Last week, the A-share market heat further increased, with the ChiNext Index rising 8.58% in a single week; The Shanghai Composite Index rose 1.7%, breaking through 3700 points during trading and setting a new high in nearly four years. Since April this year, A-shares have been experiencing a trend market for four months. In this regard, institutions believe that as the market continues to accumulate profitable effects, short-term A-share sentiment is difficult to cool down. In the future, there will be ample potential incremental funds for residential departments; At the same time, under the expectation of interest rate cuts in overseas markets, foreign capital also has a demand to increase the allocation of Chinese assets, and the trend of increasing liquidity in the A-share market will continue, pushing the index towards a new high. The trend of increasing liquidity is expected to continue, as a series of positive signals have been released in the recent A-share market data. As the Shanghai Composite Index broke through 3700 points during trading, the daily trading volume of the A-share market exceeded 2 trillion yuan for three consecutive trading days. In addition, the balance of the two funds has continued to grow, returning to the 2 trillion yuan mark since July 2015. China Galaxy Securities stated that the accelerated entry of investors is becoming an important manifestation of incremental funds in the A-share market. In July, the number of new A-share accounts opened on the Shanghai Stock Exchange reached 1.9636 million, a month on month increase of 19% and a year-on-year increase of 71%. The trend of accelerating the reallocation of residents' wealth to financial assets is clear. With the recovery of market risk appetite driving the spread of profit effects, the continuous inflow of funds has become an important driving force for the upward trend of the market. CITIC Securities believes that the earning effect continues to accumulate, market sentiment is difficult to cool down, and the trend of increasing liquidity will continue. As of the close on August 15th, the cumulative scale of the "money making effect" indicator compiled by the institution since late September last year has exceeded the high points of the "924 market" last year and the "DeepSeek market" at the beginning of this year, and in the past six weeks, the weekly money making effect has been positive for five weeks. CITIC Securities stated that the sustained profit-making effect is attracting off exchange funds to enter, further boosting market sentiment and risk appetite, and driving the market to continue accelerating. From the perspective of external influencing factors, Guangfa Securities believes that A-shares, as an important asset in emerging markets, have great potential to attract foreign investment under the logic of non US dollar assets being stronger than US dollar assets in terms of capital flow. Since July, the profit making effect of A-shares in global equity assets has been prominent, and overseas investors have realized the importance of increasing the proportion of A-shares allocation. In addition, the narrowing of the interest rate differential between China and the United States will encourage capital inflows into the Chinese market and provide further monetary policy space for China. From a historical perspective, after each round of interest rate cuts by the Federal Reserve, A-shares and Hong Kong stocks have mainly risen. According to Guotai Haitong Securities' analysis, the market has always believed that factors affecting stock valuation are mainly concentrated in company performance, risk-free interest rates, market risk appetite, and other aspects. But in fact, another major factor that is easily overlooked is institutional changes, which can even play a decisive role in specific periods. Nowadays, the capital market institutional reform aimed at improving investor returns not only changes the system, but also the value and risk perception of Chinese assets by various funds. Therefore, we believe that the accelerated structural transformation of the Chinese economy, the sinking of risk-free returns, and the reform of the capital market will jointly build the cornerstone of the current round of the Chinese stock market, with major stock indices of A-shares and Hong Kong stocks reaching new highs. ”Guotai Haitong Securities stated. Xingye Securities believes that the current market is experiencing a "healthy" upward trend, driven by policies and funding support, the continuous emergence of new momentum, the activation of market confidence, and the continuous formation of a synergy of incremental capital inflows. Since the beginning of the year, the index has steadily increased, while the volatility has continued to decline. Even though the index has recently hit a new high, most industries still have a moderate level of crowding, and the market is not experiencing overall overheating. And there are still some sectors that are in a less crowded position, which can absorb market funds and heat when locally overheated sectors cool down, thus forming the characteristic of "multi-point flowering" and alternating rotation of various industries, sectors, and themes. Xingye Securities stated that in the future, positive feedback between the asset and liability sides is expected to gradually form, and the market trend brought by the new round of institutional incremental funds entering the market may be on the way. Regarding the specific allocation of directions with global competitiveness, CITIC Securities stated that in the short term, it is still recommended that investors focus on directions with strong industry trends such as innovative drugs, resources, communications, and gaming, and avoid excessive high cut low trading. From a medium to long term perspective, investors can focus on industries with both supply and demand growth, such as rare earths, cobalt, phosphorus chemicals, pesticides, fluorine chemicals, photovoltaic inverters, etc., that have or have the potential to have sustained pricing power. Zhongtai Securities adheres to the idea of "attacking and defending simultaneously". The institution suggests that investors should focus on the technological mainline, such as the direction of new quality productivity represented by AI, robots, and computing power; On the other hand, continue the defensive allocation of high dividend assets and maintain active attention to non bank financial sectors such as securities firms. Guangfa Securities believes that if the Federal Reserve cuts interest rates in the second half of the year and drives further foreign investment into the Chinese market, its investment style is expected to maintain its characteristics of "high tolerance for valuation, and greater attention to stability and sustainability of performance". Industry trends and the status of individual stock industries are the primary considerations for foreign investment allocation. Therefore, in terms of industry selection, Guangfa Securities suggests laying out in the direction with the least resistance to foreign investment inflows, focusing on exploring the core tracks where domestic and foreign investment may resonate. From historical experience, foreign investment has always preferred industries in China that have the most distinctive features of the times and global comparative advantages. Therefore, among Chinese assets, leading enterprises with global competitiveness, such as innovative drugs, Hong Kong stock Internet leaders, Nvidia industrial chain, and new energy, deserve continued attention. (New Society)