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 oscillating upward, 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 the market’s initiation in September 2024, the maximum gain 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 rose over 513%. From this, it can be seen that 2025, as a year of a comprehensive market turnaround, shows relatively limited gains compared to the past. Because of this, 2025 is called the inaugural year of China’s stable market trend.

Although the market is steady, the actual trend 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, with single-day transactions exceeding 3.45 trillion yuan, and the stock index soared.

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 mindset, resulting in a rapid rise that was not supported by incremental funds. Soon after, the market experienced significant fluctuations and a sharp decline, taking a considerable amount of time to stabilize and begin to show steady trends.

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

By December last year, a short-term overheating again occurred, with not only record-high trading volumes but also continuous upward movement of the index for several days. At this point, trading in some popular sectors became quite crowded, with some stocks relying solely on thematic factors to hit daily limit-ups, doubling in price in a short period. Later, this trend saw short-term funds heavily concentrated in precious metals and other non-ferrous metals, while many stocks were neglected, and blue-chip stocks faced significant selling pressure. Clearly, this pattern deviated from a steady trend and showed signs of short-term speculative trading.

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

There is an old Chinese saying: “Haste makes waste.” The stock market is no exception. Currently, the real economy is gradually improving but still faces some pressures, and the prosperity of several industries needs further enhancement. Even in the thriving tech sector, technological progress needs to be accelerated, and the conversion of technological achievements into economic benefits still requires 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 the long term. 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 pattern of steady upward movement in the market will reappear.

(Source: Securities Times)