Chen Guo: The core logic of the bull market is not broken. There is a high probability of a very significant year-end rally from December to the beginning of the year.

12 Overall, the A-share market has been volatile for the past few days. In the future, it is expected to continue to experience fluctuations. Chen Guo, Chief Strategy Officer of China Securities Co., Ltd., recently analyzed and forecasted the A-share market during an event hosted by Huaxia Fund. Key points from his analysis include: 1. A bull market does not mean continuous upward movement; it may have pauses, especially this complex bull market. 2. The market has seen some pullbacks and fluctuations due to the time required for strategic deployment to tactical implementation and for the effectiveness of these strategies to be recognized. 3. The core logic of the market has not been disrupted. While some stocks may have seen rapid increases and require corrections, overall the market remains in a range of fluctuations without significant adjustment pressure. 4. Looking ahead, it is considered a good time for positioning, with a high probability of a significant year-end market rally from December to early next year. 5. Following a strong theme investment market, opportunities will focus on industries and companies affected by policies rather than previously hyped themes. Chen Guo believes that the Chinese economy is addressing issues related to asset-liability balance deflation, with the main logic being the rejuvenation of the economy and resilience against deflation, focusing on strengthening domestic demand supported by key policies. In conclusion, the market's core logic remains intact, and there is potential for a significant year-end market rally. Opportunities lie in sectors benefiting from policy support and having competitive advantages.In terms of the market, it is still in a volatile range and there is no significant adjustment pressure.In the meantime, in the medium term, we believe that with further policy measures, including those related to real estate, key industries, technology, and people's livelihoods, focused on reversing deflation and overcoming deflation, the overall trend of the market has not changed. We also think that looking ahead from now, it is a good time for layout, with a high probability of a significant year-end market rally from December to early next year. Trump taking office is a secondary contradiction and will not change China's main logic. So what is China's main logic now? China's main logic is to revitalize the economy and resist deflation. Therefore, its logic is the revival of domestic demand. Of course, it depends on whether the environment is smooth or resistant. But regardless of smoothness or resistance, this direction will not change. It will not change our goal because of the results of the US presidential election, for example, because Trump was elected, or because of its tariff policy, or fluctuations in US bond rates and exchange rates. For example, now that we have considered whether it is Trump or Harris in front, we have already considered our goal to go from point A to point B. In this process, whether there are red lights or green lights, traffic jams or other situations, it will not change our direction, but it may change our pace. If there are too many red lights, too many traffic jams, it may slow down slightly. But absolutely, we will not change our goal because of these situations. It's the same now. Our current core logic is still to stimulate domestic demand, to start domestic circulation. To some extent, if we fully assess the external impact, a stronger, faster, and more effective push for domestic demand and domestic circulation may not necessarily be a negative force for China's stock market. Of course, in terms of liquidity, factors such as the US dollar index, US bond rates, and the exchange rate of the renminbi against the dollar are all external variables to consider when discussing monetary policy or overall economic policy. But as I said, internal factors are always paramount. Why do I say this? Let's look at September, when the central bank actually took a series of very positive stances and actions. You could say it was more relaxed, but what was the actual result? The result was that the renminbi appreciated. Why? Because everyone felt that this series of policy stances and actions were a strong support or improvement for the Chinese economy. So everyone is more confident in renminbi assets. So today, although the dollar seems strong, the strength behind the dollar is the continuous accumulation of US debt, the US budget deficit is completely out of control, and it even wants to expand further. So we have to ask, if in fact monetary policy, fiscal policy do not have much control, but they end up accumulating strong data for the US economy, creating a phenomenon of a strong dollar. So why should we tie our hands and feet? Why shouldn't we be more relaxed and expansive? If we return to the target set by the Politburo meeting, to address the various difficulties and challenges currently facing the economy, I believe that if we make this the first goal, or even a stage-specific goal, everything will actually be resolved. If the economy is strong, so is the exchange rate, so it's not a problem. From this perspective, I personally think that looking ahead, although the factors mentioned earlier, such as external factors, may cause some concerns for the market profits or disruptions in valuations. But if we believe in our main logic, if we believe that our policies will gradually and methodically be put into place and will improve China's economic expectations, then these factors are secondary contradictions, and it is even possible that just as after the previous Trump tariff war, the Chinese economy and industry became stronger. Focus on the key directions where policies are truly implemented Host: In your opinion, which directions of the market are worth paying attention to? Chen Guo: Firstly, as I have mentioned before, this bull market will be divided into stages. In the second stage, it will show a certain degree of volatility. The first issue with this volatility is that if you do not grasp the rhythm well, it will naturally be difficult to make money. Secondly, some directions in this volatility may clearly outperform the market, but some directions may underperform because it is not a general rise, which is why the difficulty level is increasing. Looking at the current situation, we have just experienced a relatively strong market that I think reflects thematic investments, showing market enthusiasm but lacking confidence. The understanding of policies and their subsequent impact on the economy is still not sufficient. So, moving forward, opportunities will no longer revolve around the themes that have already been overhyped, but around the key areas that policies are truly focusing on and their potential impact on industries and companies. For example, these directions include debt restructuring, which is actually not a simple theme. As we just mentioned, it is helpful for asset revaluation and operational improvement. For example, in companies such as urban commercial banks, construction companies, environmental protection companies, landscaping companies, and various companies related to local government investment and consumption, there will be some positive effects. The second is real estate because real estate accounts for a large part of the balance sheet. Recently, policies have been continuously introduced, and more importantly, we expect that there will be many more policies to come. Including the policies announced by former Minister of Finance, Blue, including the storage and swap policy, we also anticipate that there is still some room for further interest rate cuts, as well as some relaxation in the restrictions in certain core cities. From the current situation, it can be seen that sales volumes in some core cities have stabilized and even shown an upward trend. So, real estate-related industries actually have some opportunities. Another direction is to expand domestic demand.Increased internal demand also includes a focus on the "two replacements" and "two news", which are major strategies, major security upgrades, equipment renewal, and old-for-new initiatives. We believe that these directions, whether in the central economic work conference or in the next year's two sessions, may see more related policy announcements and financial policy support.Furthermore, he will also improve the fundamentals of related industries. Actually, this year we have done some trade-ins for old products in industries such as automobiles and household appliances, which has been relatively powerful. I believe that the scope of this will significantly expand next year, and the intensity will also significantly increase. This may include various electronic products, digital products, various equipment such as mechanical equipment, and many major strategic constructions related to security. To some extent, this can effectively deal with potential tariff risks. Because a considerable part of the industries is actually export-oriented, focusing mainly on industries such as manufacturing, so the manufacturing industry is affected by external demand or tariffs, we have some key support internally, which can actually serve as a good hedge. Especially if it aligns with our strategic development direction or is an industry with global competitiveness that China possesses, the support obtained in this process may be more. Therefore, this is also a key focus for expanding domestic demand. Of course, expanding domestic demand is not limited to this, and it will also be reflected in some other areas of livelihood protection. Finally, nurturing new quality productivity is also very important. Recently, Minister of Finance Lan has also mentioned support for technological innovation, PBOC Governor Pan has also mentioned it, and leaders of other departments of the Ministry of Science and Technology have also been discussing this recently. This time, it is not just a simple stimulus for traditional industries. In this process, we also hope to find new industry directions, in which the government will actually have strong financial support. This is not a simple theme. In this process, financial support will actually improve the industry's prospects, income, and research and development. Among them, some Chinese companies with global competitiveness may gradually emerge, and the industry may grow from small to large. These are all worth our attention, so I think there are still many opportunities. If we talk about it from a strategic perspective, we need to focus on strengthening domestic demand, benefiting from policy support, and also having some advantages or industrial competitiveness of our own. If we were to talk about industries, I might list many industries, whether it's finance, real estate, machinery manufacturing, electronics, or military industry, there are probably quite a few industries worth paying attention to.