Hexun Investment Advisor Yu Xingdong: Bouncing from the Bottom, Has the Market Stabilized?

Tomorrow is Tuesday, and the A-shares are likely to start rebounding. However, I want to remind everyone that this is just a rebound at this level, and a significant upward push is unlikely.

Today’s market movement was very clear, divided into two phases. In the morning, it was relatively sluggish, with no obvious increase or decrease in trading volume. But in the afternoon, the market began a rapid rally, followed by a noticeable decline in volume. This pattern shows us a phenomenon: there is some support pushing the market down, but there is a lack of buying power to drive it higher. So, at this point, there is support below, but a lack of upward momentum above. Such a pattern makes trading very difficult, and I believe everyone can feel that.

The sectors leading the rally today were consumer goods, food and beverages, liquor, and tourism. These sectors’ movements are somewhat similar to last week’s real estate sector—suddenly jumping up, but if you chase it, it stops moving or even traps you. So, trading is very challenging right now. The only strategy is to buy on dips. If you don’t buy on dips, you’re likely to chase a rally and get caught.

Once you understand the overall trend, the rest becomes simple. Since we want to buy on dips, we need to choose the right sectors. The market also provides some clues. In our review notes, we repeatedly emphasized storage chips, and today’s morning notes also discussed them. They have the logical conditions for an increase—rising prices and shortages—though the shortage won’t last long. The afternoon rebound was actually driven by the storage chip sector.

But I also want to remind everyone: the shortage of storage chips is only temporary, lasting about a year or two at most. After some time, production lines will be adjusted or expanded, and the shortage will ease. So, do not treat storage chips as a long-term investment sector. This logic is similar to the mask shortage during the early days of COVID-19—if you chase too high, you risk standing on a peak. So, everyone needs to keep their rhythm and stay alert.

From my personal perspective, there are other sectors with even better logic than storage chips. For example, the sectors I discussed in my notes—electric power and energy storage—have more solid fundamentals.

Back to the broader market: the bottoming out and rebound at this level indicate there is support below, making it difficult for the market to fall further. But for an upward move, the key driver still comes from outside capital. Currently, we haven’t seen much outside money or solid fundamental support. During the meetings, there was no clear upward logic, and after the meetings, strong support is needed. The rationale for an upward move remains somewhat weak.

Therefore, in the short term, we shouldn’t be overly optimistic about the market. A rebound from a bottom doesn’t mean it will skyrocket. It will likely consolidate at this level for a while. When? As we analyzed in depth before, March was a period of sideways consolidation. The next key points are the annual and quarterly reports. Only when these reports become clearer and more predictable will medium- and long-term funds feel confident to enter, and speculative funds will be willing to participate more actively. So, for now, the market will mainly consolidate, but some rebounds are possible. That’s why we emphasize that this is a good opportunity to accumulate positions and wait for opportunities.

(Edited by: Zhang Yan)

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