Core Viewpoint - The A-share market is experiencing a style switch from small-cap to large-cap stocks, driven by macroeconomic stabilization and performance certainty in the upcoming quarterly reports [2][3]. Market Performance - As of October 24, the Shanghai Stock Exchange 50 Index rose by 4.33% in the past month, reaching a new high for the year, while the North Exchange 50 Index and the CSI 2000 Index fell by 6.77% and 0.25%, respectively, indicating a shift in market capitalization style [2]. - Since the "9.24 market" in 2024, the CSI 2000 Index had previously outperformed the SSE 50 Index by 109.65%, but recently it has underperformed by about 5 percentage points [3]. Fund Manager Insights - Fund managers believe that the market is transitioning from small-cap to mid and large-cap stocks due to increased risk aversion and a focus on performance certainty [2][4]. - Recent announcements of dividends and purchase limits from small-cap funds suggest a strategy to lock in profits [3]. Liquidity Cycle - The A-share market liquidity is characterized by a four-stage cycle, currently nearing the end of the initial expansion phase, with large-cap stocks expected to regain dominance as institutional funds enter the market [4]. - There is a notable shift in focus towards mid-cap stocks, which have been under pressure due to a lack of confidence in their fundamentals [4]. Fund Holdings Transition - Many high-performing funds are shifting their holdings from small-cap to large-cap stocks, reflecting a broader trend of "abandoning small for large" [5][6]. - For instance, the "champion fund" Yongying Technology has transitioned its holdings from small-cap growth stocks to large-cap growth stocks since the second quarter [6]. Fund Size Impact - The rapid growth in fund sizes necessitates a shift towards more liquid large-cap stocks, as fund managers find it challenging to build large positions in less liquid small-cap stocks [7]. - This creates a positive feedback loop where increased fund size leads to higher stock prices, further attracting investment [7]. Institutional and Regulatory Factors - Institutional changes, such as the upcoming performance benchmark regulations for public funds, are expected to reinforce the large-cap market logic [8]. - The valuation of large-cap stocks, particularly the CSI 300, indicates they are undervalued, presenting a strong defensive investment opportunity as small-cap stocks weaken [8].