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1. we believe that this current market is a rare market that combines the three factors of upward revision of profit expectations, falling risk-free interest rates and rising risk appetite. therefore, it is not a simple oversold rebound, but a reversal. in fact, the increase in the hong kong stock index can be considered to have established a bull market in a general sense. the a-share market under similar background and logic can be considered to be a bull market. the 2024 bear-to-bull transition of the chinese stock market in our annual report is being verified.

2. behind the current deflation problem is not only a cyclical problem, but also a structural problem. a large part of it is a balance sheet problem, or a debt cycle, or the so-called balance sheet recession. it can be said that various current phenomena are the natural results of this type of deflation.

3. if you do not accept deflation and its various consequences, then it is tantamount to coming up with a systemic solution to the debt cycle or balance sheet problem. this is why this decision is different from the past, because it is related to finance, capital markets and asset prices are closely linked.

4. the specific policy combination and effect will need to be followed up and verified over a longer period of time, and this process is likely to involve a gradual increase in the number of policies based on differences in effects and goals. sometimes we just start to see the intensity of the policy and some data may it's normal if it's not strong, so fundamental verification requires patience.

5. we would like to emphasize that the history of japan’s stock market in the 1990s is not simply comparable to the current a-share market. however, i think the history of japan’s stock market provides a simplified model that i call a “syllogism.”

6. the final key to china’s stock market is its mid- to long-term fundamentals. therefore, looking at the weekly level, the main contradiction in the market is the supply and demand of funds and stocks. looking at the monthly level, the main contradiction is that the policy is fiscal. looking at the quarterly level, it is financial and fundamental indicators. looking at the annual level, it is the innovative spirit of the whole society. entrepreneurs are also key here.

7. how high and far this market can go in the end, in fact, the most important thing is not the trillions of special national debt and fiscal deficit, nor the economic and profit growth rate next year. fiscal stimulus is prone to diminishing marginal effects. the core factor of this round of market conditions is how to successfully motivate and mobilize the entire society, the residential sector, and the private sector, including entrepreneurs.

8. the degree of success determines how high and far the "china asset price confidence revaluation market" can go.

9. this strategic decision of the policy at the current point in time, i think, has reason to make the market re-examine the previous misunderstanding of the bottom line and goals of the policy. we believe that it has also significantly reduced the uncertainty of the chinese market in the mid-term, or the pessimistic risk premium should be repaired and valuations should be boosted.

10. our medium-term logic is clear: we must make every effort to revitalize the economy and end deflation. there is no turning back. regardless of whether you are optimistic, cautious, or unclear in the long term, the current market situation is strategically the best opportunity to be long on the chinese stock market in the next n years.

market rising space, reasonable position and macroeconomics are three concepts

objectively speaking, our logic and judgment continue to be verified, and the recent rapid rise in the stock market has also intensified the differences among investors. i think it is necessary to report our strategic views here for your reference.

first of all, we believe that this market is a rare market that combines the three factors of upward revision of profit expectations, falling risk-free interest rates and rising risk appetite. therefore, it is not a simple oversold rebound, but a reversal. in fact, the increase in the hong kong stock index can be considered to have established a bull market in a general sense. the a-share market under similar background and logic can be considered to be a bull market. the 2024 bear-to-bull transition of the chinese stock market in our annual report is being verified.

strategy does not equal macroeconomics, and how high the market can rise does not equal rational pricing. taken together, there is still some room for growth in china's stock market. the main reason, even from a rational pricing perspective, is that we think the market has reason to be significantly higher than the may high. we believe that although the third quarter report will be under pressure, the market is mainly looking forward to follow-up earnings. we believe that policies will be significantly increased. the market’s expectations for subsequent corporate profits, especially next year, will be better than the profit expectations at the high point in may. the risk-free interest rate is higher than 5 as the monthly high falls, risk appetite will rise relative to may. however, the short-term high ultimately depends on the recent market sentiment of supply and demand for stocks and the final trading balance point. it may exceed current market expectations, but it does not rule out a rapid retracement thereafter. undoubtedly, the current market sentiment is high, and theoretically there is a lot of potential incremental funds. however, because many investors believe that strong policies and fundamentals still need to be verified, we must also see that after the market reaches a new high this year, every time it goes up 100 points, selling pressure will also increase significantly. i will not directly communicate at this meeting how accurate i see it, but at least we believe that the market standing above this year's new high is a reasonable pricing.

the main contradiction in the current economy is: efforts must be made to end deflation

behind the current deflation problem is not only a cyclical problem, but also a structural problem. a large part of it is a balance sheet problem, or a debt cycle, or the so-called balance sheet recession. it can be said that various current phenomena are the natural results of this type of deflation. therefore, if you do not accept deflation and its various consequences, then it is tantamount to coming up with a systemic solution to the debt cycle or balance sheet problem. this is why this decision is different from the past, because it is related to finance, capital markets and assets. prices are closely linked. the cost, complexity and potential risks of this systemic solution are not trivial, so the decision has been carefully considered, but now that the strategic intention is clear, we expect that we will go all out to complete it. what we are seeing now is that various departments are taking quick action. we should have optimistic expectations and confidence. the specific policy combination and effect will need to be followed and verified over a longer period of time, and this process is likely to involve a gradual increase in policy intensity based on differences in effects and targets. sometimes the policy strength and some data may not be strong at the beginning. they are all normal, so fundamental verification requires patience.

92-93 the history of the japanese stock market is not simply comparable to the current a-shares, but it provides a simplified syllogism model.

i think one of the differences in the fate of the chinese and japanese stock markets is that japan did not know at the time that it would lose twenty years due to a balance sheet recession, while china saw the lessons learned from japan and has always wanted to avoid making the same mistakes again. now it has also declared war on deflation in a timely manner, that is, on assets. the declaration of war on the balance sheet recession, coupled with the many differences between china and japan, we must particularly emphasize that the history of japan’s stock market in the 1990s is not simply comparable to the current a-share market. however, i think the history of japan’s stock market provides a simplified model that i call a “syllogism.” .

at that time, japan announced a fiscal policy in june 1992 to expand public investment and support small and medium-sized enterprises, but it did not target residents' balance sheets, nor did it target residents' income and consumption, and the intensity later proved insufficient. this resulted in three market segments. the first segment was a beta market with rapid valuation recovery. the second segment was an alpha market that continued to fluctuate and consolidate. the third segment was a moderate beta market with earnings exceeding expectations. this third segment is also accompanied by fiscal policy has been significantly increased. what we can refer to is that in the first period, non-bank financial and index heavyweight stocks often lead the rise. this was quickly followed by a significant pullback. it can be expected that during the second period of similar shock consolidation, some investors may be waiting for the verification of strong policies and fundamentals while exploring structural prosperity α or thematic market conditions. the logic of the third paragraph is that profits exceed expectations. the most elastic in the procyclical period is often not necessarily the white horse blue chip stocks in the first paragraph. the core problem of the japanese stock market is that it was not aware of the balance sheet recession at the time, so the continued strength and pertinence of subsequent policies were problematic. therefore, the subsequent decline of the japanese stock market cannot simply be used to predict the future of a shares.

the main contradictions in different time dimensions of this round of market conditions

we have all been through this for 14-15 years, and we have experience and lessons. this bull market will not be a simple artificial bull, buffalo or mmt bull. because, in the final analysis, we all agree that it is easy to make a lot of money by investing in the stock market, and it is not difficult to even provide fiscal stimulus and the economy rebounds. however, the final key to the chinese stock market is the mid- to long-term fundamentals.

therefore, looking at the weekly level, the main conflict in the market is the supply and demand of funds and stocks. looking at the monthly level, the main conflict is fiscal policy. looking at the quarterly level, it is financial and fundamental indicators. looking at the annual level, entrepreneurs are also the key.

how high and far this market can go in the end, in fact, the most important thing is not the trillions of special national debt and fiscal deficit, nor the economic and profit growth rate next year. fiscal stimulus is prone to diminishing marginal effects. the core factor of this round of market conditions is how to successfully motivate and mobilize the entire society, the residential sector, and the private sector, including entrepreneurs.

the degree of this success determines how high and far the "china asset price confidence revaluation market" can go.

at least, i think that the strategic decision-making of this policy at the current point in time has reasons for the market to re-examine its previous misunderstanding of the bottom line and goals of the policy. we think it has also significantly reduced the uncertainty of the chinese market in the mid-term. the risk premium, or pessimism, should be repaired and valuations should be boosted.

finally, although the rapid rise in the short-term market is often unsustainable and may usher in a correction at any time, and although the pace of policy may sometimes exceed market expectations and sometimes be lower than market expectations, i think our medium-term logic is clear, which is to make every effort to revitalize the economy and end deflation. there is no turning back when the bow is drawn. regardless of whether you are optimistic, cautious, or unclear in the long term, the current market situation is strategically the best opportunity to be long on the chinese stock market in the next n years.