A-Share Adjustment: A Normal Gear Shift, Benefiting Some Investors, and the Market Can Also Make Losses

　　Hexun Securities' WeChat account published an article on August 1. The recent two-day adjustment can be considered the first true adjustment of the current A-share market. It's not unexpected and may even alleviate some investors' anxiety about the bull market. How to view this adjustment? Hexun Securities offers four points:

　　First, the bull market will also shift gears. Reviewing the previous two bull markets, we can see that the bull market has shifted gears and adjusted its speed several times. After the Shanghai Composite Index first reached 3600 points on April 17, 2007, it experienced multiple adjustments, including two above 5%, one above 15%, and one above 20%. During the 2015 bull market from 3600 to 5178 points, there were two reversals exceeding 10% within a short 58 trading days. Ultimately, the market all adjusted after a sharp downturn and reached new highs.

　　Second, volatility increases above 3600 points. During the 2007 bull market, the daily average amplitude of Shanghai Composite Index, Shenzhen Component Index, and Shanghai Stock Exchange Index all expanded by more than 48% after reaching 3600 points. In the 2015 bull market, the daily average amplitude of major indices all expanded by more than 45%, with the amplitude of the ChiNext Index expanding by as much as 79.8% and 91.9%.

　　Third, an atmosphere has formed, and everyone will start dancing. During the 2007 bull market, 100% of industries doubled, with 100% of industries rising above 200%, and 50% of industries rising above 500%. In the 2015 bull market, 100% of industries doubled, with 69% of industries rising above 200%.

　　Fourth, chasing the trend, and the bull market can also make losses. Assuming that from April 8th this year, one buys a stock at the closing price on Friday every week, ranking in the top 1% of stocks by daily increase (excluding ST stocks and new issues): the final strategy returns -5.48%, while the Shanghai Composite Index rises 15.65%, losing 21.13%. The bull market is not something you can chase; it's about having a good eye and attitude.

　　Additionally, Hexun Securities summarizes two key features of the current market: First, liquidity is high. From the data, A-shares have continued to break 10 trillion yuan for 70 consecutive trading days; the scale of financial leverage has risen steadily, reaching a record high of 19.7 trillion yuan as of July 30th.

　　Second, valuations are relatively low. From the perspective of price-to-earnings ratio, there are still 20 industries in the top 30 Cinda-level industries that have dynamic price-to-earnings ratios below the historical 50th percentile, accounting for 66.7%. Only defense and aerospace, real estate, and comprehensive sectors have exceeded the historical 80% time frame. Most industries above 3600 points are not considered expensive.