Today, let's discuss a serious yet imaginative topic, concerning the Science and Technology Innovation Board (STAR Market).

The reason for discussing this topic is quite straightforward: to make a bold outlook for the STAR Market in the second half of this year and for the next three years.

Recently, the Science and Technology Innovation Index 50 (SSE Science and Technology Innovation 50 Index) has once again fallen below 700 points, with the next target being the 635 points at the beginning of 2024.

Over 600 points implies that the SSE Science and Technology Innovation 50, which was issued at 1,000 points, has seen a decline of more than 30%.

For a sector, the core 50 listed companies, in the more than four years since listing, have not only failed to bring positive returns to investors but have also seen an average decline of over 30%. This is a very serious matter.

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This fully illustrates two issues.

First, there is a premium issue in the STAR Market.

The STAR Market in the past, including the first two years, was all issued at a premium.

This year's STAR Market did not have a premium issue, but on the first day after listing, the stock price speculation was quite exaggerated.

In short, after the entire STAR Market was listed, the prices were all high, or rather, inflated.The reason why the Science and Technology Innovation Board (STIB) issues at a premium should be to provide these companies with more funds to help them survive. After all, the survival ability of companies on the STIB is not very strong. This undoubtedly brings a lot of pressure to the secondary market. Even with good intentions, it should not transfer this premium to investors. In the end, it is still the market that pays for the premium issuance of the STIB, and the ones who suffer are either retail investors or mutual fund investors.

Secondly, the performance of the STIB is disappointing. The performance of the STIB in the past two years has been really poor. Looking at the current price-to-earnings ratio of the STIB, it is excessively high. When talking about the bottom of valuations, it has started to calculate the price-to-book ratio and the price-to-sales ratio. Although the investment in research and development by STIB companies is indeed not low, after being listed for several years, the profitability is still worrying.Investing in research and development (R&D) requires spending money, which everyone understands. However, if after many years of R&D there is no product to sell, it becomes difficult to comprehend. After all, market value is ultimately linked to performance, not just to stories. No matter how much is invested in R&D, if there is no outcome in the end, capital will still be abandoned.

If there is no bottom line for performance, there is no bottom line for decline, which can be described as a continuous downward trend. In the short term, there will not be a significant improvement in the performance issues of the Science and Technology Innovation Board (STAR Market). But if we think from a different perspective, the so-called improvement is to find the worst situation and release the worst expectations.

This may be a number game, but it is indeed effective. For example, if a company originally earned 100 million yuan a year and now only earns 30 million yuan, but if it earns 50 million yuan next year, it has increased by 60% based on the 30 million yuan.

The key to the anchoring effect lies in where the market's anchoring price is. Looking at this issue from a different angle.Assuming the fluctuation range of the Science and Technology Innovation Board is between 600 to 1500 points.

Then those who buy at 600 points have an expectation of a 2.5 times increase.

While those who buy at 1500 points have to bear an expectation of a 60% loss.

The key issue is not whether the Science and Technology Innovation Board is good or not, but how to choose the right timing to find a relatively low position.

Indeed, due to the poor economic situation, the overall performance expectations of the Science and Technology Innovation Board in the past two years have not been good.

But from another perspective, the more it falls, the valuation naturally becomes cheaper.

The price-to-earnings ratio is still high, but the price-to-book ratio is indeed low, and once the performance turns around, the opportunity naturally comes.

Each bull market must have a core main line or a core sector.

The first bull market, from 2006 to 2007, was about the main board.The second bull market, from 2009 to 2010, was driven by the Small and Medium Board.

The third bull market, from 2014 to 2015, was driven by the ChiNext Board.

The fourth bull market, from 2019 to 2021, was again driven by the ChiNext Board.

What will be the core focus of the fifth bull market, from 2025 to 2026?

Many people might think it will be high dividend stocks, dividend payouts, value investing, the SSE 300, the SSE 50, or the A50.

At present, the most likely focus of speculation is the Science and Technology Innovation Board (STAR Market).

The foundation of a bull market is not based on fundamentals, but rather on sufficiently low valuations and prices.

A bull market is created through speculation, not calculated based on valuations.

Speculation is all about stories, potential, and imagination.

Understand this, and then think about that statement again.The lower limit of the Science and Technology Innovation Board (STAR Market) is the upper limit of a bull market.

The lower limit of the Science and Technology Innovation Board refers to where the starting point of a bull market is, after the board has fully adjusted downwards.

Whether it's the Science and Technology Innovation 50 or the Science and Technology Innovation 100.

No matter how bad it is, these are still the better listed companies that can be found on the Science and Technology Innovation Board.

The lower limit of these companies determines the overall quality of the entire board.

If these listed companies are not viable, then the entire board is doomed, or in other words, our science and technology innovation enterprises have no hope.

On another level, it's about how much these core companies need to fall to reach the bottom line.

This bottom line is also the bottom line at the end of a bear market.

The Science and Technology Innovation 50 has broken through 700 points, and it's not yet at the bottom. Is 635 the bottom, or will it refresh the 600 point mark? If 600 points can't stop the decline, then what about 550? 500?

The index will not fall indefinitely, there will always be a lower limit.The Shanghai Stock Exchange Index, each time it falls, it is always the least, not because there is capital deliberately protecting the market, but because the performance of the index's weighted stocks is still okay, and the bottom line is relatively high.

But it is precisely because of these weighted stocks, which are banks, oil, coal, etc., that their imagination space is insufficient, and there is not much speculative capital, so the upper limit will not be high.

In a bear market, high dividends are the kings of the defensive sector.

But in a bull market, when the market is soaring, capital does not care about the dividends of a few small stocks.

When it comes to a bull market, with ample capital, people start to tell stories, talk about technical valuation, and talk about imagination space.

And the Science and Technology Innovation Board is inevitably the most important part of the bull market.

Many people may not believe it, thinking that the market must speak based on performance.

Then you can look back at the previous bull markets, especially the bull market from 2014 to 2015, which was speculative in the GEM (Growth Enterprise Market).

At the peak of the bull market, the GEM had a price-to-earnings ratio of hundreds of times, isn't this a naked story?

Let's take a look at Moutai in 2021, with a price-to-earnings ratio of more than 70 times, isn't this the story of a big white horse, core assets?Why can't the Science and Technology Innovation Board tell stories?

The upper limit of the next bull market is not in the stories of the Science and Technology Innovation Board.

However, before telling stories, you need to have chips first.

The whole market is taking advantage of the poor performance of the Science and Technology Innovation Board to suppress prices and try to get as many chips out as possible.

When the chips are in place, the low point of performance will naturally be synchronized.

When both are in place, the foundation for the bull market is also in place.

The so-called bull market is just a link in the entire cycle. Capital must make money and will definitely create a bull market.

Don't worry about the existence of a bull market, what you are experiencing now is just what must be experienced before the start of the bull market, which is to get the chips out of everyone's hands.