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On Wednesday, the stock index surged and then retreated, briefly surpassing 3300 points, reaching a high of 3305 points, marking a new peak since the stock market crash. However, it began a gradual decline, closing down 0.23%, losing the 3000-point mark.
The four major banks continued to reach new highs, but the Shanghai Stock Exchange 50 (上证50) failed to close in the green, and the CSI 300 (沪深300) also experienced a surge followed by a retreat. Smaller stock indices were even weaker, with the ChiNext Index (创业板指数) dropping nearly 1%, and the new stock index falling by 1.5%.
After six months of rising blue-chip and heavyweight stocks, many people have begun to disdain smaller stocks. However, you can observe that on days when smaller stocks experience significant declines, the overall market is usually not performing well; on Wednesday, the ratio of advancing to declining stocks on the Shanghai Stock Exchange was 290:965.
Another factor contributing to the market’s surge and subsequent retreat on Wednesday was the noticeable decline in non-ferrous metals and coal in the afternoon. Particularly in the non-ferrous sector, almost no stocks closed at the daily limit. The resumption of trading for Fangda Carbon (方大炭素) only allowed resource stocks to maintain their gains for half a trading day.
The leading rare earth stock, Northern Rare Earth (北方稀土), reached a maximum increase of 7% during the day but ultimately closed in the red. China Aluminum (中国铝业) also faced a drop, as did Yun Aluminum (云铝股份), while Jiangxi Copper (江西铜业) fell by 1.46% at close, with coal stocks following suit. The divergence among resource stocks is becoming increasingly pronounced.
The Xiong’an New Area sector mentioned yesterday performed relatively well on Wednesday, with the leading stock, Jinghan Co. (京汉股份), continuing to hit the daily limit, and Qinglong Pipe Industry (青龙管业) also achieving a consecutive limit-up. Jidong Cement (冀东水泥) and Jinniu Chemical (金牛化工) both saw increases exceeding 6%. However, after several days of significant gains, the sustainability of the Xiong’an sector remains to be observed.
From the overall performance of the market on Wednesday, I feel that the preparation for the index to challenge 3300 is not sufficient. I still want to emphasize smaller stocks; many friends do not agree with my viewpoint, but is there really much room left for the current heavyweight stocks?
On Wednesday, there were reports that a new round of refinancing for listed banks is about to begin, with an expected scale of 500 to 600 billion yuan, which is reminiscent of the scenes from 2009-2010. Moreover, I believe this expected scale is somewhat conservative.
I admit that the concept of rising prices is indeed supported by performance, but if you study closely, many resource stocks that have recently followed Fangda Carbon’s rise cannot withstand scrutiny. Of course, when the wind is still blowing, few people will pay attention to these issues.
Therefore, I firmly believe that smaller and even medium-sized stocks must start to move; their activation is essential to lift the overall market valuation and prevent a situation where heavyweight blue-chip or resource stocks adjust, leading to a very poor market performance.
We Chinese emphasize a balance of Yin and Yang; if heavyweight stocks, blue-chip stocks, and resource stocks represent Yang, while smaller stocks represent Yin, then their balance is necessary to push the overall market to a new index range.
