Q1: After the holiday, the market sentiment has shown a pattern of opening high and closing low. What is the trend for the fourth quarter market?

The Chinese asset revaluation trend driven by the 924 policy combination has been further stabilized by the financial press conference held last weekend. Due to the rapid and significant increase in the market before the holiday, the market sentiment has shown a pattern of opening high and closing low after the holiday, and has stabilized after the first two trading days of this week.

The fourth quarter is optimistically biased towards more, with many favorable factors in the near term, such as the continuous inflow of incremental funds that can improve market expectations, and the "monetary policy" supported by the central bank for the capital market, which is a focus in the medium and short term. Moreover, the details of the adjustment of existing housing loan interest rates are being introduced one after another, which helps the real estate industry to "stop falling and stabilize". This is also the key to the long-term trend of the capital market, so the real estate policy of "stopping falling and stabilizing" is what the market is looking forward to. Third, fiscal policy has exceeded expectations.

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Looking at the ETF fund flow, the overall market ETF has shown a net inflow trend in recent times (from October 8th to October 11th, four trading days, with a net inflow of 150 billion yuan). Although the ETFs related to the Shanghai and Shenzhen 300, STAR 50, STAR 100, and ChiNext have been adjusted, they are still mostly net inflows.

So the recent fluctuations are more emotional fluctuations. The sentiment was quite high before and after the National Day, and the sentiment has recently cooled down.

Q2: In recent times, the net inflow of funds into the ETFs of the dual-creation sector has exceeded 100 billion yuan. How should the ETF asset allocation be done in the fourth quarter?

Since late September, active allocation-type foreign capital has continuously inflow into Chinese equity assets for two consecutive weeks. The attention of foreign capital allocation to Chinese assets has returned, which means that it is necessary to re-examine the core assets of China under the global valuation framework.

Can we still build positions now?

When the market is extremely hot, it is necessary to be cautious about chasing the rise. Taking the price-to-earnings ratio valuation of the ChiNext index as an example, it is still at the 18% percentile of the past 10 years; the price-to-earnings ratio valuation of the Hong Kong listed state-owned enterprise dividend index is at the 45% percentile of the past 10 years, and the valuation is not high, and some are even at a lower position.

People often joke that it is not easy to make money in a bull market because it is easy to buy at a high position, and the cost of building positions rises with the water. Therefore, if everyone agrees with the concept of building positions at a low position, accumulating chips by building positions in batches at a low valuation position or when the market is sluggish, especially when the market adjusts, gradually increasing the equity position, it will help everyone accumulate more chips with cost advantages. When the market has a good rebound, the elasticity of these low-cost chips should be very good.Q3: How do ETF investment strategies differ in different market conditions?

Style Judgment: In different market environments, one can focus on different types of index products. For instance, when the market is generally rising and you're unsure about which industry or theme to invest in, you can pay attention to broad-based indices. If the market continues to warm up and establishes a trend, you can look for industry mainlines and consider participating in industry index funds on the right side. During market fluctuations, you can focus on style indices, such as the dividend indices from last year and the first half of this year.

Selecting Products: For a fixed investment plan, choose those related to the STAR Market (Science and Technology Innovation Board) and ChiNext (Growth Enterprise Market). For current allocation, opt for a balanced broad-based configuration, such as allocating some to the STAR Market and ChiNext, and then adding some to the A50 and Shanghai-Shenzhen 300 indices.

Fixed investment is based on longer-term opportunities, such as interest rate reduction cycles, new quality productive forces, current valuation levels, and future economic recovery. If the market warms up alongside economic recovery, I believe that the STAR Market and ChiNext will be able to keep up with the market's rebound or even outperform it.

Why suggest a balanced broad-based allocation at this stage? The industry mainlines are not clear, and secondly, we are currently at a style inflection point. A balanced allocation can keep up with the overall market performance, at least avoiding a situation where efforts are counterproductive.

Q4: What if you can't buy an ETF that hits the upper limit in extreme market conditions?

If the stocks included in the index tracked by the ETF generally perform strongly, it may lead to the ETF hitting the upper limit. For example, the constituent stocks of the STAR Market and ChiNext have a fluctuation limit of 20%, while most ETFs have a fluctuation limit of 10%. When a batch of constituent stocks rise by more than 10%, it is more likely to cause the ETF to reach the upper limit. Once an ETF hits the upper limit, if investors strongly看好 the index's future performance, they can consider subscribing to the ETF's linked fund outside the exchange. As long as there are no purchase restrictions, investors can buy the ETF linked fund.

Of course, there are some misunderstandings in the middle. For example, someone asked before, on October 8th, the chip ETF hit the upper limit and was discounted by several points. Does the appearance of the discount mean that even if the index does not rise or fall the next day, it will make up for the discount?

The answer is that there is indeed a situation where the discount converges, especially if the market sentiment does not make a 180-degree turn.

Someone else asked, if the ETF hits the upper limit and is discounted, can I arbitrage by subscribing to the linked fund, because the ETF will make up for the discount and rise, right? So can the linked fund capture this part of the discount rise?Unfortunately, the valuation of a connected fund is based on the net value of the ETF fund. Although the ETF may be trading at a discount on a given day, the connected fund uses the net value for valuation, which follows the index. Therefore, it's important to remember that when subscribing to a connected fund, it is more about looking at the future performance of the index. If the index performs well, the connected fund will follow suit.

Q5: What is the significance of indicators such as IOPV, premium, and discount rate for ETFs?

IOPV: This stands for the Intraday Indicative Value of an ETF, which is a real-time estimated net value. Since the index fluctuates during the trading day and the ETF holdings are designed to replicate the index holdings, the ETF's real-time net value should theoretically fluctuate as well. This is a very important indicator for measuring the intrinsic value of an ETF.

Premium: At the same time, ETFs are tradable on the secondary market, just like individual stocks, and there is a transaction price. This price is generally based on the IOPV real-time estimated net value. Due to the existence of the ETF creation and redemption arbitrage mechanism, the ETF price often aligns with the IOPV. However, there can be exceptions, such as some QDII ETFs, like the NASDAQ, which may be subject to foreign exchange quota restrictions, limiting the amount that can be subscribed. In such cases, when there is more buying demand than selling, the ETF price will be higher than the IOPV, and this situation is referred to as a premium.

When the premium is particularly high, it is necessary to pay attention to the risk of high premiums because when sentiment subsides or subscriptions open up, the premium is likely to converge, which means that buying at a high premium is essentially overpaying.

Q6: How to choose investment strategies for broad-based index ETFs and industry-themed ETFs?

There are many types of ETFs, and when investing in broad-based index ETFs and industry-themed ETFs, do investors' trading strategies converge, or are there differences that require flexible responses?

Currently, there is no strong correlation between ETF inflows and future performance. For example, during a certain period, ETFs showed a trend of buying more as they fell. In different market conditions, the ETF investment philosophy is to buy broad-based ETFs on the left side and industry-themed ETFs on the right side, and to focus on style ETFs in a volatile market.