Millennials and Gen Z Seize Historic Bull Market as Policy Shifts Ignite Shanghai Surge

Recent developments in the stock market have presented a notable surge, marking a potential first-time opportunity for younger generations, particularly those born in the 1990s and 2000s, to experience significant equity gains. This upward trend started following the release of several stimulus policies, driving the Shanghai Composite Index from around 2750 points to surpass the 3000-point threshold, and further advancing beyond 3200 points.

According to a former chief economist of a securities firm, the current bull market is underpinned by a return to reasonable valuations, especially post the Federal Reserve's interest rate cut on September 18, placing A-share valuations at a historical low. The extremely accommodative monetary policy, alongside proactive stock market measures, has invigorated market sentiment. Key initiatives include innovative monetary tools designed to support the stock market, policies to balance primary and secondary markets, incentives for long-term funds to enter the market, improved market capitalization management, and measures to support company share buybacks and increases. These accumulated effects have resulted in a fundamental shift in the market landscape.

The reversal of foreign investors' positions has been another critical factor influencing the current market dynamics. Previously bearish and withdrawing, foreign investors have switched to a bullish stance on Chinese assets following adjustments in U.S. Federal Reserve policy, a weakening dollar, and renminbi appreciation. This shift is particularly evident in high dividend, high-tech, undervalued, and state-owned enterprises' core assets. Domestic financial actors, such as brokers, funds, and insurers, who initially missed predicting the policy shift, find themselves catching up in a rapidly changing market environment.

The strategist cautions investors to avoid using leverage to evade scenarios akin to the 2015 market bubble burst. He emphasizes that the main driving force behind the current market uptrend is the influx of long-term investment, marking a first in China's stock market, indicating a more mature investment climate. Investors are advised to follow the lead of authentic long-term funds like insurance companies, pension funds, and social security funds, and steer clear of overestimated small-cap, poor-performance, thematic, newly listed, and pseudo-growth stocks.

For newcomers, especially younger investors, it is suggested they begin with mutual funds to gain experience before directly venturing into stocks. Furthermore, the importance of financial education is highlighted, advocating for the integration of investment knowledge into the national education system to foster sound investment practices and mitigate losses due to uninformed financial decisions.

The current market rally results from a confluence of multiple factors. As investors navigate opportunities, maintaining caution and valuing investments over speculation is crucial. Ensuring investment choices are grounded in comprehensive market understanding and self-education will be vital in averting high-risk scenarios.