On February 22nd, the A-shares exhibited a notable rally, achieving their seventh consecutive day of gains by the close, indicative of a revived market confidenceThis resurgence in the equity market can be viewed as a robust response to prior downturns, sparking speculation about its sustainability.

At the close of trading, the Shanghai Composite Index surged by 1.27% to 2988.36 points, while the ChiNext Index rose by 0.31%, ending the day at 1757.87 pointsBoth the Sci-Tech 50 and the CSI 300 indices also showed gains close to 1%. The current momentum is raising questions among analysts regarding the potential for continued upward movement.

Despite this optimistic outlook, experts warn that the recent gains may simply represent a corrective phase following prior overselling

"While today’s strong performance is evident, it primarily reflects a rebound from prior losses," one analyst reportedThey cautioned that without increased trading volumes and sustained investor interest, certain stocks could quickly revert to losses.

Shanghai Index Approaches the 3000-Point Mark

The transaction volume on that day was approximately 830.7 billion yuan, with a notable continued inflow of foreign capitalApproximately 3.7 billion yuan was bought, signaling confidence from external investorsMoreover, from February 19th to 21st, the margin trading balance for the Shanghai and Shenzhen markets showed a significant rebound.

Sector performance was predominantly positive, with substantial gains observed in coal (up around 5%), computing, and telecommunications (each climbing over 3%). Additionally, sectors such as oil, media, and electronics all recorded increases exceeding 2%. Out of 4583 stocks, 96 hit the upper limit for gains, while 613 stocks fell by the close.

The hot topic of the week has been the Sora concept, which surged by over 4% on this day, marking a cumulative increase of about 9% over the week’s four trading days, with associated stocks witnessing significant gains.

"Today’s market remains strong with more sectors gaining than losing, yet the interconnection among sectors is low," commented Meng Jiayi, a researcher at Grayscale Wealth Management

• Stock Indices Slip Amid Inflation Concerns
• Excavator Sales Show Signs of Recovery
• Public Fund Surpasses 29 Trillion Yuan!
• Trade Routes Reshaped, Global Oil Exports Decline
• Nikkei ETFs Trade at Near 10% Premium

She elaborated that the key factors influencing the current equity market are the anticipation of economic recovery, stability in the real estate sector, and shifts in the Federal Reserve's monetary policyThe resumption of the Chinese economy is expected to play a pivotal role in supporting equity market advancements.

Wei Junsheng, general manager at Haokun Shengfa Investment, explained that the post-Lunar New Year rally in A-shares, marked by a seven-day rise, is significantly influenced by robust performances in overseas markets during the festive periodHe attributes this confidence to a series of policy adjustments made at multiple levels, especially actions taken by new leadership that have positively resonated throughout the market.

Will Market Confidence Persist?

Proponents of the bullish market sentiment, including Yang Bingtian, chairman of Jitian Fund, assert that the recent climb, culminating in a "seven consecutive day" gain, reflects a healing process following prior market interventions

He noted several critical indicators: a clearance of prior speculative holdings, a positive shift seen in margin trading data, and supportive statements from the new administration signaling their commitment to stabilizing the capital markets.

To maintain market confidence going forward, the external funds must continue flowing in and for positive news and policies to act as catalysts for further growthLi Shiyu, a fund manager at Xiaoyu Investment, also emphasized the importance of the Shanghai Composite Index recovering the 3000-point mark as an initial target for sustained bullish momentum.

Moreover, Liu Yan, chairman of Anjue Asset Management, highlighted that sectors like AI represent a fueled optimism that is currently stabilizing the confidence levels in the market

Future governmental measures encouraging medium- to long-term capital flows, additional tax incentives, and favorable policies for emerging tech firms will be fundamental in boosting the market’s resilience.

According to Chen Bozhong, a partner at Zhong An Dingsheng Investment, the overall market sentiment appears optimistic, despite ongoing speculative activitiesThe recent strengthening of the renminbi has led to an increase in northbound fundsThe continuation of market confidence will require a comprehensive assessment incorporating policy measures, macroeconomic data, and exchange ratesPresently, the outlook seems positive for a sustained period of market confidence.

Strategies for Sector Rotation

Meng Jiayi noted that the A-shares have currently reached what can be termed as a policy trough, along with an economic bottom, and a market bottom at valuation levels

She hypothesized that the ongoing easing of macroeconomic policies would support fundamental improvements and revive market sentiment, leading to a rise in structural opportunitiesIn particular, growth stocks, fueled by expectations of U.Sinterest rate cuts, may boost the valuations of A-shares, especially within the tech and advanced manufacturing sectors.

Yang Bingtian also hinted at the ongoing shift from small- to mid-cap stocks toward larger, value-centric onesEarly-year statistics indicate that various ETFs tracking the CSI 300 have seen cumulative net subscriptions surpassing 200 billion yuan, suggesting a clear trend in favor of these larger capitalization stocksInvestors are encouraged to acquire financially sound stocks with low debt and stable cash flows as well as high dividend yields.

The current market hot spots identified include sectors associated with the Sora video technology, as well as robust dividend stocks driving recent performance

Furthermore, there has been a rebound in previously underperforming stocks, drawing in speculative investors eager to capitalize on these movements.

In terms of strategic deployment, Liu Yan recommends that a balanced asset allocation be prioritized in the current enthusiastic market, as excessive concentration in specific sectors may escalate risk levelsDiversifying investments could mitigate single-asset risks while harnessing broader market growth opportunities.

In terms of investment strategy, Liu Yan advocates for continued attention to high-quality core assets exhibiting stability and solid fundamentalsShort-term prospects may favor AI sectors exemplified by Sora, alongside blue-chip stocks reflecting governmental capital management strategies, and previously oversold high-quality tech firms.