Gui Haoming: A-shares Return to Rationality Benefits the Long Term

Since the “9.24 Market” two years ago, the A-share market has experienced a sustained pattern of volatility and upward movement, with steady progress becoming one of its most fundamental characteristics. In 2025, the Shanghai Composite Index increased by 18.41%. Considering that last year the index had nine months of positive monthly K-line closes, this increase doesn’t seem very large. If we start from September 2024 when the market began to rally, the maximum increase by the end of last year was 50.01%.

Looking back at history, from 2005 to 2007, the stock market experienced a two-and-a-half-year bull run, during which the Shanghai Composite Index rose by over 513%. This indicates that 2025, as a year of comprehensive market improvement, shows relatively limited gains compared to the past. Because of this, 2025 is also called the inaugural year of stable and steady growth in China’s stock market.

Although the market is steady, the actual trend of the market does not always follow a stable rhythm. There are fluctuations in the market, and influenced by various factors, sometimes overheating phenomena can occur. After the “9.24 Market” two years ago, the market once showed obvious signs of excitement, especially from late September to early October, when trading volume surged dramatically, even exceeding 3.45 trillion yuan in a single day, and the stock index soared rapidly.

The overheating after the “9.24 Market” two years ago was related to some investors’ insufficient understanding of reform policies. They still treated the market with a short-term mentality, resulting in a rapid surge in the market followed by a slowdown in incremental funds, leading to significant volatility and a sharp decline shortly after. It took some time for the market to stabilize and gradually transition into a steady trend.

Since then, the market has operated at a steady pace for a long period, forming a relatively obvious structural pattern based on the specific conditions of the real economy at that time. Although the index did not rise significantly, the market was relatively stable, with broad-based ETFs and most industry ETFs achieving good positive returns. Investors who selected the right stocks also enjoyed substantial profits. This situation attracted more and more capital into the market.

By December last year, a short-term overheating again occurred. Not only did trading volumes hit new highs, but the index also rose for several consecutive days. At this point, trading in some popular sectors became quite crowded, with some stocks continuously hitting the limit-up based on thematic factors, doubling in price in a short period. Later, this rally saw short-term funds heavily concentrated in precious metals and other non-ferrous metals, while many stocks began to be neglected, and blue-chip stocks faced significant selling pressure. Clearly, this trend had deviated from a steady path and showed signs of short-term speculative trading.

In an environment of increasingly loose liquidity, some investors were no longer satisfied with steady market growth and hoped for rapid wealth accumulation. With the sharp rise of the commercial aerospace sector and the surge in precious metals and other non-ferrous metals, the market’s performance had already departed from the realm of stability. Such overheated conditions are unsustainable. As some internal and external factors in the market changed, related stocks turned downward starting from the end of January this year, and the market began to adjust.

There is an old Chinese saying: “Haste makes waste.” The stock market is no exception. While the real economy remains generally stable and improving, it still faces some pressures, and the prosperity of various industries needs further enhancement. Even in the thriving technology sector, technological progress needs to be accelerated, and the conversion of technological achievements into economic benefits still requires considerable time. In this context, expecting the market to “eat a big fat pie in one bite” is overly ambitious.

Therefore, a return to rationality in the stock market is beneficial for long-term development. If the market moves too quickly and exceeds its actual capacity, adjustments are necessary. Fortunately, this correction came in a timely manner, with early warning signals being recognized by the market, laying a foundation for stable operation. It is believed that with time, the market will once again show a steady upward trend.

(Source: Securities Times)