In recent developments in the stock market, the ChiNext Index hit a new low for the year on Thursday, breaking below the support level established in April of last yearThis raises concerns about whether the Shanghai Composite Index will follow suitDespite this bearish trend, investors are hopeful for the arrival of a new bull marketFrom my perspective, if such a bull market does emerge, it is likely that the Hong Kong stock market, known for its advantageous valuations, will lead the recovery.

So far this year, over a hundred individual stocks have doubled in value

On Thursday, the ChiNext Index plummeted to an intra-day low of 2118 points, ending the day with a year-to-date drop of 9.49%. This follows a staggering decline of over 29% experienced last year

Analyzing the candlestick chart reveals that the index is still on a downward trajectory, having increased by 79.3% since the bottom reached in July 2019, but also having decreased by 40.6% from its peak in July 2021.

The continued decline of the ChiNext Index may be significantly influenced by the struggles of its largest constituent, Contemporary Amperex Technology CoLimited (CATL). On the same day, CATL had a circulating market capitalization of approximately 807.7 billion yuan, accounting for about 9.63% of the ChiNext Index's total market valueAfter adjusting for historical peak valuations, CATL's stock price has plummeted by 45.4%, indicative of a broader deflation of industry bubbles.

However, market anticipations suggest that the fierce competition within the new energy vehicle (NEV) sector is far from overThroughout this week, numerous executives from various automotive companies have shared insights, with some suggesting that "the automotive industry has entered a survival-of-the-fittest phase." Another viewpoint emphasizes that "by 2025, China will require 1000-1200 GWh of power battery production capacity, while current plans foresee a staggering excess of 4800 GWh." A recent report by Morgan Stanley posits that bubbles in the U.S

stock market typically undergo a three-year correction after reaching a peak.

Despite the chilling environment in the ChiNext market, the overall performance of A-shares in Shanghai and Shenzhen is not as bleak as it may appearAs of Thursday, out of 5,208 stocks listed on the exchanges, there have been 103 stocks that have surged more than 100% this year, 387 stocks achieving gains over 50%, and 1,152 stocks increasing by over 20%. In contrast, only 590 stocks have experienced declines exceeding 20%, indicating that the number of stocks in bull market territory is roughly double that of bear market stocks.

Transitions between bullish and bearish market cycles often stem from what some investors refer to as "the anguish bottom."

Moreover, the rise in obscure stocks suggests a de-centralizing trend in the A-share investment landscape

The internet sector index, with a compelling rise of over 60%, has emerged as one of the top-performing sectors of the year, despite a staggering 73.3% decline compared to the peak reached in June 2015. This intense rebound in lesser-known industries has driven the Shanghai Composite Index to an increase of over 4% this yearThe Shanghai 50 Index, often referred to as the "beautiful 50," has seen a slight decline of 3.61% this year, shrinking by 38.2% compared to its 2021 peak.

As of Thursday, the Shanghai Composite Index has been oscillating around a crucial level for 14 daysThe index has fallen roughly 6% from its peak established on May 9 while showing a 12.2% growth from the bottom of 2863 points recorded last AprilCurrently, the market is simply returning to a central oscillation level that has persisted since 2016, with uncertainty surrounding when it might break free from this confinement and soar to new heights.

From a technical analysis perspective, if one considers the inviolable support levels as indicators, the Shanghai Composite Index's adjustment phases can be traced through four cycles over the past three to four years

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The first was the peak of 1558 points in February 1993, leading to a low of 325 points in July 1994, a dramatic drop of 79.1%. The second cycle saw the index decline from 2245 points in June 2001 to a low of 998 points in June 2005, representing a 55.5% reductionThe third cycle unfolded between October 2007, when it peaked at 6124 points, and October 2008's bottom of 1664 points, a loss of 72.8%. Finally, in the latest cycle, the index fell from 5178 points in June 2015 to a low of 2440 points in January 2019, equating to a 52.86% decreaseIt is noteworthy that every eight years, patterns of bull-bear transitions emerge, suggesting that the market's steadfast foundation often originates from severe distress.

Should there be a blue-chip bull market

Hong Kong stocks may perform even better

Historically, the end of bearish cycles is marked not just by violent price corrections following explosive gains, but also by coordinated governmental efforts to stabilize and revive the market

Currently, we find ourselves at a crossroads, as the latest bear market cycle began at a peak of 3731 points in February 2021, descending to a low of 2863 points in April 2022, a decrease of 23.3%. Will the assertion that “2863 points represent a solid support” ultimately be proven wrong? After all, the ChiNext Index recently fell back to levels recorded on June 1, 2020, suggesting that the April 2020 low was not a definitive bottom eitherOn that day, the China Securities Regulatory Commission stressed the importance of aligning policies with relevant parties to stabilize and bolster market confidence, indicating that these remarks are more than mere rhetoric.

Whenever rescue operations are initiated, they must come from a well-founded premiseIn May, China’s total import and export value experienced a year-on-year decline of 6.2% when measured in U.S

dollarsThe once reliable growth driver through exports now appears to be faltering, presenting a conundrum: how should we stimulate the economy? Recently, a team led by economist Ren Zeping proposed that "supporting the stock market is an effective strategy." It is crucial to note that the timing of market bottoms does not always align with economic downturns or policy shiftsFor instance, in 2020, China's economy contracted by 2.2%, marking the slowest growth since 1977; however, the Shanghai Composite Index still climbed by 13.87%, positioning it as the 12th largest annual gain in its history.

The last comprehensive market rescue took place on July 6, 2015, when 2 trillion yuan in funds were injected into the market, marking the day of the Shanghai Composite's intra-day low at 3653 points, considered the policy bottomThe index subsequently dropped to 2638 points in January of the following year, which represented a mid-term bottom, while the genuine solid bottom was established at 2440 points in January 2019.

A cautious analysis suggests that a comprehensive market rescue could foster equilibrium between supply and demand and create a consensus for a bull market, forming a vital condition for a bull market revival