Surge in A-share Trading Volume

As the Chinese stock market experiences a notable resurgence on February 21, 2025, the excitement among investors is palpableFor the first time in two months, the combined trading volume of the A-share market surpassed the impressive 20 trillion yuan markThis revival has not only captured the attention of investors but also prompted analysts and brokerage firms to closely examine the underlying dynamics at playBenefiting from robust performances in sectors like technology, AI hardware, and telecommunications, the stock indices soared, re-igniting the enthusiasm within the marketBut what are the deeper reasons behind this market rebound, and where are the A-shares headed in the future?

On the day in question, a remarkable shift occurred, with the A-share market achieving a trading volume that marked a significant recovery of market liquidity and an increase in investor confidenceThe Shanghai Composite Index rose by 0.85%, followed by a notable 1.82% increase in the Shenzhen Composite Index, and an impressive 2.51% upsurge in the ChiNext IndexThe strong performance was largely driven by several sectors collectively contributing to the upswing, with technology stocks and telecommunications particularly shining in the spotlight.

One of the standout sectors on this day was AI hardwareCompanies involved in servers and computing power surged ahead, with notable stocks such as Cambricon Technologies seeing a strong limit-up in their tradingThe remarkable performance of AI and computational power reflects not just the rapid advancements in technology, but also the market's strong confidence in the future developments of these areasAs artificial intelligence technology continues to mature, particularly in terms of hardware infrastructure, expectations for the performance of related companies have increased markedly, attracting substantial capital inflowsThe robust performance of AI applications and robotics stocks has further reinforced the belief that this technological rally has the potential to continue.

Moreover, the telecommunications sector also displayed substantial gains

Advertisements

Both China Unicom and China Telecom achieved a limit-up in their stock prices, demonstrating a gradual restoration of investor confidence in the telecom industryWith the widespread adoption of technologies like 5G, the telecommunications sector is poised for new development opportunitiesFurthermore, governmental support for infrastructure development has broadened the prospects for this sector, making it a coveted area for investors.

The shift in market sentiment played a pivotal role in the rise of the A-sharesOn that day, a significant number of stocks across the board rallied, with more than 2,800 stocks closing in the green, reflecting a bullish market atmosphereThe influx of capital encouraged rising stock prices, and the increase in trading volume further validated this positive trendFollowing the Chinese New Year, the market sentiment gradually warmed up, with an uptick in capital activity serving as a crucial driving force behind the index’s rise.

Looking ahead, brokerage firms express optimism about the stock market's trajectoryResearch from Citic Securities highlights that the market is currently in a "spring excitement window," where external disturbances are expected to remain limited until AprilThere is hope for gradual improvements in economic and policy expectations in ChinaWithin such a market environment, core assets in A-shares are anticipated to benefit and become focal points for investorsAs institutional cash flow shifts, core assets are gaining attention, suggesting a departure from the previous focus on technology stocks and thematic sectorsThese core assets primarily reside in high-end manufacturing, consumer goods, and finance—industries characterized by stable company performance and strong market competitiveness.

In terms of market concentration, analysts observe that while the current technology rally is expected to last until the upcoming Two Sessions (the annual meeting of China's legislative body), the potential for profit-making will gradually focus on high-return opportunities

Advertisements

Investors are advised to look along the paths of "low-position growth branches" and "companies that are expected to release performance in 2025," signaling a focus on undervalued growth stocks and high-quality companies with performance potential in the forthcoming yearsFurthermore, insights from Minsheng Securities indicate that while enthusiasm for investments in the technology sector remains high, the trend of asset recovery among undervalued assets cannot be overlookedDrawing parallels with the past trends during the 2013 mobile internet boom and the 2019 high-end manufacturing rally, it is evident that single sectors cannot dominate the landscape indefinitelyWith market transformation and economic recovery, the restoration of low-priced assets is becoming an important trend.

For investors pondering how to seize these emerging opportunities, they should approach asset allocation and investment decisions with greater caution as the A-share market continues its journey towards recoveryHere are some strategies to consider:

Firstly, it’s important to focus on low-position growth stocksAs market dynamics shift, there’s potential for low-position growth stocks to undergo a recovery trend, particularly in the technology and manufacturing sectors, where undervalued companies may become attractive investment opportunities.

Secondly, attention should also be directed towards core asset allocationCore assets that hold a dominant position within their industries, characterized by strong competitiveness and stability, represent crucial directions for investmentInvestors may want to leverage company fundamentals to appropriately increase their investments in these areas.

Additionally, keeping abreast of policy changes and macroeconomic trends is significantAs the Chinese economy stabilizes gradually and policy support intensifies, investors should closely monitor the announcements during the Two Sessions and broader macroeconomic trajectories, allowing for timely adjustments to their investment strategies.

Lastly, diversification of investments remains a critical strategy to mitigate risks in an uncertain market environment