Navigating the vast ocean of investment opportunities, each investor is on a quest for their guiding lighthouse, seeking to reach the shores of wealth enhancementThe phrase “Logic for Direction, Elasticity for Sectors, and Picking Trees for Funds” not only encapsulates a refined investment strategy but also reflects the essence of smart investing.

Currently, the A-share market is witnessing approaching record transaction volumes, suggesting we are entering a bullish technical scenarioIn this midst, investing in high-elasticity technology sectors appears to be a prudent choice.

The foremost task of any investment venture is to define the macro trends and the overarching direction of the market, akin to studying nautical charts before a sea voyageThe directive of “Logic for Direction” stresses the importance of using fundamental aspects—such as economic cycles, policy guidance, and industry development trends—to gauge the overall market trajectory.

For instance, during periods of economic slowdowns, defensive sectors tend to become more appealing

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Industries such as banking and utilities might see heightened interest, whereas in recovery or expansion phases, growth-oriented sectors like technology tend to lead market ralliesBy conducting meticulous logical analysis, investors can abstain from sailing against the wind and ensure their strategic decisions align with market realities.

What type of economic cycle is current market in? According to my assessment, the confluence of policy lows, funding lows, market lows, and sentiment lows has all reversedWith nearly two trillion in trading volumes, it is evident on a technical level that we are experiencing a significant bullish marketTransaction volumes do not lie; this is a reality that cannot be disputed!

From a policy perspective, the major stimulus measures undertaken last year, alongside those announced in September, indicate that we have firmly established a policy bottom

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What we are witnessing is a counter-offensive against deflationOnce the trajectory of the historical wheel turns, those who stand against it are simply battling winds with little chance of success.

Assessing the funding scenario, A-shares have never struggled for funds; they have suffered primarily from a lack of investor confidenceConfidence, in this case, is more valuable than goldThe central bank has assured that after the initial 500 billion, there will be second, third, and potentially limitless injections of liquidityThis parameter underpins the largest confidence boost for the A-share market's futureThe latest trading activity further corroborates this stability and upward movement.

On the market front, after hitting a low point of 2635 in February and a subsequent low of 2689 at the end of September, we can assert that these two lows have formed a substantial double-bottom structure

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Regarding sentiment, investors' confidence in a rising A-share market is solidifying, with significant inflows of capital—including foreign investments—gradually entering the marketIn October, we even witnessed consecutive days of above-trillion trading volumes, a series of massive bullish candles, along with incidents of trading platform outages and brokers experiencing queues for new accounts.

At present, while the macroeconomic rebound’s vigor seems subdued, history has shown that stock markets typically lead economic recoveries by two to three quartersWaiting for clear economic signs of recovery often coincides with the tail end of a bull marketHence, the emergence of an economic bottom is not a prerequisite for a bullish stock market.

Next, let’s delve into the importance of sector selection, particularly focusing on high-growth areas with appropriate valuations

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Following the identification of overall market direction, the next vital step is locating the high-potential subsectors or industries—this is termed “Elasticity for Sectors.” Here, “elasticity” signifies the industry’s sensitivity and responsiveness to shifts in external conditions.

Typically, high-elasticity sectors tend to rebound swiftly during favorable market conditions, generating above-average returnsWhen the market enters a bullish phase, elasticity is invariably showcased as a hallmark of a thriving marketBy thoroughly analyzing supply and demand dynamics, technological innovations, and supportive policies, investors can pinpoint sectors poised to navigate the stormy waters of market volatility.

In times of ample liquidity, what strategies can maximize returns? High-elasticity strategies! Recently, the market’s focal point has shifted towards technology and semiconductor sectors—areas characterized by substantial growth elasticity

The heightened risk appetite within the market opens up further opportunities for active engagement and growth.

In terms of valuation, despite the technology sector’s vibrant discussions within investment communities, it remains relatively undervalued compared to other mature marketsA comparative analysis indicates that in economies like Germany, Japan, the United States, and South Korea, technology manufacturing and application industries dominate, while cyclic industries rank lowerHowever, in the A-share market, traditional sectors such as finance and real estate hold the largest market capitalization, whereas technology comprises around 25%, which is significantly lesser compared to its presence in more developed markets.

Moreover, the growth logic of China’s technology sector appears decidedly encouragingTake the semiconductor industry as an example

It is set to benefit from a resurgence in consumer demand, indicating potential cyclical recovery; innovations in mobile device models may bolster semiconductor requests; and the domestic replacement strategy should enhance the market share of Chinese semiconductor firms.

The A-share market features 159 listed companies in the semiconductor sector, and the growth metrics reflect a robust expansion trajectoryIn the first half of the year, both the revenues and net profits for this segment exhibited double-digit growth, generating 273.83 billion yuan in revenue—a 22.01% year-on-year increase—and achieving a net profit of 17.92 billion, a rise of 11.57% year-over-year.

Notably, the second quarter figures demonstrated a marked acceleration, with revenues hitting 146.52 billion yuan—up 22.94% year-on-year and up 15.09% quarter-on-quarter—while net profits reached 11.14 billion yuan, showcasing a 15.85% year-on-year increase and an extraordinary 64.21% gain compared to the previous quarter

Since the fourth quarter of 2022, net profits in this sector have returned to the 10 billion level.

Furthermore, the ongoing global AI revolution is igniting growth across the semiconductor, consumer electronics, and software sectors, with biopharmaceuticals also riding the upward waveIn tandem, Chinese policies continue to encourage economic stimulation and bolster high-tech industry advancements, thereby setting the stage for promising performance across the burgeoning tech sector.

Lastly, we arrive at the critical stage of selecting investment vehicles—“Picking Trees for Funds.” This process entails identifying high-quality funds powered by exceptional management teams and distinctive core competencies within the chosen sectorsThis is analogous to meticulously selecting the sapling most likely to flourish into a lofty tree within a verdant forest.