Guosen: The changes and constants of the 26-year bull market in A-shares

Core conclusion: Compared with the 25-year bull market: Unchanged 1: Policies continue to be loose. Similar to the bull market in 1999, which started in September 24th, the deflation persists, and the policy environment remains loose. Unchanged 2: The bull market cycle is not over. By drawing on historical bull and bear market cycles, it can be seen that this bull market has not reached its peak in terms of time and sentiment. Change 1: The repair of the fundamentals will spread from point to surface, accompanied by the entry of household funds into the market, leading the bull market to the second half and the third stage. Change 2: The technology market is expected to shift from computing power infrastructure to application diffusion, while old assets such as liquor consumption and real estate have a chance for reevaluation. Changes and constants in the 26-year bull market Since September 24th, the A-share bull market has gradually unfolded. The Shanghai Composite Index has risen by up to 46%, the CSI 300 has risen by 48%, and the ChiNext Index has risen by 117%. Although the macroeconomic fundamentals have not substantially improved, with the improvement in liquidity driving risk appetite, the market profit-taking effect has become evident, and investor confidence is being restored. As we bid farewell to the old and welcome the new, investors are both hopeful and skeptical about the A-share market in the 26th year compared to the 25th year. What are the changes and constants in the A-share market in the 26th year compared to the 25th year? How does the rhythm and structure of the bull market compare to the 25th year? This article analyzes these aspects. 1. Unchanged: Loose policy environment Similar to the 99/5/19, the change in policy direction is the original driving force for the start of the bull market. The A-share market suddenly rose sharply at the end of September 24th, when we analyzed the nature of the market, which signaled the end of a three-and-a-half-year bear market cycle and the start of a new bull market cycle, with the logic and rhythm behind it similar to the 99/5/19 market. From a policy perspective, the 924 market and the 99/5/19 market are very similar, as both situations arose from the economy falling into deflationary pressures with policies shifting towards dealing with deflation. The essence of the market is a "deflation-fighting" bull market. The 519 market began with stock market policies encouraging funds to enter the market and reducing stamp duty, which in conjunction with proactive fiscal policies boosting the previously established foundation of property market reforms, led to the reevaluation of property and stock market assets. The 924 market also started with a shift in policy towards "deflation-fighting," and since September 24th, a combination of policies covering monetary, real estate, and capital market policies has been implemented to counter deflation, stimulate domestic demand, combat "anti-internal circulation" by dismantling local protection, preventing low-price chaotic competition, eliminating outdated production capacity, and stabilizing asset prices and boosting market confidence through "stabilizing the stock market and property market." Looking ahead to the 26th year, the loose policy environment will support the continuation of the bull market. The 924 market has continued for over a year, and since November 25th, the A-share market has turned into a volatility period, leading some investors to question the sustainability of the bull market. However, drawing on the experience of the 99/5/19 market, the loose policy environment will support the continuation of the A-share bull market in the 26th year. Referring to the signal of the end of the 99 bull market, when inflation rose, and the fundamentals improved, policies gradually tightened, and the bull market ended. The original driving force of the 99 bull market came from the policy shift towards "deflation-fighting," with inflation picking up after policy measures were implemented, and consumer confidence gradually restored. In 2000, the PPI turned positive from January and reached 4.5% in July, the CPI turned positive from February and reached 1.3% in November, and the real GDP's year-on-year growth reached 9.2% in the 20th quarter, increasing by 2.4 percentage points from 99Q4's 6.8%, with improving fundamentals each period. After the Spring Festival in 2001, the policy direction changed to tightening, with continued legislative scrutiny of illegal listed companies and measures to prevent illegal funds from entering the market leading to the end of the bull market. The loose policy environment both domestically and internationally remains unchanged. Domestically, GDP for the third quarter of 25 fell to 4.8% quarter-on-quarter, with CPI still at a low level year-on-year, PPI staying negative... (To be continued...)