Industrial: Is A-share's "healthy bull market" a switch or a diffusion?

Industrial released a research report recently, stating that in the recent period, some growth sectors of A-shares have seen increased volatility and high-level fluctuations. The intensity of industry rotation tracked by Industrial has also started to rise from a low level, leading to a noticeable increase in discussions in the market regarding whether to "cut high and low". In response to this, Industrial believes that "spring comes when a hundred flowers bloom". Only when multiple sectors rotate alternately and upwards can the market remain stable and far-reaching. The extreme structural differentiation and overly concentrated consensus in the market need to be digested and consolidated. It is continuously recommended to deal with the rhythm fluctuations with a rotation strategy. However, in the current market driven by incremental funds and economic advantages, this rotation is not simply based on position and odds, but rather based on economic logic and industrial trends, seeking to explore opportunities under advantageous styles and main themes through "diffusion". Therefore, while continuing to adhere to strong industrial trends, it is important to expand based on economic and industrial trends, balancing success rate and odds, focusing on Hong Kong-listed internet companies, military industry, innovative medicine, new energy, new consumption, "anti-enclosure" & economic cycles (non-ferrous metals, chemicals). Key viewpoints of Industrial are as follows: 1. "Healthy Bull": Is it switching or expanding? Recently, some growth sectors have shown increased volatility and high-level fluctuations, and the intensity of industry rotation tracked by the bank has started to rise from a low level, leading to a noticeable increase in discussions in the market regarding whether to "cut high and low". In response to this, the bank believes that "spring comes when a hundred flowers bloom". Only when multiple sectors rotate alternately and upwards can the market remain stable and far-reaching. The extreme structural differentiation and overly concentrated consensus in the market need to be digested and consolidated. It is continuously recommended to deal with the rhythm fluctuations with a rotation strategy. However, the bank emphasizes that in the current market driven by incremental funds and economic advantages, this rotation is not simply based on position and odds, but rather based on economic logic and industrial trends, seeking to explore opportunities under advantageous styles and main themes through "diffusion": - Financial behavior has shifted from relocation in the stock market to expansion in the incremental market. The "switching logic" is more suitable for the stock market, while the "diffusion logic" is more suitable for the current incremental market. In the stock market, when a high-level sector experiences increased volatility and under the influence of existing funds under pressure, it can only sell high-level sectors and "switch" to low-level sectors, leading to rapid sector rotation and poor continuity of main themes. It is important to consider whether to "cut high and low" in the muscle memory. In the incremental market, when certain sectors become overheated, incremental funds often tend to actively explore untapped sub-segments based on dominant themes and styles, thus deepening the internal direction of the main theme towards the low level and further strengthening the earnings effect and consensus of the main theme, making the dominant style more sustainable. - The main contradiction determining the win rate of sectors in the current market environment is economic certainty rather than high or low positions. In the current market environment, the core demand of funds is "seizing growth based on economic advantages" rather than pursuing safety based on odds. Therefore, even if some high-level sectors experience increased volatility due to short-term price-performance issues, some funds still believe that future earnings growth will continue to support current stock prices, increasing tolerance for short-term fluctuations and choosing to continue to hold on. Another part of the funds choose to explore other directions with industry logic changes. P..