The recent policy changes introduced to the A-share market on September 24, 2024, have instigated a remarkable surge in trading volumes that has caught the attention of market analysts and investors alikeThe announcement acted like a catalyst, prompting a significant rise in investor confidence as trading volumes soared dramaticallyOn the day of the announcement, the trading volume jumped from 552.858 billion yuan to 974.423 billion yuan, illustrating an impressive increaseOver the following days, this bullish momentum continued, peaking at a staggering 1.455627 trillion yuan on September 27. By October 8, post-holiday market activities revealed a trading volume that reached a new zenith of approximately 3.483543 trillion yuan, establishing a record high for the phaseThe subsequent market corrections did not hamper the robust activity; even by mid to late October, trading volumes remained palpably elevated, pointing to the ongoing positive sentiment fostered by the new policies.

A closer examination of individual market segments reveals pronounced fluctuations in the trading shares of notable indices including the CSI 800 (large-cap), CSI 1000 (mid-cap), and CSI 2000 (small-cap) from September 23 onward

Following the announcement, the weights of these segments underwent rapid adjustmentsSpecifically, large-cap stocks saw their share of trading volume escalate to 48.01% on September 24, with a subsequent high of 52.54% recorded on October 9. However, by the end of October, this figure slightly receded and stabilizedIn contrast, mid-cap stocks exhibited comparatively stable trading proportions within a range of 19% to 23%, demonstrating their resilience against volatilityThe small-cap stocks, initially fluctuating upward, ultimately settled within the 24%-25% band in late October, indicating that investor interest in this segment was on the riseTherefore, although there was a clear initial preference for large-cap stocks after the policy shift, a gradual shift towards a more balanced market preference became apparent over time, with increased transaction shares in mid- and small-cap stocks.

To gauge speculative sentiment within the A-share market, one could observe the proportion of stocks hitting their daily limit upward

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From July 2024 through September, this metric hovered around the 1% mark, suggesting a relatively calm or stable speculative environmentHowever, the last week of September marked a turning point as this rate began to increase significantlyBy mid-October, it had repeatedly breached the 2% and 3% thresholds, peaking at 5.5846% on October 28. This sharp uptick reveals a significant intensification of speculative activity, fueled possibly by policy factors or external market forces, with capital flowing into targeted stocks with increased fervorAs November approached, although there was a slight moderation in the percentages, they remained elevated, indicating that speculative fervor had not entirely dissipated and the market was still ripe with trading opportunities.

Between September 23 and November 1, following the policy announcement on September 24, the trading shares of equity Exchange-Traded Funds (ETFs) exhibited notable volatility

Initial data from late September to early October showed a sharp rise in ETF shares, peaking on October 10 as investors entered the fray enthusiastically driven by policy incentivesSubsequently, however, the momentum shifted as ETF shares began a consistent decline, most noticeably during the mid to late October period.

A clear divide emerged in the A-share market between mid to late October regarding speculative sentiment and ETF investment trendsEven as speculative enthusiasm soared post-policy, reflected via the surge in the proportion of stocks hitting their upper price limits, ETF shares experienced a successive downturnThis divergence insinuates that, while speculative capital actively pursued short-term trends and fluctuations in individual stocks, there was a discernible cooling of interest from institutional and conservative investors regarding ETFsSome of these investors may have been opting to realize profits or mitigate risk exposure during a period of increased volatility—indicating a complex interplay of different investment strategies

This prevailing disparity introduces the potential for heightened market volatility, raising alarms about the risk of corrective measures after a period of extreme speculative heat.

In reflecting upon the previous significant rebound phase for the A-share market, it is illuminating to consider trends in speculative sentimentIn this analysis, we define the trading periods marked by the ratio of limit-up stocks reaching or surpassing 2.5%. Within this context, the share of limit-up stocks first broke above this threshold at 2.18%, hitting a peak of 3.43%, and subsequently rose above the same threshold for the last recorded instance at 4.17% with a value of 3.33%. The pinnacle of this segment occurred at 2.25%, where the ratio reached a striking 8.45%, while the last instance of surpassing 7% was logged on March 11 at 7.53%.

Upon further scrutiny of the circulation of equity ETF shares during this time, a clear correlation surfaces between the rise in speculative sentiment and ETF sizes