The recent market plunge has left many investors questioning their decisions. Just last week, the index was hovering around 4,000 points, but it quickly dropped below 3,900, with a single-day plunge of 2.45% last Friday. Comments like "A-shares are doomed" and "the bull market is over" are everywhere.
But here's the thing: don't get overly optimistic when things are good, and don't get overly pessimistic when things are bad.
When the market rises, everyone thinks 5,000 points is within reach; after a few days of decline, they fear a crash. This extreme swing in sentiment highlights one issue—most people don’t truly understand how bull markets operate.
First, let’s clarify: are we still in a bull market?
The core criteria for determining a bull or bear market are two factors: trading volume and price.
On November 21, A-share trading volume approached 2 trillion yuan. Although lower than peak levels, it remains relatively high. Before the 2024 market rally, A-share trading volume had stagnated around 700 billion yuan—a true bear market where participation was minimal. The current liquidity indicates capital is still in play, albeit hesitantly.
Now, look at index levels. Despite falling below 3,900 last week, remember that the Shanghai Composite started the year around 3,200. Year-to-date, it has surged nearly 20%, outperforming most global markets. Even the Nasdaq is up only 15% this year.
From both volume-price dynamics and index positioning, the bull market structure remains intact. However, bull markets don’t move in straight lines—volatility and corrections are inevitable.
Many wonder why bull markets still experience sharp drops. The answer is simple: bear markets see sharp rallies, while bull markets see sharp declines.
Bear market rallies give false hope before trapping investors. Bull market corrections instill fear to shake out weak hands. Those who panic-sell now will regret it when the market rebounds, only to chase higher later. This cycle of cutting losses and chasing highs erodes capital—which is why many still lose money in bull markets.
This is the market’s cruelest trick—it preys on the majority. You buy high, it drops; you sell low, it rallies. A few rounds of this, and your principal is gone. The problem isn’t the market—it’s psychology and discipline.
The current plunge is essentially a shakeout. The market needs to purge emotionally-driven investors, leaving steadier capital behind. Only then can the rally resume sustainably.
Why is this correction necessary?
In early November, the Shanghai Composite briefly breached 4,000, hitting a yearly high. But consider: if this pace continued, we’d hit 5,000 next year and 6,500 the following year. While enticing, such velocity risks creating a speculative bubble. The lessons of 2008 and 2015—when euphoria preceded crashes—are stark.
Thus, this pullback is healthy. It suggests regulators are tempering extremes. After this year’s gains, consolidation is needed for valuations to align with fundamentals.
Technically, 3,900 is a critical support level—the convergence of the 30-day moving average and the six-month trendline. Even if briefly breached, reclaiming this level would preserve the uptrend.
What’s next?
Short-term, expect choppy trading between 3,700-4,100, centered around 3,900. The days of one-way rallies are likely over for now.
Why? Gains have been substantial, requiring digestion. Year-end portfolio rebalancing by institutions will amplify volatility. Stay calm—don’t let short-term swings cloud judgment.
Medium-term, 2024 still offers upside. This correction sets the stage. Barring economic shocks or liquidity tightening, A-shares’ slow-bull trajectory holds.
Could 4,000 become a major top? Unlikely. Current technicals and market structure suggest surpassing 2008’s historic high is plausible—but patience is key. This isn’t a one-month affair.
The real test? Holding power.
Investing in A-shares isn’t about stock-picking or timing—it’s about temperament. Many can’t resist selling on rallies and buying dips, bleeding capital via fees and mistiming.
The market is testing resolve now. Those who fail will be flushed out; those who endure will reap rewards.
My advice: Don’t dismiss the bull market over one correction. Use panic to accumulate quality positions. Be greedy when others are fearful, and fearful when others are greedy—easier said than done, but this is investing’s essence.
Volatility is constant, but if the bull trend persists, short-term dips shouldn’t faze you. Steady wins the race—this bull has legs.
On tech: Many are watching this sector closely.
A new T+0 ETF—港股信息技术ETF (159131)—tracking the CSI Hong Kong Connect IT Index, recently launched in Hong Kong. It’s the first ETF focused on Hong Kong’s semiconductor supply chain, excluding mega-cap internet stocks like Alibaba and Tencent.
Its 42 holdings are 70% hardware/30% software, filling a gap for pure-play chip exposure. Top holding SMIC weighs 20%, with the top five comprising 50% and top ten 71%—high concentration reflecting industry leadership.
Comparable to创业板人工智能ETF (159363), which leans heavier into computing power (CPO modules exceed 54% weight).
Tech’s 2025 rally stems from earnings surprises—real profits, not hype.
Take Nvidia: Q3 revenue hit $57B (+62% YoY), with Q4 guidance at $65B. For context, its quarterly revenue eclipses most firms’ decade-long totals. Global tech giants are pouring $320B into AI infrastructure—driving revenue for chipmakers, equipment suppliers, and software firms.
Domestically, A-share tech (electronics, communications, computing) saw H1 revenue rise 11.84% YoY, with net profit up 16.04%. AI chipmaker Cambricon’s H1 revenue exploded 4,347% YoY, turning a ¥1.038B profit after chronic losses.
This isn’t 2015’s empty hype. AI is delivering tangible ROI—Google boosts ad conversions, Amazon optimizes logistics, Meta enhances content. When investments yield returns, spending continues, fueling sector earnings.
Deeper still, this reflects a new global tech cycle. As mobile internet defined the past decade, AI now permeates everything—autonomous driving, healthcare, finance, manufacturing.
But high valuations pose risks. Many tech stocks trade at triple-digit P/Es, banking on future growth. Any earnings shortfall could trigger corrections. Since October, tech has lagged dividend stocks as markets digest gains and reassess risks.
A 20-30% tech pullback wouldn’t be surprising. Going forward, focus on firms with real earnings—not storytellers.
Concepts fade; earnings endure. True outperformers have competitive moats and sustainable value creation.
Don’t expect overnight doubles or panic over dips. Investing tests your grasp of industry trends, company worth, and holding stamina.
Risk reminder: Short-term moves don’t predict futures. Mentioned securities aren’t recommendations. Invest prudently.
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