Core Viewpoint - The report analyzes the recent upward trend in A-shares since September last year, highlighting that the Shanghai Composite Index has increased by over 40% over the past year, and compares this with historical upward phases in the A-share market over the last 20 years [2][3]. Historical Upward Phases - Historical upward phases in A-shares typically last 2-3 years, show significant overall gains, and are characterized by increased trading volume due to new capital entering the market. These phases often begin from historical lows, where investor sentiment is extremely pessimistic [2]. - The report identifies key historical phases: 2005-2007, 2013-2015, and 2019-2021, noting that the current phase since September 2024 has also experienced several adjustments and a differentiated entry of investors [2][3]. Driving Factors - The upward trends in A-shares have been driven by macroeconomic improvements, liquidity enhancements, and favorable trends in key industries. For instance, the 2007 rise was linked to rapid industrialization and strong commodity prices, while the 2015 rise was associated with economic transformation and monetary easing [3]. - The current upward trend is influenced by changes in the international monetary system and deepening narratives of innovation in China, with growth sectors like AI, innovative pharmaceuticals, and high-end manufacturing leading the charge [3][4]. Capital Market Reforms - Reforms in the capital market have played a crucial role in stimulating market vitality. Key reforms include the "National Nine Articles" and subsequent policies that have enhanced market structure and institutional participation [4]. - Recent reforms since the new "National Nine Articles" have focused on market management, long-term capital inflows, and support for innovative enterprises, indicating a commitment to further reform in the capital markets [4]. Earnings and Valuation - The report notes that previous upward phases were characterized by a combination of earnings growth and valuation expansion. Currently, A-share companies are expected to see a turnaround in earnings growth, with an estimated overall growth rate of around 3.5% for the year, particularly in non-financial sectors where growth may exceed 8% [5][11]. Mainline Characteristics of Upward Phases - The report outlines that previous mainline trends in the market have shown distinct characteristics, such as prolonged periods of broad market gains and significant sector rotations. The current mainline is driven by growth sectors, with AI, innovative drugs, and high-end manufacturing leading the way [6][7]. - Historical data indicates that even during clear upward trends, sectors may experience over 20% adjustments, but the overall long-term trend remains intact [7][8]. Long-term and Steady Conditions - The current market is viewed as having more "long-term" and "steady" conditions compared to previous phases. The government's increased focus on the capital market and its role in economic transformation is expected to enhance market stability and growth [9][10]. - The report emphasizes that the global monetary system's restructuring may still be in its early stages, providing further room for the revaluation of Chinese assets [10]. Valuation Context - Despite the significant rise in the index, the overall valuation of A-shares remains reasonable, with the CSI 300 index trading at a PE ratio of around 14 times, which is relatively low compared to other major global markets [11]. - The report highlights that the current market capitalization of A-shares exceeds 100 trillion yuan, but the ratio to GDP remains moderate, indicating that the market is not overvalued despite the recent gains [11][29]. Investment Strategy - The report suggests that growth styles are currently showing signs of expansion and rotation, with a focus on sectors benefiting from new productivity and green development. Investors are advised to pay attention to upcoming quarterly earnings reports and policy directions that support these sectors [12].