is not limited to the core area of ​​the new energy industry chain.

In the smartphone industry chain sector, which also receives considerable market attention, the stock trends of companies such as Changying Precision, Goertek, O-Film Tech, Lens Technology, and Xinwei Communication are exactly the same as those of many popular stocks in the new energy industry chain sector.

As for the weaker sectors such as film and television media, internet software, and internet applications...

Popular stocks such as Wanda Film & Television, Huace Film & Television, Baofeng Technology, LeTV, and Netspeed Technology have shown even weaker performance. After a brief rebound, these stocks have not only continued to fall, but many have also hit new lows.

Besides these main themes...

Other less popular main sectors include animal husbandry, agriculture, aquaculture, and fisheries.

The corresponding industry-weighted stocks and popular concept stocks also follow the same trend as the main technology sectors such as film and television media, internet software, and internet applications.

Looking at the entire market...

Almost only the real estate, construction and decoration, and building materials sectors in the major infrastructure sector, as well as the coal, steel, and non-ferrous metals sectors in the ferrous metals sector, and the liquor, white goods, retail, and food and beverage sectors in the major consumer sector, and the pharmaceutical, petrochemical, and power sectors, which are considered defensive sectors, have maintained a relatively strong state, either with slight fluctuations and slow upward movement, or with continuous decline in trading volume and sideways consolidation.

Overall, trading continues during market hours.

The rotation of main themes in the two markets, as well as the rotation and divergence between large and small caps, has not only not diminished, but has further expanded.

Furthermore, as the trading session progressed, the intraday trading volume and turnover of both markets continued to decline, while the main funds in the market continued to flow out.

The entire market is continuously losing capital as bullish sentiment declines.

"Judging from this situation, relying solely on the two core themes of large-scale infrastructure and large-scale consumption is still not enough to pull up the market. And once the index fails to hold up, with the continued decline of other weak sectors and the sharp drop in concept stocks within some weak sectors, the panic selling sentiment in the market will likely intensify further towards the end of the trading day." Noticing that the market trend was far from optimistic, Zhao Qiang, in the 'Yuhang Group' main speculative capital group, frowned slightly as he watched the changes in the two markets. He said, "The market's trading volume is really poor; there's hardly any capital willing to actively participate." The market is particularly weak in sectors like film and television media, internet software, internet applications, and electronic information, where there's little profit-making potential and no positive news to be expected. The trapped investors are constantly selling, creating a complete sell-off. If this continues, it will eventually drag down the two core themes of infrastructure and consumption, leading to a broad-based correction. Once this broad-based correction takes hold, the current situation of the index fluctuating below 3100 points will likely be completely broken, and the market should experience a more severe downward correction.

"Yeah, I also feel that the market's bullish sentiment is continuously decreasing, and the overall profit-making effect is getting weaker and weaker." Hearing Zhao Qiang's analysis, Lao Qian in the group chimed in, "However, it seems that the infrastructure and consumer sectors are still performing quite strongly. Basically, the active buying funds in the market are concentrated in these two main sectors, and the corresponding core leading stocks have not shown any particularly bad patterns or extreme panic selling power amid the sharp declines in other sectors. I estimate that even if the overall bullish sentiment in the market further decreases, the infrastructure and consumer sectors can still hold up for one or two more trading days."

At least for now, as long as Beijiang Jiaojian, the core stock reflecting market sentiment, doesn't collapse and doesn't exhibit an extreme loss-making trend, the market will remain stable.

Therefore, the profit-making effect in certain parts of the market can be maintained.

Judging from the current trend of Beijiang Jiaojian stock, it is clear that this stock still has room for at least one or two more limit-up days.

And then there's today's market trend...

In the field of major infrastructure projects, besides Beijiang Jiaojian, there are other leading stocks that have followed suit.

If the short-term rally in Beijiang Jiaojian stock ends and it begins to correct, other similar low-priced, popular concept stocks may emerge to absorb this bullish sentiment.

Therefore, the large-scale infrastructure sector is very likely to continue to expand its reach.

Moreover, looking at the performance of the entire real estate industry chain and related upstream and downstream sectors in the Hong Kong stock market, the trend is clearly still in a state of gradually intensifying sentiment, which means that there is still a considerable distance to go before a short-term peak and adjustment.

Furthermore, this is compared with the overall trend of the Hong Kong stock market and the overall trend of overseas markets.

From a technical perspective, the index has not yet reached a period of adjustment.

In other words, the current macroeconomic environment is still in a favorable cycle, with no substantial negative news emerging.

There was no substantial negative news to influence the situation.

With the A-share market having already digested the positive news from the previous week, and many leading sectors having already adjusted to low levels, there is unlikely to be much downward momentum.

Although on the surface, the current market trend does indeed look terrible.

The main funds flowing into the market have been continuously flowing out, with investors leaving the market. In terms of market volume, there has been a significant and continuous decline compared to the previous week.

However, there are several core themes supporting the market.

The overall shareholding structure of core sectors, including major infrastructure, finance, consumption, petrochemicals, and power, is gradually consolidating and accumulating.

In other words, it's a continuous zero-sum game.

Many major institutional investors in the market are not as pessimistic about the future of the market as we might imagine.

As long as these major institutional funds can settle in these core sectors, the market can remain stable at this level even if liquidity is limited in the short to medium term and there isn't much new capital coming in.

As for the technology-related sectors such as film and television media, internet software, internet applications, and electronic information, which have been abandoned by a large number of major institutional funds in the market, there are also unpopular and cyclical sectors such as agriculture, animal husbandry, aquaculture, and fishery.

Until its industry cycle shows significant improvement.

I think its overall trend is unlikely to change fundamentally, and it's unlikely to form a trend reversal.

Moreover, I think the continued valuation compression and decline of these industry sectors will not have much impact on the overall market trend. After all, the overall size of these industry sectors is limited, and most of them are pure concept stocks with no performance, no expectations, and only concepts.

And there is...

I think that as the core pricing power in the market gradually shifts into the hands of institutional investors.

As the vast majority of retail investors in the market gradually move away from purely speculative themes and stocks, will the overall investment style and preferences shift from the pattern of speculating on small-cap stocks and concepts seen in the last bull market, towards another extreme?

"I feel that the overall investment style and market structure are shifting. With most funds already favoring certain sectors, and with strong guidance from mutual funds and the national team, coupled with the continued losses in the technology sector, there is a real possibility that this could change and move towards another extreme." After listening to Lao Qian's analysis in the group, Sun Chengyu chimed in, "Judging from the recent market trends and the pursuit of popular stocks by many active funds, it's clear that institutional investors are currently more popular than purely speculative investors, and they are more likely to attract follow-up and support from various funds."

Upon hearing their conversation, Zhao Qiang said, "Brother Sun, are you saying... that small-cap stocks with purely speculative themes will become increasingly difficult to trade?"

Sun Chengyu nodded and said, "That's entirely possible. Looking at the overall market performance over the past few months, among the core stocks with the strongest profit-making effect, isn't Oriental Yuhong the most popular and attracting the strongest profit-making effect?"

“That’s true,” Zhao Qiang said. “But this is mainly due to the continued lock-up and guidance from funds like ‘Fuxing Road’ and ‘Huayi Capital’, right?”

Sun Chengyu said, "The continued locking of shares by 'Fuxing Road' and 'Huayi Capital' has certainly contributed a lot to the stock's performance. However, the fact that the stock has reached its current level, and that its internal shareholding structure remains well-established without rapid distribution or dispersion of shares, coupled with the continuous supply of sell orders to absorb the buying pressure at this level, suggests that it is not solely due to the influence of 'Fuxing Road' and 'Huayi Capital'. It is also driven by a gradual shift in market investment styles and the collective optimism and locking of shares by a large number of institutional investors."

“That’s true.” Old Qian in the group chimed in, “With just retail investors and speculative capital driving the market, Oriental Yuhong stock would never have reached its current level. And there’s a phenomenon you may have noticed… Many of the top-performing stocks this year are mid-cap stocks with a market capitalization of over 100 billion but under 300 billion, and they are all characterized by institutional investors holding onto them. On the other hand, there are very few stocks that have been driven up by a concentrated group of speculative capital and retail investors and have maintained a sustained profit-making effect.”

“Yes, Lao Qian, I’ve noticed that phenomenon too,” Zhao Qiang said. “It feels like the market is clearly short of funds right now, but the mid- and large-cap stocks that consume huge amounts of capital are performing significantly better than small-cap concept stocks. The trading model of chasing after the smallest concept stocks and speculating on them to the death is definitely not working now. And… it seems that large- and mid-cap blue-chip stocks with good performance, as well as heavyweight stocks, are now more advantageous in terms of valuation than small-cap concept stocks.”

Sun Chengyu responded: "This is not surprising. In my opinion, leading stocks in the industry should be safer, have stronger risk resistance, and enjoy valuation advantages. Moreover, if the market can continue with this correct investment style, and if domestic institutional groups can form the correct investment guidance for the market and change the overall investment ecosystem, then I think it will have a positive impact on the overall trend development of the market and the development of the investment ecosystem in the future."

Look at the overall trend of the US stock market...

In fact, during the long bull market in US stocks, the stocks that have consistently risen have always been heavyweight technology stocks.

It has always been these heavyweight tech stocks that have been driving the market forward.

Moreover, the overall valuation of these heavyweight technology stocks and the proportion of institutional investors holding them are far higher than those of other small and mid-cap stocks, or even micro-cap stocks, in the US stock market.

Furthermore, the valuations of these leading technology companies have consistently been higher than those of other non-leading stocks in the same sector.

I think this is a sign that the market ecosystem is gradually maturing.

This also illustrates that after the lessons learned from the previous rounds of stock market crashes, much of the capital in our A-share market has gradually become more savvy and has begun to choose another path.

“I think there’s some truth to what you said, Brother Sun,” Zhao Qiang said after thinking for a moment. “But that’s not entirely true. The reason why many major institutional investors and other active funds in the market are abandoning small and mid-cap pure concept stocks and increasingly favoring high-performing and growth stocks with strong performance is mainly due to the impact of several stock market crashes. After the market fully entered a bear market, the overall risk aversion sentiment has continued to rise and remains high. I think that’s the main reason.”

Of course, the core themes are large-scale infrastructure, large-scale consumption, power, and petrochemicals.

A shift in overall industry expectations, leading to a cyclical reversal in expectations, is also a major factor.

As for this behavior, which stems from increased market risk aversion and leads to investors clustering around safer, more risk-averse stocks such as blue-chip and growth stocks, I think the uncertainty is still very high. Moreover, given that the overall investor base is still mainly composed of retail investors, the probability of a genuine shift in this direction is not high.

After all, the biggest difference between US stocks and our A-shares is...

In addition to the fact that the US stock market is more mature and has more abundant liquidity.

Another key difference is that the investor groups in the two markets are significantly different. In the US stock market, more than 80% of the investors are mature institutional investors who are less affected by emotions, have clear analytical and stock pricing capabilities, and rarely follow the crowd in speculation.

In contrast, over 80% of the A-share market is comprised of retail investors, with institutional investors accounting for less than 20%.

Given this distribution of investor groups.

People are easily influenced by emotions, and it is very easy to create an atmosphere of following the trend and hype.

Therefore, I still don't believe that the current market investment climate, which increasingly favors clustering around blue-chip stocks and growth stocks, will become the norm for future market developments.

"It's definitely unlikely to become the norm; it's just a trend for a period of time," Lao Qian in the group chimed in. "I remember in the 50s and 50s, the US stock market also saw a 'Nifty Fifty' phenomenon where investors flocked to speculate on high-performing blue-chip stocks. Didn't that trend eventually collapse? Although the current trend of concentrated buying into leading tech companies is not much different from the 'Nifty Fifty' trend of decades ago, in terms of valuation and future expectations, it feels like the US stock market can indeed continue its bull run for a long time."

“The current changes in the A-share market should not be called the ‘Beautiful 50’ market, right?” Sun Chengyu said. “It’s just an initial shift in investment style, but it’s precisely at the initial stage of this shift that we still have time to change our trading strategies.”

"Do we really need to change our trading strategy?" Zhao Qiang asked.

Sun Chengyu said, "I think it's necessary to change. Market trends and investment directions are constantly changing. Trading strategies that used to make money may become unsuitable after market trends and investment directions change. When the win rate starts to decline and the loss effect becomes obvious, we should seek change and adapt to the changes in market trends and investment directions, instead of forcing ourselves to trade with unsuitable trading strategies."

“Mr. Sun is right.” Old Qian smiled and said in the group, “No matter when, it is always easier to make money by following the trend than by going against it. It is naturally more difficult to make money in areas where the loss effect is serious and concentrated, while the probability of making money is naturally higher in areas where the profit effect is concentrated.”

Even though there are still issues related to market liquidity and sentiment.

Overall bullish sentiment is not high.

Whether it's a core, popular theme or a less popular, non-core theme, both are suppressed by sentiment and valuation.

However, if you focus on the core themes that have the highest liquidity, attract the most attention, and generate the most profit, even if you don't catch the market trend, the leading stocks in these core themes will still fall less during the synchronized decline and adjustment than pure small and medium-sized concept stocks with completely dispersed shareholdings and no continuous attention from core institutional funds.

The strong always get stronger, and the weak always get weaker.

With a large amount of institutional funds deeply involved and continuing to do so.

Buying stocks where funds are concentrated, or stocks with more internal holdings, carries less investment and speculation risk.

such a pity……

The massive number of retail investors in the market always like to buy at the bottom and sell at the top.

Fear of heights is very common among retail investors. They believe that after a significant drop, the market will rise again, and after a significant rise, it will fall again. But... that's not how the market works. (End of Chapter)