In the contemporary landscape of the Chinese stock market—known as the A-shares—the overall valuation stands at a relatively low pointThis situation, compounded by a series of favorable government policies, creates a fertile ground for an upward trajectory in the capital marketsThis is not merely a financial phenomenon; it has the potential to catalyze positive ripple effects throughout the broader economy.

As we navigate through complexities and uncertainties emanating from international geopolitical and economic arenas, there is an urgent requirement for specific industries to propel the steady growth of the Chinese economyReflecting on the past, the real estate sector enjoyed a golden two-decade period, significantly boosting economic growthToday, the question arises: are there other sectors capable of fostering holistic economic and social advancement? If there are, they are likely sectors that can galvanize diverse industries and touch countless householdsThe capital markets manifestly fit this description.

Recently, the capital markets have introduced a slew of favorable policies, signaling the government's protective approach toward the marketThe Central Financial Work Conference has underscored the importance of capital market development for economic stability and sustainabilityThis provides a clear roadmap for fostering a long-term stable development of the capital markets.

The current valuation levels are notably low historicallyAs the Chinese economy shows signs of recovery, the A-share market exhibits promising signs of stabilizationBy the end of March, major indices such as the Shanghai Composite Index, Shenzhen Component Index, and ChiNext Index reported year-to-date changes of 2.2%, -1.3%, and -3.9% respectively, with significant recoveries from their lowest points—gains of 16%, 23%, and 23% respectively

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Parallelly, a marked increase in global capital is accelerating its influx into the A-share market, with net purchases from northbound funds under the Stock Connect scheme surpassing 60 billion yuan.

Examining the primary indices relative to their historical valuation, the CSI 300, SSE 50, and ChiNext indices sit at historically low valuation levelsThe CSI 300 index recorded a PE valuation percentile of 17.22% and 8.30% using different calculation methods; the SSE 50 index recorded 41.91% and 34.02%. The ChiNext index is strikingly low at 3.11% and 3.94% respectivelyThis indicates that the current A-share market is endowed with significant valuation advantages, suggesting ample room for valuation recovery.

Historically, every significant upward trend in the stock market has initiated from undervalued territory, evolving into robust rally phasesFor example, the surges in 2016-2017 and 2020-2021 both began from low valuation baselinesIn terms of trading volume and market sentiment, both have notably rebounded, with volumes across the Shanghai and Shenzhen markets sustaining above 1 trillion yuan for consecutive days.

Additionally, there is a compelling technical demand for rebound in the marketThe ChiNext has seen considerable declines in 2023 but experienced a vigorous rebound before the Spring Festival, making it a representative case for analysisOn a weekly chart, the ChiNext has undergone a complete cycle of "decline + consolidation + decline," with clear evidence of corrective divergence between the two phases of declineThis suggests that the second phase has ended, and a rally on the weekly scale has commenced.

In terms of supporting policies, the recent wave of favorable regulations encompasses a broad spectrum, from reducing fees and encouraging dividends to enhancing liquidity and market capitalization management

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Different policies transmit their effects through varied mechanisms—some yielding immediate results while others require time to manifestNonetheless, this plethora of favorable policies plays a pivotal role in energizing the capital market and rekindling investor confidence.

Recent system reforms and optimizations in transaction supervision by the Shanghai and Shenzhen stock exchanges include allowing increments in stock and fund applications to be made in single shares and the potential introduction of a post-trade fixed price system.

Moreover, a significant reduction in transaction handling fees, adjusted from 0.00487% to 0.00341%, represents a considerable 30% decreaseThe performance of market capitalization management is now a critical evaluation criterion for directors of state-owned enterprises, encouraging them to prioritize their listed companies’ market performance activelyThis includes engaging in market purchases, repurchases, and enhancing dividend distributions to stabilize expectations and instill confidence.

The implications of a stable upward trend extend across various sectors and affect millions of householdsOn one side, the A-share market contains over 5,000 publicly traded companies that encompass all industries, with more than 100 companies boasting a market value exceeding 100 billion yuanCompanies in strategic emerging industries exceed 2,500, accounting for over half of all listingsThe capital market is continuously aligning with innovation strategies, improving balance across different sectors.

Moreover, the A-share participants include a wide array of stakeholders—individual investors and enterprises alikeInvestors can share in corporate growth and profits by purchasing stocks and can derive financial returns from their investments

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Enterprises have the opportunity to raise funds through stock issuance in public markets, thereby facilitating their growth.

The fluctuations in the A-share market have a direct bearing on the quality of life for countless familiesWith over 200 million stockholders active in the A-share market, the influence extends to more than 200 million householdsThe volatility of the A-shares impacts not only investment returns but also the operations and profitability of enterprises, thereby affecting the livelihoods of their employees.

Currently, a rising stock market yields several positive socio-economic effectsFirstly, it enhances corporate value and market capitalization, which in turn positively influences the real economyA stable and rising stock market implies that more capital can flow into the market, providing businesses with opportunities to grow, invest, and innovate.

Secondly, a thriving stock market often results in a wealth effect for investorsAs stock prices rise, investors see their returns increase correspondingly, boosting their purchasing powerThis, in turn, stimulates both consumption and investment demands, creating a notable prosperous cycleAdditionally, investors may become more inclined to channel their funds into real economy investments, further amplifying market vitality.

Thirdly, an increasing stock market broadens financing channels for enterprises and enhances capital-raising efficiencyCompanies can utilize the upswing to issue new shares, a more flexible route than traditional bank loansThis strategy enables businesses to draw in public funds and expand their funding sources, thereby increasing their capital strength to facilitate growth and development.

Fourthly, the stock market’s positive performance optimizes resource allocation and enhances economic efficiency

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