Recently, the ChiNext Board and the STAR Market have experienced a pullback and consolidation. Is it a "good time" to get on board the dual-creation direction? This has become a question in every investor's mind.
Capital Grabs Bargains
It is worth noting that although the China Securities Science and Technology Innovation Entrepreneurship 50 Index has pulled back and consolidated, the trend of capital grabbing low valuation growth directions at low prices remains unchanged.
The Science and Technology Innovation Entrepreneurship 50 ETF (159783) has an average daily transaction volume of 338 million yuan in the past five trading days, with a cumulative inflow of 483 million yuan in the past five days. According to historical experience, bull markets are often phased: after the crazy repair at the early bottom, it will enter a stage of fluctuation and pullback. After a brief buildup, the market will choose the main line again and start the main wave of the market. Perhaps the continuous consolidation and pullback are also giving enough time to get on board.
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Dongxing Securities believes that judging from the situation where various departments focus on releasing various policies, there is no turning back once the bow is drawn, and it is a high probability event that the capital market has entered a new historical stage. If the expansionary fiscal policy is officially launched, the medium-term long bull pattern can be confirmed. In terms of allocation, suggestions are given in two stages: 1) In the [first stage of the squeeze market, the market is mainly driven by a general rise], choosing the ChiNext Board and the STAR Market with a single-day price limit of 20% is more efficient, focusing on quickly pushing up positions while also considering the basic attributes; 2) Entering the [second stage of the fluctuating market], the basic stage of large financial real estate has been basically completed, and positions can be gradually shifted to technology stocks, track stocks, cyclical stocks, and other rotating directions. In particular, the performance elasticity and industry imagination space of technology stocks in the second and third stages of the bull market are highly valued.
Higher Elasticity
Reviewing historical trends, the ChiNext Board once soared by 84% in 2015. Industry insiders have said that the current market has several similarities with 2015:
1) The basic expectation is relatively flat, and policy plays a more supportive role;
2) The bull market of mergers and acquisitions, where regulators encourage listed companies to merge, reorganize, and transform;
3) The bull market of leverage, and this time it is a regular, orderly, and controllable leverage, which is fundamentally different from the disorderly off-exchange financing in 2015. The key signal is the entry of incremental funds.CITIC Securities analysis indicates that fiscal policy is currently the focus of market attention. The Ministry of Finance's policy stance has exceeded expectations overall, and the shift in policy thinking is more important than the magnitude of the effort. The market is currently in a transitional phase from a major reversal of expectations to a significant turning point in the market trend. After the initial pulse-like rise, the market sees intensified bullish and bearish contention, with the pace of entry of new funds from outside the market slowing down. However, the scale of potential market entry funds remains substantial. It is expected that the market trend will gradually shift from being driven by sentiment to being driven by fundamental verification. The market characteristics will transition from pulse-like fluctuations to stabilization and slow growth.
New quality productivity is expected to become the new driving force for medium and long-term economic development.
On October 12th, the Ministry of Finance held a press conference where it clearly proposed to reasonably support the infrastructure construction of forward-looking and strategic emerging industries to promote the development of new quality productivity. This year, the fiscal department has optimized tax and fee preferential policies, implemented structural tax cuts and fee reductions, and continued to implement policies such as pre-tax additional deductions for R&D expenses, additional VAT deductions for advanced manufacturing enterprises, and tax exemptions for the transformation of scientific and technological achievements. It has improved tax preferential policies for technological transformation of manufacturing enterprises.
From January to August, the main policies supporting scientific and technological innovation and manufacturing development, including tax cuts, fee reductions, and tax refunds, exceeded 1.8 trillion yuan. The Ministry of Finance will vigorously implement the "two new" policies. About 300 billion yuan of ultra-long-term special national debt funds have been arranged. Starting from the end of August and early September, various localities have successively introduced specific operational methods, mainly to strengthen support for equipment updates in key areas, further enhance the ability of local consumer goods to be exchanged for the old, and effectively stimulate investment growth, release consumption potential, and promote industrial development.
The Ministry of Finance has clearly proposed to reasonably support the infrastructure construction of forward-looking and strategic emerging industries and to promote the development of new quality productivity. This is an important policy support direction for the technology industry, which is in a rapid development stage.
Guotai Junan Securities stated that the Chinese economy is currently at a critical juncture of switching between old and new driving forces. New quality productivity, characterized by the improvement of total factor productivity, is expected to become the new driving force for medium and long-term economic development. Strategic emerging industries represented by new energy, new materials, advanced manufacturing, and new generation information technology, and future industries represented by artificial intelligence, quantum computing, and low-altitude economy, are worth attention. They not only reflect the national medium and long-term economic focus but also indicate huge investment opportunities.
With the introduction of the merger and acquisition policy "combination punch" at the end of September, the vitality of the merger and acquisition market will be further stimulated. High-quality mergers and acquisitions such as cross-industry transformation and upgrading mergers of traditional enterprises, industrial chain mergers of "double innovation" enterprises, acquisitions of high-quality unprofitable enterprises, and absorption mergers of large market value enterprises may arrive. The accompanying financing of additional issues and mergers and acquisitions will also usher in more opportunities. With the recovery of the secondary market and the advancement of merger and reorganization projects, it is expected that the issuance and review of additional issues will accelerate. Mergers and reorganizations are beneficial for technology leaders to improve market concentration and industrial integration capabilities and are worth attention.
A powerful tool for sharing the dividends of scientific and technological innovation
As a powerful tool for sharing the dividends of China's technological growth and laying out scientific and technological innovation, the Science and Technology Innovation and Entrepreneurship 50 Index is composed of the 50 emerging industry targets with larger market value selected from the Science and Technology Innovation Board and the Growth Enterprise Market. It gathers high prosperity, high growth, and high development frontier fields of science and technology, representing the top 50 technology leaders in China with innovation capabilities and growth. National support + high R&D + high profitability + high growth endow it with a deep moat of technological growth. The dual innovation sector is worth attention.
In addition, the dual innovation sector has higher elasticity in the rise during the equity bull market scenario, and the price fluctuation limit is 20%, which has the advantage of high elasticity. It has led the broad-based index in the rebound of A-shares in previous rounds and may become the vanguard for investors to grasp the rebound of A-shares.Hard Technology Broad Base — The STAR Market Innovation and Entrepreneurship 50 ETF (159783) tracks the STAR Market Innovation and Entrepreneurship 50 Index, focusing on sectors such as electronics, electric power equipment, and pharmaceutical biology, encompassing popular themes like new energy vehicles, semiconductors, and innovative drugs. The STAR Market Innovation and Entrepreneurship 50 Index boasts high R&D investment, good profitability, and growth potential. The current price and valuation are at historical lows since the market opening, with both time and space relatively sufficient.
Higher Cost-Effectiveness
To better board the dual-creation (dual-creation refers to the innovation and entrepreneurship in science and technology) sector, one must consider the investment cost-effectiveness, where a lower fee rate equates to higher cost-effectiveness! Therefore, to better serve the broad investor base and provide a superior investment experience, the management fee annual rate of the Huaxia STAR Market Innovation and Entrepreneurship 50 ETF (159783) will be reduced from 0.5% to 0.15%, and the custody fee annual rate will be reduced from 0.1% to 0.05%, effective from October 16, 2024, following a consensus between the management company and the fund custodian. After this reduction, the Huaxia STAR Market Innovation and Entrepreneurship 50 ETF (159783) has reached the lowest fee rate among similar products in the entire market, aiming to reduce investors' investment costs, enhance their sense of investment returns, and help everyone better seize the investment opportunities in the dual-creation sector.