It's truly a once-in-a-lifetime sight; everyone's enthusiasm has literally crashed the Shanghai Stock Exchange.

For about an hour this morning, the Shanghai Composite Index was in a state of stagnation. Meanwhile, the Shenzhen Stock Exchange and the Beijing Stock Exchange were bustling with activity, with the ChiNext Index and the Beijing Stock Exchange 50 Index surging by more than 11% at one point today. Sometimes, it's really all about the opportunities given by the competition.

Of course, not everything today was rosy. For instance, the banking and coal sectors both experienced high openings followed by a plunge. Looking at the dividend index, its performance was not particularly impressive either.

01

Dividends Start to Lag Behind

Dividend adjustments began in late May this year and continued until early September, with this downturn effectively erasing the dividend index's gains for the entire year. It wasn't until this week, with the press conference and a slew of positive news, that the dividend index began to rebound.

The top two heavily weighted industries in the dividend index are banking and coal, accounting for more than 50% combined, so the index is highly susceptible to the performance of these two sectors.

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We can observe that since the end of May, whenever either the banking or coal sector was in a downtrend, the dividend index was likely to follow suit. For example, in July, although bank stocks performed very strongly, the decline in cyclical sectors like coal made it difficult for the dividend index to recover.A primary reason for the dividend adjustment is still due to profit-taking.

In the first half of this year, dividends could be said to have been the standout performer, and the ex-dividend dates for A-shares are concentrated from mid-May to mid-July. Therefore, with significant unrealized gains in positions plus the realization of dividends, investors are more inclined to take profits.

Additionally, the previously low market turnover, coupled with the absence of new incremental funds, has also led to adjustments in the prices of dividend assets.

This year, dividends have undoubtedly been the most outstanding performers and also the most crowded track, but this is predicated on a scarcity of assets and a general low risk appetite.

Now, I just want to exclaim: My lord, times have changed.

Today's A-shares are no longer what they used to be; as of today, the trading volume has exceeded one trillion for the third consecutive trading day. If it weren't for the Shanghai Stock Exchange's system crash, it's estimated that two trillion might not have been impossible.

Market sentiment is high, and with the stimulation of multiple favorable policies, everyone's risk appetite has noticeably increased. Dividends, with their defensive characteristics, can be part of the allocation, but in the context of a surging market, those returns are indeed a bit underwhelming.

02

It's not that dividends are not performing; it's the risk appetite that has changed.

As risk appetite gradually stabilizes later on, attention may shift more towards small and medium market capitalization and growth styles, especially some undervalued and oversold varieties that have undergone significant adjustments earlier.For instance, the micro-cap stocks that have experienced significant ups and downs this year have been in a state of correction after suffering consecutive heavy blows, and only recently have they begun to show signs of rebounding. Moreover, micro-cap stocks typically perform well during periods of weak economic growth and loose monetary policy, which are the economic bottoming-out phase or the early stages of economic recovery.

Although there are continuous positive developments, it takes a certain amount of time for policies to be published, implemented, and to take effect, and this period will also be conducive to the performance of micro-cap stocks. Looking back at those micro-cap stock funds from before, they have undergone earth-shaking changes.

Here, I mainly listed several funds that had larger declines during the several sharp drops of micro-cap stocks in the first half of the year, as well as a few micro-cap funds that have garnered high attention. Let's first discuss the overall situation: so far this year, no fund has yet to return to positive earnings, and the maximum drawdown is basically over 34%. Compared to the scale at the beginning of last year, most have seen a significant decrease.

From September 23 to September 26, the CSI 2000 Index's cumulative increase was 8.02%, and the only one slightly exceeding it was Dacheng Jingheng. This fund is still heavily invested in small-cap stocks, combining subjective and quantitative approaches, and employs a small-cap reversal strategy without making excessive changes to its strategy. Moreover, the stock position has been maintained at a high level throughout the year.

During the several shocks in the first half of the year, the fund chose to first cash out the stocks with good liquidity, shallower declines, or higher rebound amplitudes, and retained stocks that were at low levels and had the potential for recovery.

It is worth noting that among the top ten heavy-weight stocks of this fund, three are from the Beijing Stock Exchange, and today the Beixin 50 index rose by more than 11%, with these three stocks also increasing by more than 11%.Additionally, there are two funds that are hopeful to return to positive territory in the near future.

One is Jin Yuan Shun An Yuan Qi, a former internet sensation fund. Although it has also been impacted by the collapse of micro-cap stocks this year, its drawdown has been relatively smaller compared to others, with the maximum drawdown being -20.59% this year.

This fund still maintains an air of mystery. The fund manager, Miao Weibin, rarely makes public appearances, and the fund remains suspended for new subscriptions. The regular reports only summarize without making judgments.

Looking at the current industry allocation and heavy holdings of the fund, it is still balanced and diversified, focusing on small-cap stocks. It is likely that there has been no change in strategy, and the recent lack of increase in value is probably due to a relatively low stock position.

However, due to its previous excellent performance and relatively better holding experience among these micro-cap funds this year, many people are still looking forward to the fund reopening.

The other is CITIC Prudential Multi-Strategy. This fund, by combining industry prosperity, performance trends, and valuations, chose to increase its holdings in individual stocks in the consumer, pharmaceutical, chemical, textile and apparel, and machinery equipment industries in the first half of the year.

Overall, the fund has a low concentration of individual stocks and has made diversified allocations. However, it has a relatively certain focus for the future.

Of course, some funds have adjusted their strategies in line with market styles, such as Fu Rong Value Selection, which switched to a more defensive large-cap value and dividend style in the second quarter of this year.

Under the current market sentiment, buying stocks has become a scramble. I hope that the exchange can be more supportive next Monday, after all, everyone still wants to continue playing music and dancing.