As the Chinese stock market experiences a notable resurgence on February 21, 2025, the excitement among investors is palpable. For the first time in two months, the combined trading volume of the A-share market surpassed the impressive 20 trillion yuan mark. This revival has not only captured the attention of investors but also prompted analysts and brokerage firms to closely examine the underlying dynamics at play. Benefiting from robust performances in sectors like technology, AI hardware, and telecommunications, the stock indices soared, re-igniting the enthusiasm within the market. But 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 confidence. The 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 Index. The 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 hardware. Companies involved in servers and computing power surged ahead, with notable stocks such as Cambricon Technologies seeing a strong limit-up in their trading. The 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 areas. As 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 inflows. The 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. Both China Unicom and China Telecom achieved a limit-up in their stock prices, demonstrating a gradual restoration of investor confidence in the telecom industry. With the widespread adoption of technologies like 5G, the telecommunications sector is poised for new development opportunities. Furthermore, 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-shares. On 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 atmosphere. The influx of capital encouraged rising stock prices, and the increase in trading volume further validated this positive trend. Following 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 trajectory. Research from Citic Securities highlights that the market is currently in a "spring excitement window," where external disturbances are expected to remain limited until April. There is hope for gradual improvements in economic and policy expectations in China. Within such a market environment, core assets in A-shares are anticipated to benefit and become focal points for investors. As institutional cash flow shifts, core assets are gaining attention, suggesting a departure from the previous focus on technology stocks and thematic sectors. These 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. 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 years. Furthermore, 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 overlooked. Drawing 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 indefinitely. With 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 recovery. Here are some strategies to consider:
Firstly, it’s important to focus on low-position growth stocks. As 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 allocation. Core assets that hold a dominant position within their industries, characterized by strong competitiveness and stability, represent crucial directions for investment. Investors may want to leverage company fundamentals to appropriately increase their investments in these areas.
Additionally, keeping abreast of policy changes and macroeconomic trends is significant. As 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. Investors should consider their risk tolerance and opt for a balanced portfolio that includes a mix of stocks, bonds, and mutual funds to create a well-rounded asset configuration.
In conclusion, the remarkable rebound in the A-share market on February 21, with trading volumes exceeding 20 trillion yuan, signifies a vibrant market environment. Analysts are generally optimistic in their outlook, anticipating a continuation of the technology rally and benefiting core assets. Investors are encouraged to pay careful attention to low-position growth stocks, core asset allocations, and policy changes to capitalize on investment opportunities. However, given the ever-changing market dynamics and prevailing economic uncertainties, maintaining a rational approach and making cautious decisions is essential to secure long-term, steady growth of assets.