"The current situation represents a normal pullback within a slow bull market pattern, not the end of the upward trend."

After sustained gains, A-share markets have entered a correction phase. Can the "slow bull" trend continue to unfold?

On Monday (September 8), the market experienced volatile differentiation throughout the day, with computing hardware stocks suffering significant declines. Eoptolink Technology Inc.,Ltd. (300502.SZ) fell nearly 10%. By market close, the three major indices showed mixed results: the Shanghai Composite closed at 3,826.84 points, up 0.38%; the Shenzhen Component Index rose 0.61%, while the ChiNext Index fell 0.84%. Total trading volume reached 2.42 trillion yuan, representing an increase of approximately 114.1 billion yuan from the previous trading day.

Last week (September 1-5), the Shanghai Composite declined for three consecutive trading days, even breaking below 3,800 points during this period. Margin trading balances contracted significantly, reaching 2.28 trillion yuan as of September 4, a decrease of over 100 billion yuan from the previous trading day. Previously strong technology and computing stocks also experienced declines.

How should recent market volatility be interpreted? Dong Zhongyun, Chief Economist at China Aviation Securities, explained that A-shares began experiencing volatility in late August due to several factors: substantial floating profits accumulated in the market, some funds choosing to "secure profits," and a lack of policy momentum windows.

However, analysts believe recent A-share corrections can be viewed as "healthy cooling" rather than a bull market trend reversal. "Although market sentiment was previously heated, it hasn't reached extreme levels. The current situation represents a normal pullback within a slow bull market pattern, not the end of the upward trend," Yan Kaiwen, Chief Strategy Analyst at Huaxin Securities, told reporters.

Regarding market adjustment cycles and future positioning, multiple perspectives suggest that short-term market corrections are nearing completion, and periodic volatility won't change the medium-term bull market trend.

**Market Enters Volatile Adjustment Window**

Institutions generally believe the current A-share rally began on June 23. At that time, the Shanghai Composite started from 3,360 points, consecutively breaking through integer levels. In July, it climbed from 3,500 points, approaching 3,600 points by month-end. After August, the Shanghai Composite continued its assault, once approaching 3,900 points. According to East Money data, from June 23 to late August, the Shanghai Composite gained nearly 15% cumulatively, while the Shenzhen Component Index and ChiNext Index rose approximately 27% and 44% respectively.

After extended development, the rally recently entered volatile adjustment. Last week's market performance showed the Shanghai Composite declining for three consecutive days from September 2-4, breaking below 3,800 points on the 4th with a closing price of 3,765.88 points, down 1.25%. However, it recovered above 3,800 points the following day (September 5).

Trading volumes also showed significant contraction. On September 3, combined Shanghai and Shenzhen trading volume reached 2.36 trillion yuan, decreasing 510.9 billion yuan from the previous trading day. On the 5th, trading volume was 2.3 trillion yuan, contracting 239.6 billion yuan from the previous day.

Margin trading balances, serving as a market funding indicator, also ended their consecutive growth trend. As of September 2, margin balances reached 2.29 trillion yuan, decreasing approximately 8.5 billion yuan from the previous day, ending a seven-day consecutive increase. Subsequently, margin balances contracted further, reaching 2.28 trillion yuan as of September 4, a decrease of 103.17 billion yuan from the previous day—the largest adjacent-day reduction since August.

Sector-wise, technology stocks that had accumulated substantial gains also experienced significant declines last week. On September 4, Cambricon's single-day decline reached 14.45%, with market capitalization evaporating approximately 84 billion yuan from the previous day. The three stocks collectively known as "Yi Zhong Tian"—Eoptolink Technology Inc.,Ltd., Accelink Technologies, and T&S Communications—all declined over 10% that day.

Regarding capital flows, on September 4, among CITIC's 32 primary industries, 26 experienced net outflows from major funds. Computer and electronics industries led net outflows, each exceeding 10 billion yuan. Communications, machinery equipment, automotive, defense & military, and non-ferrous metals also experienced significant net outflows.

Entering this week, high-positioned computing hardware stocks continued declining at Monday's opening, with Accelink Technologies and Eoptolink Technology Inc.,Ltd. once falling over 10%. Humanoid robot concepts surged significantly, with Zhaomin Technology, Junding Da, and World achieving "20CM" limit-up closes.

**"Short-term Market Adjustment Near Completion"**

Why has the market entered adjustment, and how should this correction be viewed? Multiple perspectives suggest the slow bull market has entered a consolidation period, influenced by previous market overheating, favorable news realization, and profit-taking among other factors.

Dong Zhongyun believes that from a timeline perspective, A-shares began experiencing volatility from August 26. From a timing window standpoint, market expectations for gains before early month important events were overly consistent with substantial accumulated floating profits. After important events and before the "15th Five-Year Plan," a lack of policy momentum windows led some funds to secure profits.

"Looking further, current leveraged funds are at relatively high absolute levels, with some investors concerned that leveraged funds might be forced to reduce positions during market volatility, potentially triggering market fluctuations," he noted.

In Yan Kaiwen's view, recent A-share corrections can be seen as "healthy cooling" addressing August's steep gains and surging financing balances, representing upward continuation rather than trend reversal. Reasons include risk premiums remaining above ten-year centers and pending potential policy catalysts (October APEC, Fourth Plenum "15th Five-Year Plan").

Xia Fanjie, Strategy Analyst at CITIC Securities, mentioned that from September 2-4, the Shanghai Composite declined for three consecutive days, marking the first consolidation period in the current slow bull market.

"This mainly resulted from overheated trading since late August, with funds significantly concentrated in TMT sectors causing deteriorating trading structure. Additionally, early month important events and Federal Reserve rate cut expectations were realized or approaching realization, leading to declining risk appetite," he explained.

Why did computing technology stocks experience significant declines during this correction?

From a technical perspective, Yan Kaiwen analyzed that computing chain declines essentially represent "high-to-low switching" realization under high crowding rather than fundamental disproof. He cited data showing CPO sector "Yi Zhong Tian" gained over 40% in August with financing proportions rising to 15%, triggering technical profit-taking. However, on the industrial side, AI computing demand continues rising month-over-month, with Alibaba and ByteDance accelerating domestic large model iterations.

"Recently, some technology heavyweight stocks have adjusted after excessive previous gains, with some profit-taking occurring. Additionally, there's news about CSI Star 50 Index sample stock weight adjustments," Zhang Yufeng, Chief Strategy Analyst at China Aviation Securities, explained.

From a funding perspective, Zhang Yufeng believes funds are currently exiting significantly profitable varieties while seeking investment opportunities in currently lower-valued varieties. The market is expected to form a pattern where high-growth and low-valuation stocks jointly rise through volatility.

Regarding margin balance changes, he noted that margin balances cooled after consecutive increases, indirectly reflecting some leveraged funds moderately deleveraging under market volatility pressure.

How long might this correction last? Market participants generally believe short-term market adjustments are nearing completion.

In Dong Zhongyun's view, current market volatility has lasted approximately one week and may still be insufficient, but previous hot themes have shown significant adjustments, suggesting volatility may be approaching mid-stage.

"Based on recent two-day market performance, trading volumes have declined from previous accelerated rally phases, with previous hot themes retreating. Meanwhile, new energy, robotics, agriculture and other sectors have shown movement, possibly reflecting market enthusiasm returning from agitation to normal levels while maintaining sufficient bull market confidence and actively seeking new opportunities. Therefore, current A-share volatility won't have excessive downside space," he said.

Zhang Xia, Chief Strategy Analyst at China Merchants Securities, indicated that short-term market adjustments are nearing completion, transitioning to more sustainable low-slope upward movement. After adjustments, market sentiment may marginally moderate.

**Periodic Volatility Won't Change Medium-term Bull Market Trend**

How should this correction be addressed? Can markets maintain medium-to-long-term upward momentum? Overall, industry consensus suggests short-term volatility won't change medium-to-long-term upward trends.

He Kang, Chief Strategist at Huatai Securities Research Institute, mentioned that from a medium-to-long-term perspective, core drivers supporting A-share gains haven't fundamentally changed. These drivers include: marginal improvement in external environment with strengthened market expectations for Federal Reserve rate cuts in September, strengthening RMB appreciation logic providing some support for market risk appetite; continued policy floor support with unresolved "asset shortage" phenomena, maintained monetary looseness, and relatively abundant market liquidity.

From a funding perspective, He Kang observed the market is in a phase of "institutional + individual" capital resonance inflows, with financing-led transactional funds seeking new low-positioned thematic directions while allocational foreign capital and newly-issued equity-focused funds continue entering markets.

Dong Zhongyun believes that medium-term, new-old momentum transformation as the core driver of this economic transformation bull market continues steady progress, with periodic volatility not changing medium-term bull market trends. Additionally, in this economic transformation bull market, "stock market stabilization" policy tools' actual operational effectiveness has been verified, with policies expected to promote this bull market's development through slow bull trends.

How should positioning occur during bull market consolidation periods?

Dong Zhongyun suggests "high-to-low switching" may be unfolding, recommending attention to industries with substantial profit improvement and relatively low valuations, including power equipment, beauty care, transportation, pharmaceuticals & biotechnology, and food & beverages.

He Kang recommends internal "high-to-low switching" within previous themes like AI, pharmaceuticals, anti-involution, and major finance, focusing on innovative drugs, insurance, storage, AI applications, robotics, and chlor-alkali directions. He also mentioned appropriate left-side positioning in consumption, such as recovering dairy products, seasonings, beauty care and other mass consumption directions.

This article is for reference only and does not constitute investment advice. Investors operate at their own risk.