Rebirth of the Capital Legend

"It's amazing that the Shanghai Composite Index has actually turned positive, but what's the use of turning positive? My account is still losing money."

In the final ten minutes of trading, the Shanghai Composite Index recovered all of its intraday losses and resumed its upward trend, prompting many retail investors gathered on various online stock investment exchange platforms to express their amazement.

"Indeed, it would have been better if the market had fallen. If the Shanghai Composite Index had turned positive, my account would have suffered even greater losses."

"That's right. It feels like the major stocks in the market, along with many leading stocks in core sectors, have absorbed all the buying liquidity in the market. This has directly resulted in a lack of sustained buying attention for small and mid-cap stocks, causing them to completely lose liquidity."

"What's the use of the Shanghai Composite Index turning positive? Out of more than 2500 stocks in the market, more than 1800 are still showing a downward trend. With this kind of trend, it's impossible to make money."

"Let alone making money, it would be good enough if we could just break even."

"I made money on the index but lost money on my personal finances. It's really frustrating. I would have preferred a general market crash."

"Why is it that all the small and mid-cap stocks in the market have suddenly lost the attention of continuous buying funds? Why has all the active buying funds in the market poured into the market's core themes and heavyweight themes? I really don't understand the current market trend."

"It should be the so-called certainty of expectations. After all, the certainty of future expectations for small-cap concept stocks can't compare with that of a group of central and state-owned enterprise stocks and blue-chip stocks."

"In my opinion, it has nothing to do with the certainty of expectations; it's just pure institutional banding together."

"You could say the same thing."

"I feel that the overall risk aversion in the market has increased, which is why many major funds in the market are concentrating on heavyweight stocks?"

"Risk aversion is rising? That can't be right."

"Whatever the reason, the current investment trend in the market, as well as the focus of large funds' trading, has completely shifted towards heavyweight stocks."

"Not entirely. There are still quite a few small-cap stocks that have risen in the market."

"How much is that? Compared to the overall number of stocks in the market, the few small-cap concept stocks that rose only accounted for 1%. But look at how many heavyweight stocks rose. Eight out of ten heavyweight stocks in the core themes have risen. That percentage shouldn't be low, right? I think... since heavyweight stocks are generally performing better than small- and mid-cap concept stocks, we should adjust our portfolios and follow the lead of the major institutional investors."

"I also want to adjust my portfolio and switch stocks, but unfortunately I'm already stuck with losses, and I really can't bear to cut my losses."

"The losses are too deep; cutting losses and adjusting positions is pointless now."

"I think it's still meaningful, right? I feel that small and mid-cap stocks haven't bottomed out yet, especially in sectors like film and television media, internet software, internet applications, and electronic information... These technology-oriented sectors are truly bottomless. When the market falls, these sectors fall sharply; when the market doesn't fall, or even falls slightly, these sectors fall only slightly; when the market rises, or even surges, these stocks can only maintain a sideways trend. If this continues... they're bound to underperform the market."

"Yes, the stocks listed on these lines are indeed bottomless abysses."

"Look at Baofeng Technology's stock. It has already halved in value this year, but it just won't stop. It feels like it won't stop until it falls to one-tenth of the high point of last year's bull market. Each wave is lower than the last. Those who bought this stock and are stuck at the top must really be in despair. It has been falling for so long, and there hasn't been a decent rebound."

"I'm afraid it might even fall to one-tenth of last year's bull market peak, and that wouldn't be enough to stop it."

"This stock seems to have no future prospects. During the bull market, funds flocked to speculate on this stock, which was just reckless speculation."

"There's been a lot of hype around. Wasn't LeEco hyped up back then? Its peak market value was close to 2000 billion yuan. Now look at it... those who were hyping up this stock back then are all silent now."

"LeTV and Baofeng Technology are clearly different stocks, aren't they?"

"How are they different? In my opinion, they are all the same. They have no fundamental support at all and can't produce any results."

"Does stock trading require performance as a basis? But many historically high-performing stocks in the market don't actually have much performance to back them up. I think that the quality of performance is not the primary driving force for stock price increases. The preferences of major funds are the primary driving force for stock price increases."

"So what determines the preferences of major funds? Isn't it the fundamentals and changes in performance?"

"There are also positive news and favorable macroeconomic policies."

"In any case, it is a fact that the performance of small and micro-cap stocks in the market has been lagging behind that of the market's heavyweight stocks recently. In other words, the overall market speculation preference and the trend of the market are indeed shifting towards the heavyweight stocks. Since that is the case, we should rely on the heavyweight stocks for our operations."

"It's not just about the heavyweight stocks, is it? For example, are stocks like Oriental Yuhong and Beijiang Jiaojian considered heavyweight stocks?"

"It can only be said that funds are concentrated in heavyweight stocks, which account for the majority."

"In addition to the core stocks and heavyweight stocks, there are also some growth stocks and blue-chip stocks that are also very popular with major funds."

"There are indeed some good growth stocks, but they are a bit hard to pick."

"Even though the performance of heavyweight and blue-chip stocks in the market has been much more stable than that of small-cap and micro-cap concept stocks in the past few days, it's not advisable to continue chasing these heavyweight and blue-chip stocks, which have attracted concentrated investment from various major funds, as well as many growth stocks. After all, the overall market liquidity is not high, and these heavyweight, blue-chip, and growth stocks have generally seen significant gains since their bottoms. Chasing positions or adjusting portfolios at this point could very likely result in buying at the peak. If the market trend reverses then, it could be very bad."

"Yes, at this time, making random purchases and moves could very likely result in even greater losses."

"I agree with that."

"What should we do then? Following portfolio adjustments isn't right either, and holding onto small-cap concept stocks indefinitely isn't right either."

"Being out of the market or having a small position is the right thing to do."

"Judging from this, the national team has clearly taken complete control of the market. The Shanghai Composite Index simply can't fall any further. I think it's better to follow the national team and buy heavyweight stocks. Didn't many people say before that the best defense is offense? You can't go wrong by following the market trend."

"To be honest, I really don't understand why the film and television media, internet software, and internet application sectors, as well as the core stocks within these sectors, have not seen a decent rebound despite the fact that they have fallen so much, with many stocks dropping to only one-third of their original value."

"Is this strange? I feel it's actually quite normal."

"Where is it normal?"

"Firstly, institutional investors are clustering together, so the market doesn't have much active liquidity. Secondly, in sectors like film and television media, internet software, and internet applications, many stocks were overhyped before, and even after a two-thirds drop, their valuations aren't cheap." "Compared to the major sectors and sectors with a concentration of blue-chip stocks, such as film and television media, internet software, and internet applications—these technology sectors, while indeed down significantly compared to last year's bull market peak—are really hard to find many truly undervalued stocks."

"I think the reason why the film and television media, internet software, and internet application sectors have fallen so sharply is mainly because their valuation systems have collapsed, right?"

"The valuation system has collapsed, what do you mean by that?"

"Isn't that right? The industry's fundamentals continue to decline, stock prices continue to fall, and the profit-making effect has completely disappeared. This has led to people becoming increasingly pessimistic about the future of these sectors and individual stocks, and these major industries. And under the shadow of pessimism, won't valuations continue to be compressed? When valuations are compressed again and again, and the valuation system collapses, how can stock prices not fall?"

"That's true, but I think the fundamental reason why the stock price has been falling without any decent rebound is that there are too many trapped investors in the market. The current market liquidity is simply not enough to move it."

"If the current market liquidity is insufficient to stimulate growth, then how come some heavyweight leading stocks can keep rising?"

"Does this mean that the sustained buying power required for these large-cap stocks with larger market capitalization and larger free float is less than that required for many small-cap and micro-cap stocks in the market? I think... I don't think so. So I think the fundamental reason is not the so-called insufficient liquidity or insufficient buying power, but rather that people lack confidence in these sectors and in the entire small-cap and micro-cap stock market."

"It should be said that there are various factors that have led to the current polarization of market trends."

As these retail investors continued their discussions, the market finally reached its closing time at 3 PM.

After a day of intense trading...

The Shanghai Composite Index ultimately settled at a gain of 0.23%, showing a slight increase.

Meanwhile, the Shenzhen Composite Index and the ChiNext Index, the two core market indices, were down 1.17% and 1.29% respectively, performing much weaker than the Shanghai Composite Index.

As for the Huazheng 500 Index and the All-China 1000 Index, which represent the performance of small and micro-cap stocks in the market, their closing prices were even weaker, both settling at a drop of more than 1.3%.

Amidst the extreme divergence in the major core indices of the two markets.

The trends of the major core themes in the market are showing a clear divergence.

The financial sector, representing the main weighted trend, and the consumer and infrastructure sectors, where many major institutional investors are concentrated, saw their corresponding industry sector indices, such as real estate, construction and decoration, building materials, liquor, food and beverage, and banking, all ranking among the top gainers in the two markets.

Among them, the real estate sector, construction and decoration sector, and building materials sector occupied the top three positions in terms of industry sector gains in both markets, while the liquor and food and beverage sectors ranked fourth and fifth, respectively. Then came the banking sector, where the "national team" locked up large amounts of shares.

Besides the performance of indices and industry sectors...

Regarding the performance of specific stocks in the market.

The stock 'Beijiang Jiaojian', which has garnered the most attention from a large number of investors, closed at the daily limit up price again today. Even amidst the market's volatile trading this afternoon, the stock did not show any signs of sustained volume increase and remained locked at the daily limit up price.

Another stock that has garnered the second-highest market attention after "Beijiang Jiaojian" is "Dongfang Yuhong". Today, this stock also performed exceptionally well, not only outperforming the index but also hitting a new high for the year during the trading session, demonstrating an unstoppable upward trend.

Furthermore, this stock is compared to its bottom level a few months ago.

The overall increase has exceeded 120%.

The stocks 'Taihe Shares' and 'Shuguang Shares' are also very popular in the market, ranking behind 'Beijiang Jiaojian' and 'Dongfang Yuhong'.

The surge in popularity of Taihe Co., Ltd. stems from the stock's strong upward trend, which saw it rise to the daily limit.

The surge in popularity of 'Shuguang Shares' stems from the fact that it was the weakest performing stock after its price surged and then plummeted during the day, resulting in the largest number of trapped funds and retail investors. It was also the stock that experienced the largest drop from its high point and the greatest intraday volatility.

Besides these few popular main theme stocks...

In the key sectors, the market discussion surrounding high-performing blue-chip stocks such as Kweichow Moutai, Wuliangye, Luzhou Laojiao, Gemdale Corporation, Conch Cement, Huaguo Tourism, Haitian Group, Gree Electric Appliances, Midea Group, and Haier Electric Appliances is also quite heated and shows a continuous upward trend.

Correspondingly, the major sectors with the weakest market performance.

Such as film and television media, internet software, and internet applications.

Stocks such as LeEco, Baofeng Technology, All-China Education Group, and Yinjie Technology, which have continued to hit new annual lows or even historical lows, have also generated considerable discussion in the market.

However, the general sentiment towards these stocks is pessimistic and critical.

Among them, Baofeng Technology's stock almost hit the daily limit down, and because in this round of index rebound from 2800 points to the present, this stock has actually shown a pattern of almost halving, which has made it a hot topic of criticism from many investors who are trapped in this stock.

In short, this applies to indices, various main sectors, and individual stocks in the market.

Basically, they all show a clear trend of differentiation.

Furthermore, amidst this polarized market trend, overall market volume is also shrinking further.

"I really don't know how to evaluate this trend." After the market closed, Li Jinshi, in the 'Fushan Group's' main speculative capital group, sighed after a brief review of the market, "The market polarization is getting more and more serious. Large consumer sectors such as finance, liquor, and white goods, as well as large infrastructure sectors led by real estate, construction and decoration, and building materials are forcibly supporting the market, while other market sectors, as well as countless small and micro-cap concept stocks, are continuously bleeding and falling sharply. If this continues... the market's downturn will not only be irreversible, but will also get worse."

He doesn't believe that relying solely on the major themes of finance, infrastructure, and consumption can fully support the market.

Moreover, the current core market themes that are being held by many major institutional investors, along with a number of industry leaders and heavyweight stocks, are all at relatively high price levels. Given the very limited overall market liquidity, it is difficult to attract retail investors to continue buying at these high prices.

That is to say...

Even with positive future prospects, it's difficult for these major themes to see further upward movement at the current juncture. (End of Chapter)