Core Viewpoint - Liu Zhihui emphasizes a rational approach to investment amidst market volatility, focusing on macroeconomic cycles and industry allocation to achieve steady returns [2][3] Investment Philosophy - Liu's investment framework consists of three core elements: understanding macro cycles, assessing odds, and respecting market signals [3] - The investment philosophy includes "Investment Way," "Investment Method," and "Investment Technique," focusing on market trends, macro and industry analysis, and specific trading strategies [4] Multi-Asset Framework - Liu's investment strategy spans fixed income, equities, and convertible bonds, aiming for absolute returns through flexible allocation and odds thinking [5] - In bond investment, Liu adjusts duration and leverage based on macro analysis, credit environment, and market sentiment [6] Stock and Convertible Bond Strategy - Liu captures industry trends and cyclical turning points through sector rotation and concentrated allocation, focusing on both intrinsic value and market pricing signals [6] - For convertible bonds, Liu only allocates when they exhibit characteristics of downside protection and upside potential, guided by macroeconomic fundamentals [6] Recent Market Actions - In response to market adjustments, Liu increased exposure to sectors like innovative pharmaceuticals and AI, while also considering undervalued sectors such as machinery and real estate [7] - Liu maintains a neutral stance on the bond market, focusing on short-duration government bonds and high-rated credit bonds due to low yield levels [7]

Group 1: Liquidity and Fund Flows - Leverage funds, stock ETFs, and buybacks have all expanded to historical highs, with net inflows of leverage funds reaching 468 billion CNY, placing it in the 95th percentile over the past three years[11] - Stock ETFs saw a net subscription of 379 billion CNY, also in the 90th percentile historically[11] - The total buyback amount reached 54 billion CNY, up from 27 billion CNY, ranking in the 88th percentile[25] Group 2: Demand and Financing Trends - Equity financing dropped significantly to 2 billion CNY, which is only in the 3rd percentile historically[11] - Industrial capital net reduction was 19 billion CNY, down from 52 billion CNY, placing it in the 37th percentile[30] - Southbound capital saw a cumulative net inflow of nearly 520 billion CNY over the past five months, with a weekly net inflow of 24.3 billion CNY, ranking in the 17th percentile[40] Group 3: Market Sentiment and Investor Behavior - The Shanghai Composite Index rose by 1.3% on the first trading day after the holiday, returning to 3900 points, which boosted A-share search interest on social media[2] - Retail investor net inflow reached 822.1 billion CNY, an increase of 435.2 billion CNY from the previous value, placing it in the 34.9th percentile over the past five years[2] - The trend of public funds clustering has weakened, with a shift towards value stocks, particularly in the electronics and consumer sectors[2]

- The report discusses the market's high volatility phase, likened to the "tail" of a fish, indicating a potential peak in the TMT sector's performance due to high trading concentration and lack of clear drivers for other sectors [1][7] - Industry divergence, measured by rolling quarterly return standard deviation, has been expanding and is expected to reach its peak since September 2024 if the current "strong-get-stronger" trend persists [1][7] - The TMT sector's trading volume share is at its third-highest level historically, and when combined with the advanced manufacturing sector, it approaches the historical peak, suggesting a crowded trade scenario [1][7] - The stock-bond yield gap has been running below the -2 standard deviation of the Bollinger Band for nearly three years, implying limited upside potential for the market without new upward drivers [2][8]

Group 1 - The current technology bull market has been ongoing for a period, with leading stocks continuously reaching new highs, raising questions about its sustainability and potential for further growth [1] - Historical references from previous technology bull markets (2013-2015 and 2019-2021) provide valuable insights into the current market dynamics [1] Group 2 - In previous bull markets, the maximum gains for the ChiNext Index were 589.73% and 201.81%, while the CSI Technology 100 Index saw maximum gains of 457.03% and 156.04%. As of September 18, 2024, the current maximum gains for these indices are 113.67% and 110.35% respectively, indicating potential for further increases [2] - In the "Internet Bull" market, 31 industry indices saw maximum gains exceeding 100%, with the computer index soaring nearly 8 times. In the "Track Bull" market, 19 industry indices also exceeded 100%, with the power equipment industry index increasing over 3 times. Currently, only 6 industries have doubled, with the communication index rising over 180% [2] Group 3 - The duration of the current bull market has been approximately 1.5 years since the low point in 2024, while previous bull markets lasted around 3 years [3] Group 4 - Trading congestion is at historical highs, with the TMT sector's cumulative trading volume reaching nearly 95 trillion yuan since 2025, a nearly 20% increase from 2024 [4] - The TMT sector's trading volume accounted for over 46% of A-shares at one point this year, surpassing previous bull market peaks [4] - The weighted turnover rate for the TMT sector reached nearly 5.8%, exceeding previous bull market highs, indicating a high concentration of trading activity [4] Group 5 - Despite high trading volumes, much of it is driven by quantitative high-frequency trading, and the margin financing balance has exceeded the peak in 2015, but its market value ratio is still 50% lower than that year [5] - The sentiment indicator for A-share retail investors shows that while sentiment has increased, it has not reached the exuberant levels seen in mid-2015 or late 2020 [5] Group 6 - The TMT sector's high valuations are a concern, with the computer industry index's rolling P/E ratio exceeding 93 times, electronics over 70 times, media over 49 times, and communications over 47 times as of September 19, 2025 [6] - However, these P/E ratios are not at historical highs, with the computer, electronics, and communications sectors around the 50th percentile historically [7] Group 7 - The TMT sector's total market capitalization has surpassed 23 trillion yuan, accounting for over 22% of the total A-share market, marking a historical high [7] - The number of TMT stocks with a market capitalization exceeding 100 billion yuan has reached 34, the highest on record [7] Group 8 - The disparity between the performance of the real economy and financial markets is a global phenomenon, with the correlation between macroeconomic indicators and capital markets in China and the U.S. at a five-year low [8] - The current technology bull market is characterized by high-quality fundamentals and performance-driven characteristics, particularly in the AI computing industry, with companies like New Yisheng and Zhongji Xuchuang experiencing explosive growth in revenue and net profit [8] Group 9 - Institutional allocation in the TMT sector remains below historical peak levels, with public funds holding over 1.6 trillion yuan in TMT stocks, indicating potential for further investment [9] - The average holding ratio of public funds in the TMT sector is currently 5.73%, about 70% of the peak level during the last technology bull market, suggesting room for increased allocations [9]

Group 1: Liquidity and Fund Flow - Leverage funds and newly issued public funds remain at high levels, with net inflow of leverage funds and new issuance of equity public funds continuing to be robust[10] - Southbound funds have seen a net inflow exceeding 460 billion over the past four months, averaging over 10 billion per week[10] - The total net inflow of leverage funds reached approximately 467 billion, while the total net inflow of equity public funds was 127 billion, maintaining a high percentile ranking of 88% and 95% respectively[11] Group 2: Trading Activity and Market Sentiment - Trading heat in the new energy vehicle sector increased by 16 percentage points to 57%, while the real estate sector rose by 7 percentage points to 77%[4] - The brokerage sector saw a decline of 20 percentage points to 42%, and the military industry dropped by 17 percentage points to 33%[4] - Retail investor net inflow in the A-share market reached 186.82 billion, marking a significant increase of 693.7 billion from the previous value, placing it in the 92.5 percentile over the past five years[4] Group 3: Market Trends and Investor Behavior - The Shanghai Composite Index rose from 2600 to 3400 primarily due to state-owned funds and retail investor inflows, with a notable increase in new fund issuance in recent months[5] - The recent week saw a significant increase in search interest for A-shares on Douyin, reaching a new high since April[4] - The overall sentiment in the ETF market improved, with a net inflow of 80.8 billion, reversing the previous outflow of 41.5 billion[25]

Liquidity - Leverage capital net inflow has returned to a high level, with a total inflow of 632 billion CNY, representing a 97% percentile over the past three years[10] - The net reduction of industrial capital has expanded to a historical high, with a net outflow of 136 billion CNY, also at a 97% percentile[10] - Southbound capital has seen a continuous net inflow of over 100 billion CNY weekly for four consecutive months, totaling nearly 430 billion CNY[2] Trading Congestion - The trading heat for photovoltaic industry has increased by 28 percentage points to 73%, while the mechanical industry has decreased by 39 percentage points to 19%[7] - The trading heat for new energy vehicles has risen by 20 percentage points to 44%, while the military industry has decreased by 21 percentage points to 46%[7] Investor Sentiment - Retail investors' net inflow in A-shares was 117.45 billion CNY, a decrease of 119.5 billion CNY from the previous value, placing it at the 65.8% percentile over the past five years[2] - The Shanghai Composite Index rose by 1.7% on September 11, driving a sustained high level of search interest in A-shares on social media platforms[2] - The trend of public funds clustering has strengthened, with a focus on value and sectors like consumption and cyclical industries[2]

Core Viewpoint - The report highlights key indicators to monitor during a bull market, emphasizing macroeconomic metrics, trading activity, capital inflows, and asset valuation comparisons [2][3]. Group 1: Macroeconomic Indicators - Indicator 1: The ratio of market capitalization to GDP is currently at 85.6%, with a change of 18.5% from the start to the end of the current market cycle, indicating room for improvement compared to historical highs [5][16]. - Indicator 2: The ratio of market capitalization to household deposits stands at 73.2%, with a change of 15.7% during the current cycle, suggesting potential for further growth [5][19]. Group 2: Trading Activity - Indicator 3: Trading volume has increased from 1.6 trillion to a peak of 3.19 trillion, indicating a potential for further expansion as historical cycles have shown larger increases [6][22]. - Indicator 4: Trading congestion reached a maximum of 39.3%, up from 27.7%, reflecting a significant increase in trading activity [6][24]. - Indicator 5: The drawdown risk is currently at 5.9%, lower than previous cycles, while the profit-loss ratio is at 2.8, indicating a favorable risk-reward scenario [6][26]. Group 3: Capital Inflows - Indicator 6: Margin financing balance is at 2.24 trillion, a 1.21 times increase from the starting point, with room for growth compared to previous cycles [8][28]. - Indicator 7: The number of new accounts opened has seen limited growth, with a ratio of 1.0 compared to the starting month, indicating potential for future increases [8][30]. - Indicator 8: The issuance of equity funds has a ratio of 1.1 compared to the starting month, which is relatively low compared to historical data [8][32]. Group 4: Asset Valuation Comparisons - Indicator 9: The equity risk premium (ERP) has decreased by 1.58% during the current cycle, which is a lower decline compared to previous cycles [10][34]. - Indicator 10: The difference between equity yields and bond yields has decreased by 1.08%, but remains at a relatively high level compared to historical averages [10][36].

Group 1: Macro Indicators - The market capitalization to GDP ratio is currently at 85.6%, indicating room for improvement compared to historical peaks[4] - The market capitalization to household deposits ratio stands at 73.2%, suggesting potential for growth[4] - The change in market capitalization relative to GDP during this bull market is 18.5%, which is relatively low compared to past bull markets[4] Group 2: Trading Activity - The trading volume increased from 1.6 trillion to a peak of 3.19 trillion, representing a doubling in volume[5] - The maximum turnover rate reached 2.76%, an increase of 0.99% from the starting point, indicating potential for further growth[5] - The trading congestion ratio peaked at 39.3%, up 11.5% from the starting point, which is considered high[5] Group 3: Risk and Profitability - The drawdown risk is currently at 5.9%, significantly lower than previous bull markets which were above 10%[6] - The profit-loss ratio is at 2.8, indicating a favorable risk-reward scenario, although there is still room for improvement compared to the 2014-2015 period[6] Group 4: Capital Inflows - The margin financing balance reached 2.24 trillion, a 21% increase from the starting point of 1.85 trillion[7] - The number of new accounts opened during this bull market peaked at 196.4 million, showing limited growth compared to previous bull markets[7] - The issuance of equity funds has a ratio of 1.1 compared to the starting month, which is relatively low compared to past bull markets[7] Group 5: Valuation Comparisons - The equity risk premium (ERP) has decreased by 1.58% during this bull market, which is considered a low decline compared to historical data[11] - The equity-bond yield spread has decreased by 1.08%, but remains at a relatively high level compared to previous periods[11]

Group 1 - The market shows signs of localized overheating, but it is not fully overheated [2][3] - Short-term market may experience slight corrections, but the overall extent is manageable [3] - The technology sector is expected to present significant investment opportunities due to trends in advanced manufacturing [3] Group 2 - Current A-share sentiment index is at a historically high level [4] - Multiple dimensions such as market liquidity and trading activity indicate a crowded market, particularly in sectors like chemicals, machinery, and electronics [5] - A high number of industries are currently in a state of persistent crowding, which may lead to market adjustments [5] Group 3 - Short-term investment opportunities are recommended in sectors such as non-ferrous metals, real estate, and aerospace [6][7] - Policy support and a shift of household savings towards capital markets are expected to provide strong backing for the market [6] - The overall profit growth of A-share listed companies is projected to turn positive by 2025, with significant elasticity in the technology innovation sector [6]

Group 1 - Current A-share market sentiment is at a historically high level, characterized by liquidity, asset pricing differences, and trading activity [1] - Several industries, including chemicals, building materials, light manufacturing, machinery, defense, automotive, home appliances, textiles, non-bank financials, electronics, communications, computers, and media, are triggering congestion indicators [1] - A high number of industries are in a sustained congestion state, indicating potential for market adjustments [1] Group 2 - A-share market showed strong fluctuations with sectors like liquor, non-ferrous metals, communication equipment, and aerospace performing well, while electronic chemicals, automotive, beauty care, and utilities lagged [2] - There is a notable shift of household savings towards capital markets, providing a continuous source of incremental funds [2] - The overall profit growth expectation for A-share listed companies is projected to turn positive by 2025, ending a four-year decline, with significant elasticity in the technology innovation sector [2] Group 3 - Following stabilization of overseas liquidity disturbances, the A-share market continued its trend of rising volume and price, with the Shanghai Composite Index nearing 3900 points and total market turnover exceeding 30 trillion [3] - There is a focus on the rotation opportunities in recently popular sectors and potential rebounds in relatively low-positioned sectors supported by recent policies [3] - The "anti-involution" policy and demand-side policies are expected to significantly influence the A-share market, with household savings entering the market being a crucial support for index strength [3]