The persistent contraction in A-share volume has caused concern among many investors. Following last Friday's sharp decline, A-shares continued to adjust with reduced volume on November 25th, with the Shanghai Composite Index falling by 0.36% in the morning, and the STAR Market Index approaching a 2% drop, with transactions in Shanghai, Shenzhen, and Beijing totaling less than 950 billion yuan.

Industry insiders believe that the foundation of the A-share bull market has not changed, but due to reasons such as profit-taking and cautious investor sentiment towards the overseas environment, the market has entered a period of slowed pace and gear-shifting. In the short term, economic data have shown improvements, and investors can continue to anticipate policy intensification.

"Does not affect the long-term bull market foundation"

"Although A-shares face short-term adjustments, the foundation for a long-term bull market is almost laid, and the logic for a long-term upward trend remains valid. Investors should remain patient, view market fluctuations rationally, and seize structural opportunities," said Yu Fenghui, a consultant of the Hong Kong Stock 100 Strong Research Center's Advisory Committee and an economist. From a technical perspective, the rapid market rise in the early stage accumulated a large amount of profit-taking, which needs to be released through adjustments and is also a correction of overheated sentiment; from a macroeconomic perspective, China's economic recovery is steady, despite facing some structural challenges, the overall trend is upward, and the policy front continues to send positive signals, providing solid support for the market.

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Pan Jun, an investment manager at Cheese Fund, said that the recent trend of A-shares has been a retreat after reaching highs, entering a stage of continuous volume contraction and adjustment. On one hand, the market has seen a significant rise in the short term, necessitating some adjustments. Various favorable policies have been implemented, but their actual effects still require time to observe. Moreover, as the year-end approaches, investment institutions need to lock in profits, leading to a noticeable decrease in market risk appetite. However, the latest domestic economic data released, including PMI, retail sales data, and real estate sales data, have all shown significant improvements. The country's attitude towards stabilizing the domestic economy is very resolute, and if the subsequent economic recovery does not meet expectations, further policy intensification may be possible.

Pan Jun believes that while the current international situation is unpredictable, it has not had a significant impact on China's actual export industry. The amount of import and export trade and the trade surplus continue to reach new highs, and the current impact is more on market sentiment.

Li Lifeng, a strategy analyst at Huaxi Securities, said that looking ahead, periodic fluctuations, and consolidation are beneficial for the market to move more steadily and sustainably. On one hand, the China Securities Regulatory Commission has pointed out the need to vigorously develop equity funds, especially index-based investments, and the recent establishment of A500ETF-related products is expected to bring incremental funds. On the other hand, the Political Bureau meeting and the Central Economic Work Conference will be held in December to set the tone for next year's economic policy, and investor policy expectations will continue to support risk appetite.

The equity financing scale remains low

Some industry insiders believe that the current low financing scale in A-shares still has upward momentum in the market trend, and the STAR Market may become the main line of the next phase of the market trend, with sectors such as independent control expected to perform well in the upcoming market.

Fan Jituo, a strategy analyst at Cinda Securities, said that the market has recently adjusted, and a small number of investors are worried about whether the bull market is still there. One of the most important forces in this bear-bull turn is the reduction of equity financing driven by stock market policies, bringing about a change in the supply and demand pattern of the stock market. In the investor structure of A-shares, the most important force is the listed companies and major shareholders. Historically, most of the time, A-shares have been a financing market (financing scale greater than dividends), but there have been a few times when the scale of equity financing was lower than the dividends of listed companies, which were in 1995, 2005, and 2013. After these times, regardless of whether the economy improved, the stock market would see a larger-scale bull market.

Fan Jituo believes that since the second half of 2023, with the reduction of equity financing driven by stock market policies, the supply and demand pattern of the stock market has changed, which is the most important force for the bull market. It is foreseeable that in the short term, the scale of equity financing is still difficult to rebound quickly.

Hu Guopeng, a strategy analyst at Guotai Securities, said that whether the STAR Market can become the main line of this bull market can be referred to as the GEM from 2013 to 2015. At the end of 2012, the market generally rose from bear to bull, and in 2013, the GEM stood out in differentiation. This time, there are four similarities between the STAR Market and the GEM at that time: they have all experienced sufficient adjustments, emerging new industries, policy support for mergers and acquisitions, and a temporary halt to IPOs, as well as similar fund holding ratios. In addition, the differences between the STAR Market and the GEM at that time are in valuation levels, performance, and sector structure, which may lead to less upward space for the STAR Market than the GEM at that time, and fluctuations may also be relatively larger.

Hu Guopeng believes that the core policy orientation of the United States is to cut taxes domestically, increase taxes externally, tighten immigration policies, raise labor costs, and increase the risk of reflation, which may slow down the pace of interest rate cuts by the Federal Reserve. It is expected that in the subsequent market, the industries that dominate in A-shares will be concentrated in consumer white horses, TMT, and non-bank sectors, and themes such as independent control, rare earths, and soybeans will also have opportunities.

A Shanghai fund manager said that some investors who are heavily invested in sectors such as semiconductors may accelerate the realization of industrial autonomy and domestic substitution due to the harsh overseas environment, and companies will also have more related financing plans or merger and reorganization actions.