During the National Day holiday, many people were busy raising funds, preparing to dive into the market on October 8th to welcome a wave of riches. Some even misattributed the sentiment to me, claiming it was “an unprecedented bull market,” which is akin to saying, “the more, the merrier.”

I must clarify that this is not a "super bull market," and those entering the stock market with the expectation of sudden wealth need to exercise calm, calm, and further calmness!

That said, we must genuinely commend the strong rally in the A-share market prior to the holiday and the precise policies from relevant authorities. The three-year shadow over the stock market has been lifted, allowing millions of investors to enjoy a joyful holiday, as evidenced by the surge in consumption during the National Day. If social consumption continues to rise and economic growth expectations rebound, this market trend is unlikely to be short-lived.

However, to analyze the market's direction post-October 8th, we need a more comprehensive, nuanced, and rational perspective. Here are three key observations:

First, we must recognize that the primary reason for the market surge at the end of September was a significant boost in market confidence, not an improvement in economic fundamentals.

Historically, the major bull markets in the A-share market have been based on long-term upward trends in China's economic fundamentals. Unlike the three major systemic bull markets in A-share history (1996-1997, 2005-2006, and 2014-2015), the current upward logic in China’s economy is not particularly strong.

This is due to two main reasons: first, domestic recovery momentum remains weak. Over the past decade, the demographic dividend in China's labor market has diminished, and the real estate boom has faded. Although new growth points like electric vehicles, photovoltaics, and the digital economy are emerging, the substantial gap left by real estate and its industrial chain—which once contributed over 30% to China's economic growth, now reduced to around 18%—cannot be filled by other sectors in the short term. This leads to a scenario where only certain industries and companies rise, preventing the emergence of a “super systemic bull market.”

Second, the intense geopolitical rivalry is suppressing larger-scale foreign investment in China. The shift in China's economic development model towards mid-to-high-end sectors inevitably undermines the fundamental interests of the West. Unlike the first 30 years of reform and opening when China's manufacturing complemented Western economies, the current situation sees Western countries imposing significant restrictions on investments in China, particularly in high-tech sectors. International capital is also hesitant, caught between China and the West, ready to withdraw at the slightest disturbance. This dynamic will likely suppress the investment enthusiasm in the A-share market. In the foreseeable future, the geopolitical tensions between China and the U.S. will not fundamentally change, further delaying the arrival of a "super systemic bull market."

Second, while a “super systemic bull market” is unlikely to occur in the short term, it does not mean that there won't be ongoing market trends; these trends will be intermediate and relatively rational.

In this regard, I agree with Professor Huasheng's assessment in his October 4 Weibo post, which suggests that the market could rise by 10%-20% from current levels, supported by favorable policies, funding, and relatively low valuations. If optimism prevails, a rise exceeding 20% is also possible; however, the market may revert to rationality in a few weeks.

The upcoming intermediate trends in the market are primarily due to the prolonged downturn in the A-share market, significant declines, and low valuations, which have resulted in historically high ratios of A-share dividend yields to risk-free rates, prompting macroeconomic policies impacting the market to shift direction at the end of September.

The case of Japan during its "lost thirty years" serves as a relevant reference. Despite the differences in peak market challenges between China and Japan, many similarities exist regarding the current difficulties faced by China and those encountered by Japan in the early 1990s. Japan experienced several intermediate rallies during its prolonged bear market; the first major rebound occurred after a three-year decline of 62%, with the Tokyo Stock Exchange index rebounding by 56% over the course of a year.

From this perspective, upcoming macroeconomic policies in China become increasingly crucial. Until key economic indicators show substantial improvement, fiscal and developmental policies will continue to be in effect.

If these macroeconomic policies yield results, indicators such as fiscal revenue, deflation, housing prices, unemployment rates, and debt are expected to improve, likely not until the end of this year or the first quarter of 2025. In this context, many professionals in the industry remain uncertain about the market's outlook during the National Day holiday.

Third, there is still significant potential for reform dividends. With effective measures, China's economy and development expectations are likely to rise.

The 24% surge in the Shanghai Composite Index at the end of September was fueled by bold innovations and precise implementation of monetary policies related to the stock market, indicating that China is on the verge of a new wave of reform dividends. Nearly three months have passed since the conclusion of the 20th National Congress, and the commitment to complete the reform tasks by the 80th anniversary of the founding of the People's Republic of China in 2029 is urgent. The next step is to precisely roll out reform policies, which will likely generate optimistic narratives across society.

Currently, the financing balance in the Shanghai and Shenzhen markets, reflecting market risk preferences, remains at a low level compared to recent years. An increase in risk appetite requires more effective reforms that drive domestic economic recovery and a manageable international situation.

Visible risks remain both domestically and internationally. Domestically, issues like speculation in poor-performing stocks and financial fraud persist, necessitating substantial reforms and penalties, which will take time to accumulate. Broadly, constructing a "high-level socialist market economy" remains a challenging and complex process. The situation on September 30, when only eight stocks fell while 5,336 rose, allowing for easy profits, is undoubtedly an exception.

From an international perspective, geopolitical events continue to pose uncertainties that may disrupt domestic markets. Before the end of 2024, U.S.-China relations may stabilize, but the risks of escalating conflicts in Ukraine and the Middle East remain. In this competitive global landscape, a perfect blend of strategic determination, proactive measures, refined policies, and results-oriented approaches will be essential for China.

In summary, I remain cautiously optimistic about China's development trajectory and sincerely wish for the future of its capital market. However, for every investor, maintaining a calm and cautious mindset, along with a long-term perspective, is essential.