The market's unexpected decline reflects its sluggishness and investors' helplessness. At the same time, some positive factors are also influencing the medium-term market direction.

As the market anticipates a year-end rally, the Shanghai Composite Index once again experienced an unexpected drop, falling below the 3,000-point mark.

On December 5th, the A-share market fluctuated and fell, with the Shanghai Composite Index seesawing during the session and ultimately losing the 3,000-point psychological barrier. By the close, the Shanghai Composite fell 1.67%, closing at 2,972.3 points, the Shenzhen Component Index fell 1.97%, and the ChiNext Index fell 1.98%.

The turnover of the Shanghai and Shenzhen markets on that day was 822.5 billion yuan, a decrease of 28.6 billion yuan from the previous trading day. The number of declining stocks reached 4,611, accounting for 87%, with only over 600 stocks rising.

In the A-share market on December 5th, the "seesaw" effect between the Beijing Stock Exchange and the Shanghai and Shenzhen markets was once again evident, with stocks on the Beijing Stock Exchange defying the trend and turning red. By the close, the Beijing Stock Exchange 50 Index soared by 7.2%.

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Li Zhenhui, Director of Research at Quanjing Fund, told Caijing that behind the surge in the Beijing Stock Exchange 50 Index, concept small-cap stocks are attracting market funds for competition.

At this stage, how to choose the main line for layout? How will the market perform in the future? Will the year-end rally come as expected? Investors still have multiple concerns.

The Shanghai Composite Index fell below 3,000 points again.

On December 5th, the Shanghai Composite Index opened lower with a gap, but was still above 3,000 points, and then fluctuated around the 3,000-point mark. Starting from 2:10 PM, the decline widened, and the index dived, eventually losing the 3,000-point mark again. On that day, the Shanghai Composite fell by 50.62 points, a decline of 1.67%, closing at 2,972.30 points. The Shenzhen Component Index and the ChiNext Index also fell by 1.97% and 1.98%, respectively.In addition to the strong performance of the Northern Securities 50, all broad-based indices saw a significant sell-off, with the Shanghai Composite Index breaking through the 3000-point threshold, and the Shanghai 50 and CSI 300 both hitting new lows since the adjustment on February 18, 2021.

Wind (Wang De) data shows that Northbound capital sold a net of 7.521 billion yuan throughout the day, marking three consecutive trading days of net sales. Among them, the Shanghai-Shenzhen Stock Connect sold a net of 4.894 billion yuan, and the Shenzhen Stock Connect sold a net of 2.627 billion yuan.

Looking at the sectors, all 31 first-level industries classified by Shenwan fell. The largest decline was in the computer sector, which dropped by 3.56% on the day. Media fell by 2.83%, and electronics fell by 2.63%. National defense, military, communications, machinery equipment, real estate, and social services all saw declines exceeding 2%. The smallest decline was in agriculture, forestry, animal husbandry, and fisheries, with only a 0.97% drop.

In terms of concept indices, dairy, newly listed shares, pre-cooked meals, lithium mines, and food processing saw gains. Huawei Hongmeng, big data, artificial intelligence, and Huawei HMS all fell by about 4%.

Some leading stocks performed poorly. On December 5th, the leading stock of CXO (pharmaceutical research and production outsourcing services), WuXi Biologics, opened lower and continued to decline, closing down by 8.45%. The decline of WuXi Biologics also led to significant drops in other CXO concept stocks.

The direct trigger came from the information disclosed by the company on December 4th, which revised the company's full-year performance guidance downward, with new projects not meeting expectations. WuXi Biologics stated at the business exchange meeting held that day that, affected by biotechnology financing, the industry is expected to achieve single-digit percentage growth in the next two years. In contrast, the average growth rate of CXO in the past few years has been close to 40%.

A research report released by BOCOM International downgraded the target price of WuXi Biologics to 34 Hong Kong dollars per share and the rating to "Neutral". It believes that WuXi Biologics faces significant industry pressure and performance uncertainty in the short to medium term, and the stock price still has a certain downside risk in the coming months.

The performance of various important indices in the Hong Kong stock market was also poor. As of the close of trading that day, the Hang Seng Index fell by 1.91%, the Hang Seng China Enterprises Index fell by 1.64%, and the Hang Seng Technology Index fell by 2.05%. In terms of individual stocks, Tencent Holdings fell by 2.53%, and Xiaomi Group fell by 2.89%.

Li Zhenhui believes that on December 5th, the two markets continued the downward trend at the opening, and the whole day continued to decline with reduced trading volume and shock. Affected by the adjustment of the real estate, finance, and liquor sectors, the Shanghai Composite Index once again broke through the 3000-point mark, which undermined investors' confidence in doing more. The Northern Securities 50 Index soared by 7.28% throughout the day, and concept small-cap stocks attracted market existing funds for speculation.

"From past experience, we can see that when the market has been weak for a long time, investment sentiment is low, and trading funds are reduced to the end, investors' psychology is relatively fragile. At this time, any adverse news will be infinitely magnified by the market, causing a significant decline, and all favorable news will be selectively ignored by the market," Li Zhenhui said.The Northbound 50 Index Surges by Over 7%

While the Shanghai and Shenzhen stock indices were declining, the secondary market of the Beijing Stock Exchange (BSE) shone brightly, with the Northbound 50 Index experiencing another surge.

During the trading day, BSE stocks once again rose, with the Northbound 50 Index increasing by over 7%. Companies such as Zhongke Meiling, Tianfang Standard, Knight Dairy, and Gai Shi Food all hit their upper limits, with nearly 80 BSE stocks temporarily surging by more than 10%, and nearly 20 stocks increasing by over 20%. By the close, the Northbound 50 Index stood at 991.57 points, up 7.28%.

"The scarcity of BSE stocks and their small market capitalization, along with insufficient liquidity, is a double-edged sword, which can easily lead to significant price fluctuations. Especially with the intraday fluctuation range of 30%, it is extremely tempting for speculative capital," said Zhou Yunnan, founder of Beijing Nanshan Investment.

At the end of November, the Northbound 50 market gradually heated up. At the beginning of the month, the daily trading volume of the Northbound 50 fluctuated around 2 billion yuan, but by November 21st, the Northbound 50 Index rose by 4.51%, with intraday gains temporarily exceeding 11%, and the daily trading volume reached 10.243 billion yuan.

In the following trading days (November 22nd to 27th), the daily trading volume of the Northbound 50 remained above 10 billion yuan. On November 27th, the Northbound 50 closed at 1,101.79 points, up 11.41%, with a daily trading volume of approximately 30.327 billion yuan, setting a historical record since the establishment of the index.

On the afternoon of November 27th, the BSE issued an announcement to strengthen trading supervision, taking regulatory measures against abnormal trading behaviors such as intraday price manipulation, large-volume orders at the upper limit price, or continuous orders.

After the enhanced supervision, the BSE market cooled down slightly. On November 28th, the Northbound 50 fell by more than 4%.

On December 5th, the BSE market strengthened again. Will this trend be sustainable?

Zhou Yunnan believes that the extent and duration of the second short-term market wave at the BSE by the end of the year need to closely monitor the changes in daily trading volume, the number of stocks hitting their upper limits, and the number of consecutive board stocks.How will the market unfold in the future?

In fact, there is frequent positive news on the news front. Recently, China New Investment Co., Ltd. (hereinafter referred to as "China New Investment") has increased its holdings in the China Securities National New Central Enterprise Technology Index Fund, and stated that it will continue to increase its holdings in the future. This is considered to be the third move by the "national team" this year, following two interventions by Central Huijin Investment Co., Ltd. (hereinafter referred to as "Huijin Company").

On the evening of December 4th, the Chairman of the China Securities Regulatory Commission, Yi Huiman, accepted an exclusive interview with Xinhua News Agency, making clear statements from three aspects: first, he is working on formulating a policy framework for building a modern capital market with Chinese characteristics; second, he is introducing more pragmatic measures to improve the functions of the capital market; and third, he is making every effort to maintain the stable operation of the capital market.

If we extend the timeline, influenced by multiple factors at home and abroad, the Shanghai Stock Index rebounded to around 3400 points in early May this year, and then adjusted with fluctuations all the way.

After the Shanghai Composite Index broke through 3000 points in late October, in November, the index has been hovering between 3000 and 3100 points. Why did it fail to hold the important integer level again?

"The market is still generally weak. The shrinkage of trading volume highlights the insufficiency of micro liquidity, and also reflects that the market sentiment is still relatively low," said Xia Fengguang, fund manager of Rongzhi Investment.

Xia Fengguang analyzed that the PMI index (Purchasing Managers' Index) in November was once again below 50, and the economic data's retraction reflects that demand is still at a low level. Perhaps the relatively low macro data in these two months is also one of the reasons for the recent market weakness.

"Although the regulatory authorities have expressed their support for the development of the financial market, many deep-seated issues, such as supply and demand imbalances and long-term capital support, require time to be resolved and cannot be achieved overnight. The market will choose to vote with its feet," said Yi Xiaobin, Director of Equity Investment at Shunshi Investment.

However, analysts also mentioned that there are still multiple positive factors in the market.

"On the contrary, the relatively low data also makes the market look forward to further easing of policy in the next step," Xia Fengguang mentioned. In addition, other factors such as exchange rates in the surrounding markets are also bullish for the stock market, and some positive factors are affecting the medium-term market direction.Li Zhenhui believes that, on one hand, from the perspective of the economic fundamentals, the domestic economic growth rate has gradually recovered, and the Federal Reserve's interest rate hikes are also nearing their end. On the other hand, in terms of market policy support, there has been a recent flurry of policies aimed at boosting investor confidence and invigorating the capital market, and regulatory efforts to curb speculation are also being strengthened, all of which are conducive to attracting funds to discover value.

So, at the current stage, how should one select the main theme for layout? How will the market move in the future? Will the year-end rally come as expected?

Xia Fengguang believes that after entering December, whether the market will reverse and embark on a year-end rally is worth paying attention to. High-growth sectors such as technology, new energy, and pharmaceuticals remain the focus of attention for the next step.

"Although we are still full of confidence in the A-share market, left-side trading is indeed difficult to grasp. At present, we can only continue to wait in agony, especially as the year-end approaches and funds become increasingly tight, the market can only maintain relative activity in a structural market." Yi Xiaobin said, still optimistic about the TMT industry (technology, media, and telecommunications) with better growth prospects and low valuation stocks with high dividends.