In the past week, the A-share market experienced intense fluctuations.

Firstly, on the first trading day after the National Day holiday, the three major stock indices continued the strong upward trend from before the holiday: by the end of the day, the Shanghai Composite Index had surpassed 3,400 points, and the ChiNext Index "soared" by 17.25% in a single day; however, in the following three trading days, the market fluctuated downwards with increasing divergence.

Looking at the weekly perspective, this week (October 8th to 11th), the three major stock indices shifted from a sharp rise before the holiday to a decline. According to WIND statistics, as of October 11th, the Shanghai Composite Index, ChiNext Index, and Shenzhen Component Index have fallen by 3.56%, 3.41%, and 4.45% respectively since October 8th.

As the market's ups and downs rapidly switch, many investors are worried that this round of market movement has ended and have doubts about the future performance of A-shares. At the same time, with the market's divergence increasing, another focal point of investor concern is: how to find investment opportunities in a volatile market.

In response to this, securities firms and fund institutions have provided answers one by one:

1. The intrinsic logic of this round of market movement: the joint improvement of domestic and foreign risk preferences.

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The strategy team of Huaxia Fund pointed out that this round of market movement is an opportunity under the backdrop of a decline in the risk-free interest rate, with the joint improvement of domestic and foreign risk preferences.

Regarding the market movement on 9·24, the team analyzed that policy shifts, as the core driving force of this round of rising market movement, have given rise to a "reassessment of confidence in Chinese assets." Since September 24th, major Chinese stock indices have risen across the board, with A-shares and Chinese概念股 leading the way, and the consumer, medical health, and real estate sectors leading the gains. In addition, the Federal Reserve's official announcement of a 50bp rate cut on September 20th was also significant. The rate cut improved the external funding environment for A-shares and, to some extent, boosted foreign capital preferences.

2. It is necessary to view the adjustment after a significant rise rationally.

Liu Sidan, an investment manager at the Macro Strategy Department of Bosera Fund, believes that it is quite normal for this stage to experience a回调震荡. The current movements of some funds have less to do with the assets themselves and are more related to short-term gains and losses. It is a very normal phenomenon for the market to experience a回调 after a significant rise, and the market is very prone to exhibiting a wave-like characteristic.In the view of the Huaan Securities strategy team, after the significant gains in the early period, the market's expectations for policy intensity and micro liquidity have returned to rationality. At the same time, subsequent market volatility is expected to continue to converge, with short-term attention to the statements made at the Ministry of Finance's press conference, and mid-term reliance on the fundamental improvement or sustained expectation improvement of the economy.

3. The current valuation level of A-shares still has appeal; the mid-term market catalyst depends on the substantial improvement of the economic fundamentals or the relay of sustained expectation improvement.

Liu Sidian pointed out that understanding the market mainly depends on the change in expectations. The current reason is the significant policy changes, which are worth the market's rise. However, what can continue to catalyze the market is the introduction of detailed policies. From a mid-term perspective, it is the change in fundamental numbers. For the time being, what can be expected in the short term is mainly the introduction of detailed policies, especially in the fiscal aspect.

"The current A-share market's expectations for policy shifts have been quite sufficient. From a mid-term perspective, I have high confidence in the improvement of China's economy and the rebound of Chinese enterprises' profits. From a cyclical perspective, when the economy reaches a high point of repair or improvement later, the market's level is also likely to be significantly higher than it is now, and the mid-term judgment is relatively optimistic," Liu Sidian said.

The Huaan Securities strategy team also analyzed that the short-term market's driving force mainly relies on the improvement of market risk preference brought by policy or event catalysts, but the development of the short-term market into a mid-term market inevitably requires the economic fundamentals to show substantial improvement or at least sustained expectation improvement to bring a more stable and far-reaching market. Otherwise, when the fundamentals do not show substantial improvement or lag too much, there will inevitably be fluctuations.

From a valuation perspective, according to statistics from the Huaxia Fund strategy team, currently, the trailing P/E ratio of the Wind All A Index is 18.17 times, which is cheaper than about 64% of the historical time and is still in a medium-low position; in terms of price-to-book ratio, the current Wind All A Index is 1.56 times, which is cheaper than about 93% of the historical time, and it is also a relatively obvious undervalued range.

"In the long term, we remain relatively optimistic. The overall valuation level of A-shares is still attractive, and the inflection point of the valuation cycle has just appeared. The dollar cycle, liquidity easing, and the imminent fiscal stimulus policies are all medium to long-term influencing factors. Overall, the time and space dimensions of this round of market should be worth looking forward to," the team pointed out.

Golden Eagle Fund believes that although A-shares have experienced a more significant pullback after the holiday, and the market risk appetite has significantly cooled down, in the medium to long term, the strength of this round of policy shifts is still expected to exceed the current investors' cautious expectations, and it may ultimately become the most positive signal to guide the market inflection point and clarify the direction. The certainty of A-shares' long-term upward trend remains strong.

4. The current focus should be on the main line and grasp the structural opportunities.

The Huaan Securities strategy team believes that when the transaction volume remains at a high level, the market still has structural opportunities. Currently, two main lines can be valued: the first main line is the growth sector with improved liquidity, frequent catalysts, and expected better-than-expected performance in the third-quarter report, including electronics, new energy, communications, and military industry.The second main thread is the partial consumer goods with support from the business cycle or policies, including home appliances, automobiles, pharmaceuticals, and agriculture and animal husbandry. These directions have experienced lagging growth in the early stage, thus there is a possibility of catching up. The current pig cycle has not ended, and it is expected that pig prices will reach new highs in the future. At the same time, quarterly inventory data will be released in October, and it is expected to bring catalytic opportunities for agriculture and animal husbandry, referring to the data in April and July.

In the medium term, the Huaxia Fund strategy team believes that two clues can be focused on for layout: First, the cyclical direction in the growth sector. Starting from the perspective of policy attitude reversal, the most significant change in expectations is still in the cyclical sectors represented by finance and real estate, consumption, and technology growth. It is expected that the market may spread to the cyclical direction in the growth sector, including but not limited to electronics, computers, and game media.

The second is PB breaking net assets. When the market has a certain "fear of heights" sentiment, PB net-breaking stocks may be another choice for funds; especially when policy catalysis occurs, it is expected to become a main line with sustained strength.

In addition to the above two logics, the Huaxia Fund strategy team believes that the diversified financial sector represented by securities firms will have high "explosiveness" during the cycle of rising trading volume and turnover rate.

Golden Eagle Fund analysis, value-oriented leading companies with stable performance and high dividend yields are expected to become a new key force in stabilizing the market after the introduction of monetary innovation tools. In addition, some important directions that are expected to significantly benefit from policy shifts and central leverage increases are still worth focusing on, although some sectors have shown a significant decline in risk preference in the short term. For example, consumer goods such as home appliances and automobiles supported by the policy of replacing old with new, and the military sector where government orders are expected to recover rapidly by the end of the "14th Five-Year Plan," are all worth continuous attention.

5. It is essential to avoid frequent portfolio adjustments and chasing gains and killing losses at the moment.

The Huaxia Fund strategy team believes that the current market, after explosive growth driven by policy and sentiment, and after the valuation has been repaired from the low ground, there is a need for the market to return to calm. However, the prelude to the continuous rise of the medium-term valuation center may have just begun. Therefore, for short-term high points, profits can be gradually taken, but if you remain optimistic about the long-term trend of the market, you might as well keep an appropriate bottom position, and then reallocate positions as emotions gradually cool down and the index adjusts. Do not frequently adjust positions and chase gains and kill losses.

Liu Sidian suggests that whether to take profits at the moment should be judged based on the different situations of each investor. If you have been in the market before, you can consider taking some profits. In fact, the current market turnover is so high, which is contributed by both buyers and sellers of stocks. Many sellers should be taking profits.