"A few days ago, the wealth management product I bought was falling every day. The profits from the early stage were almost gone, and the principal was about to be lost. I have a half-year lock-up period for this wealth management, otherwise I would have redeemed it immediately." During the National Day holiday, Ms. Chen was worried about her fixed-income wealth management product. At the same time, the equity public mutual fund that Ms. Chen's husband has been investing in has recently seen a pleasing rise. The couple are considering selling the wealth management product as soon as it opens and buying more funds at the right time.

Such investors are very common recently. After the A-share market's pulse-like rise, the game between bulls and bears has intensified. Although the pace of external funds entering the market has slowed down, the incremental funds from residents' wealth, bank wealth management, foreign capital, and other sources are gathering, and the potential scale of funds entering the market is still very large.

However, as the market enters a "swing" state, some institutional investors have quickly adjusted their positions, experiencing the process of adding and then reducing positions. Industry insiders believe that after short-term fluctuations, the market is likely to return to the logic of fundamental-driven, and after a short-term rise, a phased adjustment may bring a longer-lasting rise.

Incremental funds are gathering to enter the market

Incremental funds from all walks of life are entering the A-share market.

From September 24 to October 11, as the market moved from a strong rise to a fluctuating decline, there was a clear sign of moving from deposits and wealth management to the stock market, and a large amount of funds moved to the stock market, and then calmed down with market fluctuations. Data from Industrial and Commercial Bank of China show that from September 24 to September 30, the net value index of ICBC's bank-broker transfer was 2.15, 1.40, 4.40, 7.04, and 16.71, among which the index related to individual investors was 1.19, 1.87, 1.08, 5.20, and 16.92. On October 8, the net value index of ICBC's bank-broker transfer directly rose to 54.88, indicating that funds are "eager to enter the market". However, after the market made a significant correction on October 9, the net value index of ICBC's bank-broker transfer quickly fell back to around 6.8.

In terms of wealth management products, according to statistics from Guoxin Securities, as the stock market heats up and the bond market rebounds, the seesaw effect between stocks and bonds is evident, coupled with the end-of-quarter factor, the scale of bank wealth management products has contracted significantly. As of October 6, the total scale of products from bank wealth management companies was 25.03 trillion yuan, down 923.2 billion yuan from two weeks ago (September 22). The scale of fixed-income wealth management products has shrunk significantly, especially cash management products, with a decrease of 479.2 billion yuan in the scale of products in the past two weeks.

In addition, with new investors flooding into the stock market and old investors returning, securities firms' account opening business is busy, and even during the National Day holiday, they are "open to customers", with the number of new accounts and financing scale increasing rapidly. Feng Chencheng, the fund manager of Huabao Securities ETF, said that in the hot market before the National Day holiday, it was noticed that individual investors were entering the market obviously, and many dormant accounts were awakened. Recent data from bank-broker transfers and internet securities firms show that due to the wealth effect caused by the short-term stock market surge, coupled with the continuous decline in the yield of other products allocated by residents, a large number of individual investors have transferred funds to equity assets, and the number of securities accounts has soared. According to the research of the selling side, the new account opening of securities firms is mainly concentrated online, mainly targeting young customer groups who have not opened accounts before.

In terms of public mutual funds, Wind data shows that since September 24, more than 30 bond funds, including Guangfa Jinghua Pure Bond C, Huitianfu Xinyi Fixed Open A, and Fuguo Yili Pure Bond C, have announced an increase in net value precision, most of which are due to "large redemptions". At the same time, channel insiders revealed that the enthusiasm for equity fund subscriptions has recently increased significantly. In addition, although the position of equity funds was not low due to regulatory requirements before, the scale growth has significantly slowed down in recent years, and with the repair of the stock market, the issuance of funds is expected to further warm up.

Another set of data can also intuitively feel the market entry sentiment of investors. Since September 24, funds have entered the market through A-share ETFs. Wind data shows that from September 24 to October 11, nearly 290 billion yuan of funds have净流入 A-share ETFs, and unlike the previous institutional funds' preference for CSI 300 ETFs, this round of increases has also attracted a large amount of funds to high-elasticity growth-style ETFs such as the ChiNext Board, the STAR Market, and chip funds. At the same time, the transaction volume of ETFs in the market continues to set new historical highs, showing a significant increase in individual investor participation.In terms of insurance capital, according to statistics from the Xingye Strategy team led by Zhang Qiyuan, as of the end of August 2024, the balance of insurance funds in use was 31.8 trillion yuan, of which 3.3 trillion yuan was invested in stocks and equity funds, accounting for only 10.4%. In the private equity sector, according to Huarun Trust's calculations, as of the end of August 2024, the stock private equity position was 48.45%, also at a historical low. With the enthusiasm of investors opening accounts increasing, and the trend of residents' wealth, industrial capital, and financial management funds increasing their allocation to stocks, the market is expected to usher in a continuous influx of incremental funds.

The Xingye Strategy team led by Zhang Qiyuan believes that as China's equity market warms up, various funds have shown a significant increase in entering the market, and there is still a lot of room for incremental funds to enter in the future. On the one hand, recently, foreign capital has turned to actively do more, and has become the main force driving the significant increase in Hong Kong stocks. In recent years, foreign capital's allocation position for A-shares has dropped to a historical low level. In the long term, the replenishment of foreign capital positions will drive funds to continue to flow back. On the other hand, the current domestic institutions' allocation ratio for equity assets is still at a historical low level. Subsequent scale growth and position lifting are expected to drive incremental funds into the market.

From September 24 to October 11, the A-share market experienced a process from a strong universal rise to a fluctuating differentiation. It is worth noting that during this half month of market changes, many institutional investors quickly adjusted their positions, and from the perspective of product net value changes, they went through a process of adding positions and then reducing positions.

For example, the fund managed by Sun Sheng, Jianxin New Economy Flexible Configuration Mixed, was very aggressive in the previous market's significant rise. The net value of the fund on September 24, September 30, and October 8 rose by 5.16%, 11.11%, and 7.23%, respectively, ranking in the upper level among similar funds. However, during the market fluctuations on October 9, the net value of the fund only retreated by 1.96%, far lower than the average level of similar funds on the same day. On October 11, the fund only retreated by 0.24%, showing a clear sign of adjusting positions and stocks.

The fund managed by Liu Yubin, Yingda Rui Xin Flexible Configuration Mixed, saw its net value rise by 5.78%, 9.21%, and 7.03% on September 27, September 30, and October 8, respectively. On October 9, when the market experienced significant fluctuations, the net value of the fund fell by 6.42%, close to the average level of similar funds, but on October 10 and October 11, its retreat was about 1%.

A person from a small and medium-sized public offering institution said that the company's equity products with flexible positions have already reduced their positions, but some stock funds are constrained by position requirements and have not made too many adjustments. A public fund manager who has recently made obvious adjustments to positions and stocks told a reporter from China Securities News: "Since August, we have been closely following the changes in macro financial policies. After the policy combination was introduced, we immediately adjusted our investment strategy, allocating to stocks with upward trends in fundamentals and those that have been oversold, especially those preferred by Northbound funds, so the fund's net value performance is better. However, considering the risk of the market rising too much in the short term, we need to be cautious about market fluctuations, actively allocate some high dividend stocks, and flexibly adjust position levels according to relevant models."

A private equity person also revealed to a reporter from China Securities News that their products have recently "recovered a lot of blood", but shortly after the market opened on October 8, when the market was at a high level, they reduced their positions in some holdings, especially some ETFs. He believes that the subsequent market will not be as "ferocious" as before the National Day holiday, and further observation is needed before making decisions.

However, not all adjustments can achieve the desired results. The investment director of a private equity firm revealed that one of their products previously had both long positions in stocks and short positions in stock index futures. When the market rose significantly, they "closed" the short strategy of stock index futures, but the market fluctuated significantly in the following days. Looking back, although the decision was made for risk control at the time, the objective result was indeed not satisfactory.

Stage adjustments are beneficial to long-term upward movement.After the A-share market experienced fluctuations and cooling down, investor sentiment is gradually becoming calmer. In the view of some fund managers, extreme upward trends are hard to sustain, and periodic adjustments are actually beneficial for the medium and long-term healthy upward movement of the market.

Zhang Yuan, a fund manager at Yingda Fund, stated that due to the rapid market increase in the early stages, recent pullbacks have a certain degree of rationality. However, after short-term market fluctuations, it is highly likely that the market will return to a logic driven by fundamentals. Looking at the latest policies introduced by the Ministry of Finance last weekend, they mainly revolve around stabilizing growth, expanding domestic demand, and mitigating risks, especially with significant support for local debt resolution. At the same time, they are accelerating the reform of the fiscal relationship between the central and local governments, which is expected to liberate the local coordination capabilities and promote economic recovery.

Regarding the future market trend, she believes that for investors, on one hand, broad-based index ETFs still have investment value; on the other hand, safety cushions can be increased through portfolio allocation. Specifically, the following directions can be mainly focused on: First, the new quality production force sector, such as domestic substitution of TMT, and the high-end, intelligent, and green transformation and upgrading of the manufacturing industry; second, the long-term direction related to expanding domestic demand and improving people's livelihoods, such as the repair of consumer goods, entertainment, and home appliance sectors under the stimulus of consumption-promoting policies; third, the cyclical sector and the factor marketization reform-related sectors, such as energy, railways, public utilities, etc.

Guotai Fund stated that in the development of the market trend, after a short-term rise, a periodic adjustment may bring a longer-lasting market trend. From historical experience, when a bull market starts, it usually goes through a stage of rapid bottom repair, and then gradually enters a window with a relatively gentle upward slope, longer duration, and stronger profit effect. The recent adjustment is quite in line with the rules, and as the third-quarter report disclosure approaches, the market begins to refocus on fundamental factors, making this round of the market trend more enduring. In terms of allocation, on one hand, sectors that are more directly affected by policies and have been suppressed in risk preference in the early stage, such as pharmaceuticals and education, can be focused on; on the other hand, sectors with good fundamentals have lagged behind in the "filling the gap" market trend and are expected to break through upward in the subsequent valuation repair, such as automobiles, home appliances, power equipment, and electronics sectors.

Xingye Investment believes that adjustments after a rapid rise are expected to accumulate momentum for the subsequent market trend. From a medium-term perspective, before there are obvious signs of improvement in the economic fundamentals, it is expected that policy intensification will continue. The macro environment has shown a very obvious improvement, and the medium-term investment return level is expected to increase. Once the policy effects are verified and the economic fundamentals further improve, it will open the second stage of the market reversal trend.

Tianhong Fund believes that in the medium term, the improvement of the economy and corporate fundamentals can be focused on. If they can be gradually verified, the sustainability of this round of market trends will be stronger. In the fourth quarter, the following aspects can be focused on: First, recent U.S. economic data exceeded expectations, and after overseas interest rate cuts, demand is expected to improve, and domestic export expectations are optimistic; second, there are signs of inventory replenishment in the country, which may switch from passive inventory replenishment to active inventory replenishment; third, recent real estate sales data have shown improvements. Tianhong Fund is optimistic about the long-term trend of A-shares. First, the central bank has newly created monetary policy tools, and the capital market has regained importance; second, fiscal policy is expected to intensify, forming a support for the economic fundamentals; third, the scale of treasury financing is expected to rise significantly; finally, the absolute scale of residents' deposits is very large, and the capital market is expected to become an important source of wealth effect.