Hexun Investment Advisor Wang Jigang: Broad rally with shrinking volume of 300 billion, the rebound's foundation still needs confirmation

On Tuesday, the market as a whole experienced a significant rebound. Except for the ChiNext, other indices rose by more than 1%, with the CSI 2000 gaining 3.74 and micro-cap stocks increasing by 5.56. Clearly, the broad-based recovery today was mainly concentrated in the small and mid-cap sectors, which is a positive phenomenon. However, during the trading session, the volatility was still relatively large. For instance, the ChiNext opened up 1%, then quickly dropped 2.5%, and later in the afternoon, it oscillated back with a fluctuation exceeding 3%. The intra-day divergence was quite significant. In fact, it wasn’t just the ChiNext; the Shanghai Composite Index experienced the same situation today. According to Wang Jigang from Hexun Investment Consulting, this tells us that after experiencing a rapid decline, the first thing that rebound funds consider is not to increase positions but to reduce positions and realize profits. After all, it has dropped significantly, right? Reducing positions to lower risk is reasonable. So, are the indices stable today? I believe we have not seen that signal yet. Note that yesterday there was a significant drop in volume, and today there was a rise on reduced volume, with a decrease of more than 300 billion in volume, and only at the end of the day did we see an increase in volume. I noticed that the trading volume of some ETFs like the CSI 300 and SSE 50 increased at the end of the day, but it was minimal, indicating that the support funds did not enter the market decisively.

Today’s recovery is more of a self-repair. I have discussed this before. For the market to lift at this level and maintain a sustained rebound, there must be supportive policies and an influx of capital; both are essential and currently not satisfied. However, at this point, there is no need to be overly pessimistic and look downward. Unless the external situation continues to deteriorate, the index is likely to stabilize and consolidate around the 3800-point mark. Therefore, we should maintain patience and act less. In terms of sectors, today was basically a broad-based rally led mainly by power, pharmaceuticals, medical services, banks, and some areas of technology and new energy such as photovoltaics and wind power batteries, which saw a rebound. Overall, it is still a rhythm of rotation. The power sector currently looks better in trend, and we can delve into some of the lagging stocks here without much concern. The time for annual reports and quarterly reports is approaching, and we can gradually pay attention to undervalued high-performing technology stocks as well.