Core Insights - The A-share market is at a critical turning point, transitioning from the "real estate-debt" old cycle to the "technology-innovation" new paradigm, mirroring the four pillars of the long bull market in the US stock market [3][5][6] - The new economic sectors are becoming the core drivers of ROE recovery, with the overall ROE for non-financial sectors in A-shares expected to rebound to 6.48% by Q3 2025, contrasting sharply with the deep losses in the real estate sector [3][7][18] - The economic structure and valuation paradigm are undergoing reconstruction, with hard technology becoming the new focus for capital allocation, as evidenced by the significant increase in market capitalization of sectors like electronics and biomedicine [3][4][24] - The investor ecosystem is shifting towards long-termism, driven by institutional changes that encourage value investing and stabilize the market [3][4][30] Group 1: Transition from Old to New Cycle - The A-share market is at a historical crossroads, moving away from the old real estate-debt driven model, with the current market volatility seen as a necessary pain in establishing a new growth paradigm [5][6] - The long bull market in the US is not a myth but is firmly based on technological innovation, institutional leadership, shareholder returns, and a survival-of-the-fittest mechanism, providing a clear blueprint for the future evolution of A-shares [6][17] Group 2: New Steady State of Profitability - A-share profitability is showing clear signs of bottoming out, with Q3 2025 ROE for non-financial sectors at 6.48%, up from 6.27% in Q2, driven primarily by improvements in net profit margins rather than increased leverage [7][8][10] - The recovery in profitability is not uniform but is concentrated in high-growth sectors like TMT and materials benefiting from policy changes, indicating a structural recovery led by new economic drivers [8][11][17] Group 3: Structural New Paradigm - The structural transformation of the Chinese capital market is deeply rooted in the continuity of supportive policies, with the technology sector's market capitalization surpassing all other styles during the "14th Five-Year Plan" [18][20] - The valuation system for the electronics sector has undergone significant reconstruction, reflecting a shift towards a narrative-driven or long-term value perspective, similar to the US market [22][24] Group 4: New Balance in Ecosystem - The funding ecosystem in the A-share market is highly differentiated, with institutional funds dominating core asset allocations, while small-cap and high-dividend sectors contribute to market diversity [30][32] - The ongoing optimization of the investor structure indicates a long-term trend towards maturity in the A-share market, with institutional reforms fostering a long-term investment mindset [33][36] Group 5: Awakening of Returns - The regulatory environment is shifting towards a focus on shareholder returns, with an increase in voluntary dividends and a significant rise in share buybacks, particularly cancellation buybacks, which enhance per-share value [38][39] - The rise in cancellation buybacks, with an expected total of 225.29 billion yuan in 2025, reflects a significant change in the value management awareness of A-share companies, supporting the long-term bull market narrative [39][41]

Group 1: Market Milestones - The A-share market reached two significant milestones on August 18: the Shanghai Composite Index hit a nearly 10-year high, and the total market capitalization of A-shares surpassed 100 trillion yuan for the first time [1] Group 2: Regulatory and Institutional Support - Continuous efforts by regulatory authorities to promote long-term capital inflow and establish rational, value, and long-term investment philosophies have been pivotal for the market's robust performance [1] - The implementation of registration system reforms and strict enforcement of delisting regulations have contributed to a more standardized and transparent market environment [2] - The China Securities Regulatory Commission (CSRC) handled 739 cases in 2024, imposing fines totaling 15.3 billion yuan, reflecting a "zero tolerance" approach to illegal activities [2] Group 3: Long-term Capital Inflow - Domestic long-term funds, including social security funds, pension funds, and insurance capital, along with foreign capital through channels like the Shanghai-Hong Kong Stock Connect, have provided stable and continuous funding to the market [2] - As of the end of Q2 this year, the stock investment balance and proportion of life and property insurance companies have continued to rise [2] - Foreign investors increased their holdings of domestic stocks and funds by 10.1 billion USD in the first half of the year, indicating a strong interest in value investment [2] Group 4: Improvement in Company Quality - The overall quality of listed companies has shown a steady improvement, with more firms focusing on core businesses, increasing R&D investments, and enhancing corporate governance [2] - The trend of mergers and acquisitions among listed companies has accelerated, with 118 companies announcing significant asset restructuring as of August 19, indicating a drive to cultivate new profit growth points [3] Group 5: Shareholder Returns - The total cash dividends of A-share listed companies for the 2024 fiscal year reached 2.4 trillion yuan, a 9% increase from 2023, reflecting a growing awareness of shareholder returns [3] - The number of companies consistently paying dividends has been increasing, with over a hundred companies disclosing mid-year dividend plans for 2025 as of August 19 [3] Group 6: Investment Philosophy - The market is gradually maturing, and all parties are encouraged to actively practice the "three investments" philosophy (rational, value, and long-term investment) to ensure stable market growth [3]