In the past couple of days, the A-shares market has indeed shown remarkable strength, with significant increases in both the magnitude and intensity of the rally, which is somewhat "dizzying." The Shanghai Composite Index has surged to 3000 points within three days, almost a 10% increase, and the trading volume of both markets has once again returned to the scale of trillions.

As everyone in the group knows, I have been saying that there are only two factors suppressing the A-shares market: externally, it's the Federal Reserve's tight monetary policy, and internally, it's the tight demand policy. If these do not change, the A-shares market will not improve and will continue to decline.

However, both the external and internal factors that have been suppressing the A-shares sentiment are no longer present, and we can now say that there has been a fundamental change. In fact, in my latest article titled "Finally Erupted, One Less Suppressing Factor!", I conducted relevant analysis and made some advance predictions, which have been essentially verified. Those interested can go back and review it.

Firstly, the Federal Reserve's monetary policy has shifted towards easing.

At the September interest rate meeting, the Federal Reserve officially announced a rate cut, lowering the target range for the federal funds rate to 4.75% to 5%, which is a 50 basis point reduction. This is the first rate cut by the Federal Reserve since 2020, and a new round of global easing is being initiated.

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The Federal Reserve can be considered the central bank of the world's central banks. If it begins a new round of rate cuts, it will release a significant amount of liquidity. Emerging markets like A-shares and Hong Kong stocks, which are relatively undervalued, will see some foreign capital inflows, and stock prices will naturally be repurchased.

In fact, in response to the Federal Reserve's rate cut, both A-shares and Hong Kong stocks quickly reacted. The following day, they both experienced explosive gains, especially Hong Kong stocks, which are sensitive to U.S. Treasury yields, with a much larger increase. The Hang Seng Technology Index rose by more than 3% that day, showing a very strong rebound.

Secondly, both monetary and fiscal policies have shifted towards expansion simultaneously.

As I have mentioned several times before, the Federal Reserve's rate cut is only an external factor. The real determinant of the rise and fall of A-shares is internal, that is, economic performance and expectations for the future. If expansionary policies are introduced, the performance of listed companies will improve, the intrinsic value of A-shares will also increase, and external funds will flow back in.

In recent days, policies, both monetary and fiscal, have undergone significant changes, even a fundamental reversal, with substantial policy measures being implemented.Expansionary Monetary Policy.

At a press conference held on Tuesday, the central bank, the China Securities Regulatory Commission, and two other major financial regulatory authorities announced a series of significant policies. The comprehensive policy package is rich in content and covers a broad range of areas. For instance, it includes measures such as reducing the reserve requirement ratio, lowering the minimum down payment ratio for second homes, and reducing the principal of existing mortgages, which are all supportive policies for the real estate sector with a considerable impact. To be frank, these policies are still relatively conventional. In fact, during this meeting, there were many unconventional new policies, such as allowing funds and insurance companies to pledge to the central bank to obtain liquidity, permitting listed companies to borrow money to repurchase shares, and encouraging enterprises to engage in market value management and restructuring. These are the ones that truly exceed expectations, directly providing liquidity to the stock market and offering the market vast room for imagination.

Expansionary Fiscal Policy.

On September 26th, high-level officials convened an important meeting to focus on analyzing and studying the current economic situation. There is a lot of specific content, much of which is not easy to disclose. The core is to set the tone for the current economy and then to increase fiscal and monetary support, fully developing the economy, especially promoting the development of private enterprises, and ensuring employment and people's livelihoods.

Compared to previous communiqués, there are actually many differences. The content is more concise, and the wording is more straightforward, especially regarding the view on real estate. There has been a significant change, with the current approach being to promote price stabilization, which is a completely different expression from before.

In fact, the information revealed behind this is quite simple: it is to fully gear up to develop the economy, with fiscal policy shifting towards expansion. There will be many supporting policies to follow, such as issuing a large number of government bonds and launching major projects. This can directly stimulate the economy and is more effective than monetary policy.

Therefore, when the communiqué was released yesterday, the stock market exploded directly. The liquor and real estate industries, in particular, saw their stocks hit the daily limit, and the three major indices soared, with the Shanghai Composite Index directly reclaiming the 3,000-point mark, with a gain exceeding 3.6%, which is something that has not been seen for a long time.

If the previous monetary policy was a signal of a trend reversal, then the description of fiscal policy is the establishment of the trend reversal. I personally am looking for a reversal, and it can be basically judged that the bear market has ended. I am very optimistic about the market in the next couple of years, and the probability of a major bull market is very high.

Now, it is time to change investment thinking and no longer be conservative. It is time to consider offense. I have been discussing this in the group yesterday. The investment direction should also change accordingly, reducing the allocation of value sectors and increasing the allocation of growth stocks.

There are three reasons for allocating growth stocks.Firstly, the valuations are very low. Due to the continuous decline over the past three years, the growth sector has experienced a significant drop, to the point where it is almost universally disdained, with virtually no one optimistic about it. The valuations have already reached a very low level, and the current investment value is quite high.

For instance, taking the CSI 300 Growth as an example, the current price-to-book ratio is only 2.25 times, which is at the 29th percentile over the past decade, almost equivalent to the low point of the bear market in 2018. The valuation can be considered very low, and the investment cost-performance ratio is relatively high.

Secondly, the growth sector has high bull market elasticity. The growth sector is highly sensitive to interest rates. When interest rates decrease, the investment value is passively elevated, and valuation levels can be pushed to very high levels. For example, during the bull markets of 2015 and 2020, the valuation levels of growth stocks were very high.

At present, not only the Federal Reserve but also central banks around the world have begun to lower interest rates. The globe has entered a new round of easing cycles, and the tight箍咒 on growth stocks is gradually loosening. A massive amount of liquidity is emerging, which is very favorable for the later performance of the growth sector.

Thirdly, the growth sector has significant gains during bull market phases. It is well known that high elasticity is a main characteristic of the growth sector, and during the bull market's upward phase, the gains are quite substantial, allowing for greater returns.

For example, in the last bull market, from January 2019 to February 2020, the CSI 300 Growth increased by more than 152%, while the CSI 300 Value only rose by 36.7%. The former's gain was nearly 120% higher than the latter's, a significant difference.

Of course, the growth style is a broad concept, including industries such as consumer goods, pharmaceuticals, new energy, and technology, all of which are part of the growth sector. Relatively speaking, if it is during a bull market phase, naturally, the technology sector is the first choice because the gains will be greater, and the elasticity will be stronger, such as electronics, computers, consumer electronics, and semiconductor sectors, covering a very broad range.

In fact, by investing in technology index funds, one can cover all these industries without the need for further selection or comparison, making investment simpler. For example, the $Information Technology ETF (SH562560)$ tracks the CSI All-Share Information Technology Index, and its related Information Technology ETF Linked Fund (021471) is also being issued recently.

The CSI All-Share Information Technology Index is composed of stocks with good liquidity and market representativeness from the information technology industry within the CSI All-Share sample stocks, reflecting the overall performance of information technology industry stocks in the Shanghai and Shenzhen markets.

This All-Share Information Technology Index has several notable characteristics:Firstly, it covers most of the technology sectors.

Looking at the industry distribution, the index covers a comprehensive range of industries, encompassing almost the entire information technology sector. Among the constituent stocks, semiconductor companies have the highest weight (36.3%), consumer electronics companies account for 16.1%, software development companies for 10.6%, optical and optoelectronic companies for 10.8%, computer equipment companies for 9.1%, component companies for 8.6%, and IT service companies for 5.1%.

Because it covers almost all technology sectors, there is no need to compare different industries, nor to worry about selecting industries, and there is no need to consider rotation or differentiation issues. Investing becomes relatively simpler.

Secondly, it covers the leaders of the technology sectors.

Looking at the top ten constituent stocks, they are basically well-known leading enterprises in the information technology sector, with large market capitalization and unique industry positions. For example, Luxshare Precision, BOE Technology Group Co., Ltd. (referred to as "BOE A"), North Microelectronics, Hikvision, SMIC, and Foxconn Industrial Internet are all leading companies in their respective fields.

Additionally, because these companies have good fundamentals, they are very popular in the market. Many of them are also heavily held by institutions, with a significant proportion of institutional holdings, and they are often the focus of increased investments.

Thirdly, it shows a relatively stable performance.

The current A-share market is very different from the past. Due to the significant increase in the number of listed companies, it is rare to see a situation where all stocks rise or fall together. Differentiation is the norm in the market, and it shows a very clear rotation characteristic. Even within the same sector, due to different driving factors, the performance of price increases and decreases is also different.As introduced earlier, due to the comprehensive nature of the information technology sector, which includes various industries such as electronics, computers, and telecommunications, it covers all sub-sector trends without missing any. Moreover, the fluctuations are not as drastic as those in more specialized industries, making it more stable.

Overall, it is currently more important to focus on growth-oriented styles, especially in the technology sector. For instance, the Huaxia CSI All-Share Information Technology ETF Initiated A (021471) tracks the All-Share Information Index, which has significant advantages and can better capture the trends in the technology sector, deserving everyone's attention.

Lastly, it is worth mentioning that expansionary monetary policy is a signal of reversal, and the accompanying fiscal policy has also been introduced. It is essentially certain that the trend of reversal has been established, and there is no need for pessimism. The most difficult phase has passed, and it is time to shift our thinking. We should start focusing on industries with strong technology attributes, as they will experience greater gains and stronger elasticity during the bull market phase.