To The Moon

Since its establishment in 2010, the Growth Enterprise Market (GEM) has experienced four major bull cycles, each with distinct starting points, peak structures, and concluding patterns.

A recent macro-depth report from Soochow Securities Company Limited., dated July 27, systematically reviews these four cycles, using this framework to assess the current market phase. The report notes that from its low on September 23, 2024, to its interim high on June 25, 2026, the GEM index surged 185.66%, followed by a maximum drawdown of 21.58%. As of July 24, 2026, this drawdown had narrowed to 20.38%.

Among the four historical cycles, the 2018–2021 period most closely resembles the current one in terms of cumulative gain, duration, and the initial adjustment path after the peak. Therefore, it serves as the primary reference model.

Analysts Lu Zhe and Tang Yaokan from Soochow Securities Company Limited. concluded in their report that, as of July 24, 2026, valuations, actual earnings, ETF subscriptions and redemptions, and domestic interest rates have not yet weakened in tandem. The existing evidence is insufficient to confirm the end of the current structural upward trend. However, price trends and market breadth remain in a warning state, and a definitive right-side confirmation has not yet formed.

Four Cycles: Varying Gains, Valuations, and Durations

Since its launch in 2010, the GEM index can be divided into four main structural upward phases, each with significant differences in key indicators.

The initial cycle, starting in 2010, lasted 112 trading days, with a cumulative gain of 42.99% and a peak trailing P/E ratio of 73.89 times. Due to the index being in its early stages of publication and sample expansion, its structure was unique and representativeness limited. The report retains this as a special case study for early index pricing and valuation adjustment.

The 2012–2015 cycle was the most extreme in terms of gains among the four. The index rose 570.80% from its December 2012 low to its June 2015 high, spanning 605 trading days. The peak trailing P/E ratio reached 124.71 times, with a price-to-book ratio of 13.43 times, and margin financing accounted for 1.50% of the total GEM market capitalization. This phase was driven by prolonged price increases, significant valuation expansion, and leveraged funds, with valuation expansion far exceeding that of other periods.

The 2018–2021 cycle saw a cumulative gain of 195.69% over 682 trading days, with a peak trailing P/E ratio of 59.42 times. Near the main peak, year-over-year growth in revenue and net profit attributable to parent company was 33.04% and 53.80%, respectively, providing solid fundamental support. This cycle was propelled by a recovery from low levels, earnings growth, and a dominant growth style.

In the current cycle, which began in 2024, the index rose 185.66% from its low to the interim high on June 25, 2026, over 423 trading days, with a peak trailing P/E ratio of 49.90 times. Notably, this cycle has progressed rapidly in a low domestic long-term interest rate environment. Near the peak, margin financing accounted for 3.04% of the total GEM market capitalization, and the top 5% of trading volume accounted for 55.78%—both indicators exceeding levels seen near the peaks of 2015 and 2021.

Peak Structures: The Divide Between Single High and Composite Tops

The four cycles exhibit two distinct peak structures, which the report categorizes as "single high" and "composite top."

The 2010 and 2012–2015 cycles both belong to the single high type. The 2010 cycle saw a sustained decline after a 120-day trend weakening, with prices quickly turning downward. Similarly, the 2015 cycle experienced a rapid trend reversal after the peak, with no subsequent high forming near the previous peak. Within 22 trading days of the 2015 peak, the maximum drawdown reached 34.58%, the fastest and deepest adjustment among the four cycles.

The 2018–2021 cycle, in contrast, formed a classic composite top. The main peak on August 4, 2021, was 3,563.13 points, followed by a pullback and rebound. A subsequent high of 3,505.73 points formed on November 22, 2021, with a difference of only 1.61% between the two. It was not until December 20, 2021, when the index first fell below both its 60-day and 120-day moving averages, that the confirmation of a mid-term top gradually increased. This process took about four months, with moving averages and relative trends weakening sequentially, representing a gradual confirmation.

The report points out that during the 2021 top phase, changes in valuations, external interest rates, and earnings were not synchronized. Near the main peak, the trailing P/E ratio was 59.42 times. The U.S. 10-year Treasury yield rose from 1.24% at the end of July 2021 to 1.52% by year-end, continuing to climb in 2022. However, year-over-year growth in revenue and net profit attributable to parent company remained high at 33.04% and 53.80% in July 2021, respectively. Although profit growth slowed by the end of the year, it remained at elevated levels. This suggests that price trends and valuation constraints may weaken ahead of financial data, and true mid-term confirmation still comes from a sustained trend reversal.

Current Cycle vs. 2021: Similarities and Differences

Among the four historical cycles, the 2018–2021 cycle has the highest comparability with the current one, but the report clearly states that the current cycle is not a simple replication.

Similarities include: both cycles saw gains of 195.69% and 185.66% from low to closing peak, respectively, with relatively long durations; year-over-year growth in revenue and net profit attributable to parent company remained positive near the peaks; and there was a concentration of trading in a limited number of stocks.

Differences are equally significant. The current cycle's interim peak trailing P/E ratio is 49.90 times, lower than the 59.42 times near the 2021 main peak. The Chinese 10-year government bond yield has fallen from 2.87% near August 4, 2021, to 1.73% as of July 24, 2026, indicating significantly lower domestic discount rate pressure. Conversely, the U.S. 10-year Treasury yield has risen sharply from 1.19% near August 4, 2021, to 4.69% as of July 24, 2026, creating an opposite external constraint. Additionally, the current cycle shows higher relative leverage and trading concentration, though ETF shares have maintained net subscriptions over the last 20 trading days, and actual earnings continue to grow.

Regarding the initial adjustment path after the peak, the current cycle's maximum drawdown of 21.58% within 22 trading days is higher than the 11.91% seen in the 2021 cycle but lower than the 34.58% recorded in the 2015 cycle. The report emphasizes that a drawdown alone cannot replace the combined verification of trend persistence, earnings, and capital signals.

Conclusion Method: Confirmation Through Trend, Capital, and Earnings Resonance

The report reviews the verification methods for the conclusion of each historical cycle and constructs a framework for top warning and confirmation.

From historical experience, the common feature of the three concluded cycles is a sustained weakening of price trends, which was at least jointly verified by one of the following: capital, actual earnings, or the interest rate environment. The 2010 and 2015 cycles ended relatively decisively, with prices declining continuously after moving average trends weakened. The 2021 cycle experienced a more complex composite top process, with moving average breaches, relative performance weakening, and earnings growth declines occurring sequentially.

The report divides peak judgment into three levels: warning, reinforcement, and confirmation. It explicitly states that price trends and market breadth both belong to the technical dimension and should not be counted as two separate types of confirmation signals. A more reliable top confirmation requires a sustained weakening in the technical dimension, along with at least one verification from capital, actual earnings, or the interest rate environment.

As of July 24, 2026, the conditions for confirming a top in the current cycle have not yet resonated. On the technical front, the index is still 11.50% and 4.45% below its 60-day and 120-day moving averages, respectively. Only 24% of constituent stocks are trading above their 120-day moving averages. The 20-day and 60-day relative returns versus the CSI 300 are -12.51% and -2.05%, respectively. However, the trailing P/E ratio is near its historical median, year-over-year growth in net profit attributable to parent company remains at 55.37%, the ChiNext ETF has seen a share increase of 8.732 billion shares over the last 20 trading days with an estimated net subscription of 27.223 billion yuan, and domestic long-term interest rates remain low.

The report notes that the key for subsequent judgment lies in the following: if the index can stably recover its 120-day moving average, accompanied by improved market breadth, continued earnings delivery, and no sustained ETF redemptions, the recent adjustment may still be a risk release within an upward trend. Conversely, if a rebound fails to recover the 120-day moving average, accompanied by persistently low breadth, widespread ETF redemptions, and a continuous weakening of earnings in the semi-annual and third-quarter reports, the reliability of a mid-term top judgment will significantly increase.