Rebirth of the Capital Legend

"It looks like the 'big infrastructure' sector is about to experience another period of major upward movement." Zhao Zhiyuan paused, then continued, "This trend is truly resilient. Even with prices generally having nearly doubled over the past few months, it still maintains such strong momentum."

Liang Jiucheng smiled and said, "This is the power of a fundamental reversal. With the fundamentals of the entire real estate industry chain reversing, expectations of explosive future performance in all upstream and downstream industries have already formed. Once this situation takes shape, the main institutional capital groups in the market, as well as the large number of capital groups that follow the trend and go long, will naturally continue to raise valuations and expectations. As a result, many core leading stocks in all industries upstream and downstream of the entire industry chain will feel increasingly undervalued and safe as they rise."

"That's the logic..." Zhang Wei said, "but the scale of expansion of the entire industry chain isn't unlimited, right? Considering the future, I feel like the current market, with its concentrated long positions of major institutional investors and the large number of retail investors following suit, are a bit too optimistic?"

"What do you mean by considering the final outcome?" Zhao Zhiyuan asked puzzledly.

Zhang Wei said: "In other words, referring to the urbanization rates of developed countries abroad, my country's urbanization rate will most likely end up at around 80%, and it will be difficult to increase further. Compared with the current urbanization rate of more than 60%, the room for future scale expansion is actually not very large.

Besides, as more and more houses are built, they have to be sold, right? People always need to live in them, right?

But now, with the development of social macro-economy and as people's living standards are getting better and better, even if the country relaxes the restrictions on fertility rate.

However, it seems that people's desire to have children will show an inverse ratio to the economic trend.

In this regard, we can actually refer to the fertility rate trends in developed countries abroad.

If the fertility rate in society continues to decline in the future, then as the aging of the social population structure becomes more and more serious, the number of people of marriageable age will also decrease.

So, at this point, many people's expectations for real estate have changed.

In other words, the booming domestic real estate market is based on the fact that the number of people of marriageable age is at its peak in recent years.

Looking ahead, the number of people of marriageable age in our country will increase in the next few years or even for many years to come.

It must be a continuous downward trend.

After all, the previous peak in births was approximately 15 to 25 years from now.

Therefore, I think the future of the real estate industry chain is not that optimistic. Of course... from the perspective of the end game, the real estate industry chain may enter a long period of recession in the distant future, but this will not affect the continuation of the current hot bull market cycle.

For investors in general...

In the bull market, infinite optimism, while in the bear market, infinite pessimism is often the norm.

Therefore, even though the future of the real estate industry chain is unlikely to be bright, it does not affect the continued bullish sentiment at this stage and the continued rise of many industry-leading stocks.

"Lao Zhang, your endgame thinking is indeed quite fresh," Zhao Zhiyuan said. "However, judging from the country's macroeconomic guidelines and policy orientation, I think the future demand explosion prospects for the main line of large-scale infrastructure and the real estate industry chain you mentioned, in fact, focus not only on the domestic market, but also on the development of foreign markets. I even think that the development of foreign markets may be the key in the future.

Isn’t the country currently promoting the New Era Silk Road and the Maritime Silk Road in its macro-strategy?

If this macro strategy can continue.

Then, the huge foreign infrastructure market will definitely be opened up.

Furthermore, the current international situation, as a whole, is still in a multilateral trade form. Under the multilateral trade form, the implementation of this macro strategy is very high-level and promising.

Once the huge demand market abroad can be opened up, a lot of excess production capacity in traditional domestic industries will have a place to go.

From this perspective, it is superimposed on the macroeconomic strategic conception of the Silk Road on land and on the sea in the new era.

I think it is still a bit early to talk about the final outcome of the core theme of large-scale infrastructure.

Furthermore, observing the development history of many developed countries abroad, especially the urbanization process, it is indeed difficult to make any further progress after the urbanization rate reaches more than 80%.

However, everyone's desire to pursue a happy life and a better life is endless.

When the basic needs are met.

So, with the continuous development of the economy and the continuous improvement of people's living standards, will improved housing become the mainstream?

If you look at those old houses built twenty or thirty years ago, are there still many people living in them?

Furthermore, there is only so much land available for development in the country, but everyone certainly has demands for living environment and house size, and they will demand better and better.

Therefore, even if the urbanization rate reaches 80%, it will no longer continue to grow.

So, under the demand for improved housing, the development of the real estate market will not stagnate. Of course... the rate of growth will definitely slow down.

But no matter what...

Just like what you said, Lao Zhang, this is currently a bull market in the national real estate market, and it is the trend of the real estate industry.

In the atmosphere of a bull market, the vast majority of investors involved are relatively optimistic, their sentiment remains high, they can only see the good news but not the potential bad news. These are all actual phenomena, and under this actual phenomenon, it is normal for the relevant core stocks in the market to be continuously chased and hyped by various major capital groups. In other words, no matter what the final outcome of future industrial development will be, it will not affect the current trend development and continuation.

I think... this should be the power of trends."

"Well, this is indeed the power of trends," Liang Jiucheng continued. "A reversal in industry fundamentals will drive growth in the performance of leading stocks in related industries across the entire industrial chain. The continued growth in performance of leading stocks in major industries will, in turn, lead to increased valuations and rising stock prices.

When valuations increase and stock prices continue to rise, a money-making effect continues to accumulate.

Naturally, it will attract more speculative funds that want to make money and continue to participate.

If more speculative funds participate in the trend, it will further increase the stock price and the valuation of the stock, thereby further consolidating the money-making effect and boosting everyone's optimism and spirit.

This creates a trend that continues to grow.

Generally speaking, this trend is difficult to stop unless the performance of many industry-leading stocks stagnates or the industry fundamentals reverse.

And according to what you said...

If the domestic real estate development market, and even the entire upstream and downstream industrial chain of major infrastructure, wants to start slowing down its expansion, it will have to be at least until the domestic urbanization rate reaches 80%.

There is still a long way to go before the domestic urbanization rate reaches 80%.

The current urbanization rate is around 63%.

There is still 17% of room to reach the target of 80%. Based on the speed of increase in the market urbanization rate in the past, it will take at least three to four years, or even five to six years, to reach the scale of 80%.

In other words, in the next three to four years, or even five to six years.

The market urbanization rate is in a continuous improvement process, and the market scale is also expanding. The entire real estate bull market will not stop easily at this stage.

In other words, the current trend should be considered in accordance with the end-game thinking that you mentioned, Lao Zhang.

That was three or four years, or even five or six years later.

Since we are still far from the end, and we are not industrial investment venture capital in the primary market, we are speculative capital in the secondary market, and short-term speculative capital that can withdraw at any time, then we don’t need to think so much for the time being, just follow the trend and keep going.

Didn’t you say something?

Follow the trend, don't over-predict the trend.

According to normal development logic, the scale expansion of the real estate industry chain will continue to slow down for another three to four years.

These three or four years are not long, but they are not short either.

No one can predict how many variables will occur in this historical development process, and how much policy intervention or policy promotion there will be.

In fact, let alone three or four years.

Even a year from now, no one can be sure what the market situation will be like or where the Shanghai Composite Index will fall.

So, instead of doing that, it’s better to follow the trend. When the trend doesn’t change, we continue to go long and follow the trend. When the trend really changes... I believe we should all be able to detect it. "

"I think what Lao Liang said makes sense," Zhao Zhiyuan said. "Predicting the future is too difficult. It's easier to just follow the market. Generally speaking, trends have inertia. Since we can confirm the direction of major infrastructure construction, the current trend is still there, and the performance explosion expected in the next few quarters is very certain, there is no need to worry too much about the future. We can just follow whoever is stronger.

If I were to ask you, regarding the major infrastructure projects...

If you want to bet on the short-term leader, then buy the stock of "Beijiang Communications Construction".

If you want higher stability and greater certainty, you can buy major real estate stocks such as Poly Real Estate, Kewan Real Estate, China Merchants Shekou, and Gemdale Group, as well as Anhui Conch Cement, a core leading stock that has already developed a very strong trend and has formed an atmosphere of institutional main force.

Other things like industry development logic, policy direction changes, etc.

Although it has a great impact on the stock price trend.

However, since we cannot predict it, we naturally don’t need to think too much about it.

I believe that no matter what information comes out of the market, no matter whether the market news is good or bad, it will eventually be reflected in the stock price through volume and trend.

In this case, just keep an eye on the stock price trend, as well as the emotional feedback and trend feedback of the entire main line.

As long as sentiment and trends are sound, I believe the stock price performance of individual stocks, especially the core leading stocks in the mainline sectors, will definitely be good.”

"That makes sense." Zhang Wei thought for a moment and said, "Looking at it that way, I'm a bit confused. Indeed, any good or bad news will eventually be reflected in the trading volume and stock price trends. In that case, we just need to keep an eye on the stock price trend and the continuity of the trend."

Liang Jiucheng nodded and continued, "Yes, compared to the current market trends, there is no doubt that the major infrastructure investment sector is still the most certain, has the strongest trend, and has the highest concentration of institutional capital.

Although the new energy industry chain and the smartphone industry chain are also performing well.

But I always feel that the internal chip structure of these two lines has not been settled. The overall chip structure has not settled. There are a lot of floating chips inside. The main institutional capital group seems to have not completed the final position building target for these two lines. Therefore, these two lines will most likely fluctuate in trend.

At least it won't be as smooth as the major infrastructure line.

Especially the new energy industry chain, the major positive news for this line was actually just released a few trading days ago.

Regarding the impact of these major positive factors on the future fundamentals of this line, that is, the expected reversal of the fundamentals of the new energy industry chain, there are actually some differences among various capital groups in the market.

Since there are differences in expectations and the good news was released suddenly, the entire main line actually has insufficient turnover.

This naturally leads to the relative dispersion of chips within this line.

This kind of dispersed chip structure makes it difficult to form a continuous upward breakthrough, so the subsequent development of this line... when the main institutional capital groups have not yet formed a consistent expectation, there will definitely be repeated and adjustments. There is no need to be so anxious about the layout of this line.

As for the smartphone industry chain, the chip structure is relatively better than that of the new energy industry chain.

However, the same consistent expectations have not been formed.

I think this line still needs to be stimulated and tested by the news from the upcoming Apple new product launch conference before we can truly judge the strength of the subsequent trend.

Other market main lines...

The trend is relatively weak and there is no value in paying too much attention to it at the moment.”

"Yes." Zhao Zhiyuan nodded and said, "The current focus of market manipulation is indeed still on the three core lines of large-scale infrastructure, new energy industry chain, and smartphone industry chain."

As he spoke, he turned his attention back to the two markets where trading was going on fiercely.

All I saw was the continuous discussion among several core speculators in the main speculator group of the "Qilu Gang".

At this time, the market trading time was approaching 2 o'clock in the afternoon, and after more than half an hour of rapid counterattack in the afternoon market.

At this moment in the market, there is an overall bullish sentiment and a group of speculative funds following the trend.

Most of them have calmed down.

The market's intraday trading volume has also dropped to the level near the midday closing in the morning.