Market Analysis - The performance of stock indices is positively correlated with the market capitalization of listed companies and negatively correlated with the number of listed companies[1] - The formula representing this relationship is: Stock Index = F(Market Capitalization / Number of Listed Companies) = F((Earnings per Share * Price-to-Earnings Ratio) / Number of Listed Companies)[1] U.S. Market Insights - From 2010 to 2024, the average annual growth of the total market capitalization of U.S. stocks was 13%, while the number of listed companies increased by 2% annually[2] - The Nasdaq index increased by 912% from the end of 2009 to October 21, 2025, with a stable price-to-earnings ratio (TTM) around 41 times, indicating significant earnings growth[2][3] - The top 8 technology companies on the Nasdaq accounted for 53% of its total market capitalization, highlighting a high concentration that enhances overall profitability[3] A-Share Market Dynamics - The average annual growth of China's A-share total market capitalization from 2010 to 2024 was 11%, similar to the U.S. market's growth rate[6] - The number of listed companies in A-shares grew by an average of 8% annually during the same period, which is significantly higher than the U.S. rate[6] - A-share market capitalization experienced rapid increases followed by adjustments, leading to longer intervals between new highs compared to the U.S. market[7][8] Future Outlook - Recent trends show that A-share total market capitalization increased from 70.07 trillion to 105.16 trillion CNY, a 50% rise, while the number of listed companies grew only by 1%[9] - The current expansion in A-share market capitalization is primarily driven by a recovery in valuation, with a rolling price-to-earnings ratio around 22 times, indicating room for further growth[10] - Continued economic growth in China, with a GDP growth rate of around 5% annually, supports the potential for sustained earnings growth among listed companies[10] Risks - Potential risks include underwhelming growth policies, escalating U.S.-China trade conflicts, geopolitical uncertainties, and possible delays in domestic interest rate cuts[11]