Morgan Stanley Fund: The conditions for a bull market in A-shares have begun to take shape. Pay close attention to changes in company fundamentals in the future.

The Morgan Stanley fund stated in a publication that since the introduction of the "924" policy combination, the A-share market has completed an amazing turnaround, quickly rebounding from the previous period of volatility and correction. In just 6 trading days, the Shanghai Composite Index has risen by over 20%, the Shenzhen Component Index has risen by over 40%, and the ChiNext Index has risen by over 66%. With the return of market confidence, the medium to long-term trend of A shares is also expected to return to an upward trend. The bank believes that in this fast rising market, the future market evolution needs to focus on several conditions, with a short-term focus on the inflow of incremental funds and a medium to long-term focus on the improvement of corporate fundamentals. Reviewing history, since the millennium, there have been a total of 3 significant bull markets in the A-share market. In each of these bull markets, there have been similar situations, namely "positive policies + incremental funds + improvement in performance", which together affect short- and long-term expectations and form the basic conditions for the market trend. The data source is Wind; the time period is 2000.1.7-2024.10.18; the target index is the Shanghai Composite Index. The three bull markets have all been set based on the period's temporary low and high points, with specific times being: 2005/6/6-2007/10/16; 2012/12/4-2015/6/12; and 2019/1/4-2021/12/13. Past market performance does not represent future performance. Each bull market has been supported by various factors, and summarizing the core elements, there are several key points: In the first bull market, it was mainly driven by the start and implementation of the equity division reform + the anticipation of RMB appreciation leading to an increase in domestic liquidity. For the second bull market, it was mainly driven by the ChiNext Reform + the rise of the internet economy + the entry of leverage incremental funds. For the third bull market, it was mainly driven by overseas quantitative easing + the rise of the new energy industry + strong demand for domestic alternatives in the technology sector. For this current bull market, the first two conditions are already in place: (1) the clear attitude of the "924" policy combination, (2) the return of market confidence leading to capital inflow. The improvement in corporate fundamentals has a certain lag and requires continuous observation. Who led the bull market in the past? Looking at historical data, the leading industries of each bull market have changed, indicating the changing focus industries of China's economic development. Initially, the cyclical industries with heavy assets such as real estate and non-ferrous metals were the main drivers; then came the rapid development of the internet, with the computer and media industries leading; followed by major breakthroughs in the new energy industry and strong demand for domestic alternatives in the technology industry. In general, the industries leading the bull market in each period were basically the focus of economic development at that time, or areas directly stimulated by favorable policies. Based on data from Wind; the time period is 2000.1.7-2024.10.18; the target index is the Shenzhen Stock Exchange Industry Classification. The three bull markets have all been set based on the period's temporary low and high points, with specific times being: 2005/6/6-2007/10/16; 2012/12/4-2015/6/12; and 2019/1/4-2021/12/13. Past market performance does not represent future performance. How do fund managers view the future market? In the latest quarterly report, the Director of Quantitative Investments Department of Morgan Stanley Fund, and the fund manager of Morgan Stanley Quantitative Multi-Strategy Stocks, Yu Bin, stated: "I am inclined to believe that the price correction of Chinese assets will be completed in stages. In September, the Fed initiated interest rate cuts, providing an important policy window for stabilizing asset prices in China. Under the current low inflation and social stability, the second phase of asset price recovery will be ushered in. The final stage of price recovery is a systematic revaluation of Chinese assets. The premise of revaluation is the proper handling of the debt issues of some economic participants, making it possible to enter a new credit expansion cycle. At that time, emerging industries represented by new quality productivity and traditional industries with scarcity will undergo a systematic revaluation." In summary, the "darkest moment" has passed, and after experiencing rapid growth, the market may enter a stage of increased volatility and polarization. At this time, it is not advisable to act rashly, chase gains or cut losses, as not only will valuable opportunities may be missed, but losses may also occur.