"Indeed," trading group leader Jia Yongxiang responded with a smile. "The main-theme rally is spreading comprehensively, and the market is expanding in volume simultaneously. This indicates that plenty of sideline capital is pouring in, and it also shows that the market trajectory of the 'real estate' main theme has gained sustainability, unlocking a wealth-creation effect in the market.
As long as the main-theme rally can be sustained and the market's wealth-effect can spread accordingly, then more and more sideline capital will stream in, and the overall market trend will gradually improve."
"It feels almost like we've returned overnight to the beginning of last year, during the explosion of the bull market, when the financial main theme and the mega-infrastructure main theme advanced side by side," Song Shaopu paused before adding, "However, this time around, major finance hasn't moved much. Although market volume has expanded somewhat, this volume cannot support multiple market main themes advancing in parallel. Therefore... we still cannot set our expectations too high regarding how far the subsequent rally can go!"
"It should be able to break 3,000 points and repair the gap left by the market crash at the beginning of the year, right?" Jia Yongxiang said. "Besides, the fundamentals of the real estate sector are indeed improving step by step. Even if the index's subsequent trajectory fails to form a sustained rebound, the real estate sector should still be able to chart an independent rally."
"That's not necessarily true," Song Shaopu countered. "In our market, institutional capital factions have always harbored some prejudice against the real estate sector, feeling that it's an industry with overly high liability ratios and leverage ratios.
Its valuation level is discounted compared to other industries, and if valuations fail to rise—relying solely on the performance-driven momentum generated by fundamental shifts—it's hard to say whether it can carve out an independent rally in a sluggish market."
"I don't think so," Jia Yongxiang argued. "Precisely because real estate's leverage ratio is so high, its performance is explosive enough during industry prosperity cycles. Without a doubt, the domestic real estate development industry has currently entered a prosperity cycle, stimulated by a new round of skyrocketing housing prices.
Furthermore, domestic institutions generally enforce strict valuations on enterprises only during cyclical downturns.
Once a prosperity cycle is entered, accompanied by the pursuit of numerous other market funds—especially retail and hot-money investor groups—institutions become relatively relaxed regarding valuations.
Therefore, I believe that as the real estate prosperity cycle continues, stocks across the domestic real estate sector, especially those real estate development enterprises with national strategic layouts and robust land resource reserves, will definitely usher in a 'Davis double-play' of valuation and performance."
"Let's hope so." Hearing Jia Yongxiang's analysis, Song Shaopu nodded slightly and said with expectation, "If the market really moves the way you describe, it will definitely be a good thing for our fund."
"So, should we next... further reduce our position weight in other market main themes and increase our position weight in core stocks along the real estate main theme?" Jia Yongxiang asked. "Following consecutive days of gains over these past few trading sessions, core real estate leading stocks have basically already rebounded by about 15%."
Song Shaopu thought for a moment and said,
"Judging from the market's price action, active market capital is currently converging almost entirely into the core main theme of 'Mega-Infrastructure'. Other market main themes have zero traction; not only do they lack any rally, but because capital is being siphoned away by the 'Mega-Infrastructure' main theme, they are performing even worse than the index itself.
Since market capital has made this choice, and market capital has formed a consistent expectation within the 'Mega-Infrastructure' main theme, then there's no need for us to keep guarding main-theme sectors like the 'new energy industrial chain', 'consumer electronics', 'petrochemicals', or 'major finance'.
Let's execute a further position adjustment. Shift our fund's primary positions entirely onto this core main theme of 'Mega-Infrastructure'. However..."
Here Song Shaopu paused briefly before continuing,
"Even though we must focus on the main theme, in terms of specific individual stocks and sub-sector structures, it's still necessary to diversify somewhat. There's no need to concentrate all our positions solely on the core leading stocks of the real estate development sector. Deploying a bit into other sub-sector leading stocks along the real estate industrial chain is also acceptable."
"Does Manager Song mean..."
Jia Yongxiang asked with slight puzzlement.
Song Shaopu replied,
"Among the various sub-sectors of the real estate industrial chain, which sub-sector do you think holds the strongest future expectations, and which stock—or which group of stocks—possesses the greatest future performance explosive capability and expectation gap?"
Jia Yongxiang thought it over and said,
"If we consider future expectations, I feel that sectors currently sitting at valuation bottoms—which were previously suppressed by severe industry overcapacity and now benefit from the 'supply-side reform' policy support proposed by the state, such as steel, coal, and cement—hold a relatively larger future expectation gap.
However, coal is deeply bound to the thermal power industry, and coal prices are strictly regulated by the National Development and Reform Commission (NDRC), showing a stronger link to policy. Compared to the steel and cement sectors, which feature more complete marketization, coal carries greater uncertainty.
Therefore, if I were to choose... the upstream sectors of steel and cement, which are intimately tied to the real estate industry, currently hold the highest expectation gap and elasticity within the 'Mega-Infrastructure' main theme.
Among them, in terms of certainty, the cement sector takes a slight edge. After all, the overcapacity problem in the steel sector is extremely severe. Even with the stimulus of the real estate industry's recovery and the advancement of 'supply-side reforms', achieving a complete turnaround in the fundamentals is unlikely to show effects anytime soon.
Moreover, major enterprises in the steel industry basically serve as financial and employment pillars for local governments across various regions and generally possess state-owned backing. These factors present heavy obstacles to clearing out excess capacity and shutting down production lines.
Therefore, a fundamental reversal and predictable performance explosion in the steel sector are difficult to achieve in the short term.
Conversely, for the cement sector, although many companies in the industry are also state-owned, the clearance of excess capacity began long ago. Furthermore, cement has a transportation radius, making regulation and the clearance of excess capacity much easier.
All things considered, I believe that within the 'Mega-Infrastructure' main theme, the corresponding core industry-leading stocks in the cement sector will exhibit stronger fundamental transformation and performance-explosive capabilities in the future, alongside a stronger expectation gap.
As for individual stocks... Conch Cement, Beijing New Building Materials, Tianshan Cement... are all quite good.
Moreover, over the past few days of market movement, these tickers have clearly won the approval of various market capital factions, or rather, many prescient, large-scale funds in the industry.
In fact, I suspect that Huayi Capital, which we are all focusing heavily on, also holds positions in these stocks."
"What about the construction sector?" Song Shaopu asked. "What about stocks like China State Construction Engineering, China Railway Group, China Communications Construction, and China Metallurgical? What about building materials and interior decoration sectors tightly linked to real estate, along with their respective core stocks? Do these sub-sectors lack elasticity?"
Jia Yongxiang responded,
"Although these sub-sector sectors also exhibit positive feedback loops with the cyclical trajectory of the real estate industry, their performance elasticity and expectation gap are clearly inferior to upstream industries like steel and cement.
Furthermore, the performance expressions of the corresponding core enterprises in these sub-sector sectors lag behind housing prices and the real estate development cycle. Since they lag... uncertainties naturally exist. What we currently require most is certainty.
Additionally, if various major capital factions in the market concentrate on speculating and operating within this main theme over the long term, then we can operate sequentially according to the realization of expectations and performance: finish playing the rallies of core stocks in the real estate development, steel, and cement sub-sectors first, and then rotate back to play the rallies of sub-sector stocks like construction, building materials, and interior decoration. That is entirely feasible."
In his view, because the realization of performance across these major core sub-sectors was asynchronous, it meant that expectations were asynchronous as well.
Naturally, the trajectory of the market rally and the reaction of share prices would not occur simultaneously.
That being the case, deploying speculations in accordance with the sequential order of industrial chain performance realization was undoubtedly the most correct operational mindset.
"What you say does make sense."
After listening to all of Jia Yongxiang's analysis, Song Shaopu smiled, nodded, and continued,
"Then let's proceed with subsequent deployment operations according to your plan: continue reducing the position weight of stocks in other main themes, while simultaneously increasing our chips in core real estate stocks and augmenting our chips in core leading stocks of the 'cement' sector."
"Understood,"
Jia Yongxiang acknowledged.
Immediately afterward, he issued the corresponding trading instructions to the traders in the trading room.
With the issuance of these trading orders, the market trading hours had now entered the final 15-minute window of the closing session.
In this closing phase...
various active capital factions in the market were still concentrating their convergence toward the 'Mega-Infrastructure' main theme.
Furthermore, the 'cement' sector mentioned just moments ago by Jia Yongxiang had undoubtedly become the focal point where numerous major capital factions within the market were centrally assaulting, with the intraday gains of core stocks across the corresponding sector generally exceeding 6%.
"Looks like everyone's thoughts... are quite aligned!"
Noticing that Conch Cement—the core heavyweight stock of the cement sector—had already registered an intraday gain of exceeding 8% while presenting a posture of comprehensive volume expansion on the tape, Song Shaopu smiled helplessly and said.
Jia Yongxiang replied,
"In a bear market, the capital that remains inside the market to continue trading is smart capital. Wherever expectations are strongest, and wherever the most explosive rallies and capital-following sentiment can erupt, everyone can basically perceive it the exact instant a rally kicks off.
However, viewed from a long-term perspective, Conch Cement's current share price and valuation remain at a historical bottom.
We don't need to obsess over a few percentage points of position-building cost. As long as we cast our sights further ahead—looking back six months or a year from now—a cost gap of a few percentage points will have virtually zero impact on our performance."
"Your mindset and macro perspective are truly commendable," Song Shaopu praised with a smile. "That being the case, buy indiscriminately."
Having won Song Shaopu's endorsement, Jia Yongxiang nodded and instructed the traders to disregard cost concerns and build positions in accordance with the trading plan just issued.
Hearing that they didn't need to worry about entry costs, the traders promptly began placing buy orders.
As massive capital from the "Huarui Elite Growth No. 1" fund poured into the market order books through the keyboards operated by the traders, the "cement" sector—which was heavily focused on by various major capital factions and countless retail and hot-money groups in the market—during the final ten minutes of the closing session, formed a continuous upward trend of volume-accelerated gains.
Ultimately, when 3:00 PM arrived and the two exchanges closed, the gains of the "cement" sub-sector within the "Mega-Infrastructure" main theme actually surpassed those of the "real estate development" sector, closing up 5.89%.
Among them, core sector stocks such as Conch Cement, Tianshan Cement, and Beijing New Building Materials closed almost entirely at their limit-up boards.
"Haha, today's price action has finally let us hold our heads high."
Seeing that both the indices and individual stocks were universally higher in the final closing results, Xu Qiao could not help bursting into laughter within the "Shanghai Ultra-Short Syndicate" major hot-money chat group in Shanghai.
"The 'Mega-Infrastructure' main theme has exploded comprehensively." In the chat, Old Zhang couldn't help marveling as well. "A rare major bullish candle; this wave of market wealth-effect has truly been thoroughly hammered out. In a single day, the market expanded in volume by 80 billion yuan. Huayi Capital, managed by Brother Su, is truly formidable. Without any major market-positive news, they genuinely used their seat influence and massive capital advantage to forcefully forge a wave of main-theme rallies."
"The reason why this core main theme of 'Mega-Infrastructure' was able to break out..." Old Wu chimed in, "is on one hand due to Huayi Capital under Brother Su's management building massive positions in this main theme alongside the influence of their seats.
But more crucially, it's because housing price trends across major cities nationwide have indeed warmed up comprehensively. And this is the fundamental reason supporting the core real estate stocks in both the A-share and Hong Kong markets being swarmed and heavily hyped by various capital factions. Brother Su merely utilized his seat influence to spark this fire."
"So, the biggest positive catalyst is the warming of nationwide housing prices, right?"
Old Zhang chuckled lightly.
"The foundational logic is definitely that," Brother Chen replied. "However, the most fundamental positive catalyst remains the relaxation of real estate regulatory policies at the state macroeconomic level, coupled with the stimulation of the 'supply-side structural reform' policy guidelines proposed by the top leadership. Only with the stimulation of these two foundational policies did we get the warming of the housing market, and only then did we get today's wave of rallies."
"Brother Chen..." Hearing Brother Chen's analysis, Xu Qiao thought for a moment before asking, "Do you think this time we could see a two-way linkage between the stock market and the housing market?"
Brother Chen replied,
"I think that's unlikely. A bull market in the housing market is basically traceable now, but the stock market... given the sheer brutality of the bull-bear transition phase last year and early this year, which created a colossal mountain of trapped capital amounting to tens of trillions of yuan across the entire market, I'm afraid it won't be that easy to digest. Therefore, for the stock market to follow the housing market into a bull run is basically impossible."
"A comprehensive rally—I also feel that's unlikely," Old Zhang said. "Look at past market history: bull-bear transitions and bear-bull transitions always require a few years of digestion. This wave of rallies... my personal expectation is at most 3,000 points.
Once the Shanghai Composite repairs the price gap from the early-year market crash, returns to 3,000 points, and touches the heavy accumulation zone of trapped capital above, I believe that's when we should lock in profits and retreat.
Given the current environment and market volume performance, we dare not harbor excessively high market expectations. Taking profits while conditions are favorable is the survival rule of a bear market."
(End of Chapter)