Recently,the Shanghai Composite Index has been hitting new lows almost every day,with the pace of decline showing signs of acceleration.

Investors are feeling dizzy and disoriented,and their hearts are as cold as ashes.

Of course,the decline is not that significant,akin to a dull knife cutting flesh or boiling a frog in lukewarm water.

By the time you feel uncomfortable,you are already powerless to resist.

In the first week of September,the index broke through the 2800-point mark,and now it is approaching the 2700-point level.

The decline of the Shanghai Composite Index is mainly attributed to the banking sector.

Initially,banks were supporting the market,but the index has been steadily falling.

When banks started to sell off,the brewing industry added to the chaos,making the index's decline appear to accelerate.

In contrast,the Shenzhen Component Index and the ChiNext Board,which had been leading the decline,have shown some strength,but this is merely a rotation of strength among the indices.

Looking at the market news during the Mid-Autumn Festival,there is no significant positive news to excite everyone,but there is no shortage of negative news,such as increased regulatory enforcement and penalties for illegal and irregular activities.

The U.S.has also increased tariffs.

It is highly likely that the market will open below the 2700-point level after the holiday.

Once the 2700-point level is broken,it is just a stone's throw away from the 2635-point level.

Will this lead to panic?

When will the decline end,and from which aspects should we judge whether the market has bottomed out?

The general judgment of the bottom is mainly based on valuation,which is nothing more than price-to-earnings (P/E) ratio and price-to-book (P/B) ratio.

We know that there have been four significant bottoms in the history of A-shares: the 998-point level in June 2005,the 1664-point level in October 2008,the 1849-point level in June 2013,and the 2440-point level in January 2019.

Although the index is still above the 2700-point level,the current rolling P/E of the Shanghai Composite is less than 11.6 times,and the P/E of the CSI 300 is less than 11 times,both lower than the historical bottom levels at that time in 2005 and 2008.

In fact,everyone knows that a large number of individual stocks have already fallen below the 2000-point level or even lower.

The P/B ratio is also below the level of the four historical bottoms,with the Shanghai Composite P/B ratio at 1.13 times and the CSI 300 P/B ratio at 1.16 times.

It is clear that history is made to be rewritten,and no one can guarantee that a historical low will definitely be the bottom.

A simple comparison can only indicate that the bottom is not far away.

However,changes in valuation are often very slow and do not change significantly in a short period of time.

Moreover,even if the bottom is reached,it only means that the market can no longer fall,but it does not mean that it will rebound immediately.

Sometimes it may stay at a low level for a long time,oscillating repeatedly,and it requires the cooperation of various factors to pull it up.

But at this time,it is obviously not appropriate to continue to sell off,but it is likely that we will have to endure the torment,and it is possible that extreme trends will appear.

Market sentiment will become extremely pessimistic,with bearish voices everywhere,and many people often cannot bear the final torment.

It is not uncommon for people to cut their losses and leave the market at the bottom.

This is how cruel the market is.

Most people are stuck at high levels and cannot bear the long-term decline,and finally cut their losses and leave at the bottom.

When a large number of cheap chips are concentrated in the hands of large funds,the rebound becomes very easy.

So what is the cause of the current market that keeps falling?

To truly bottom out and have a big rebound,what opportunities are needed?

First,it is related to the supply and demand relationship,of course,not the supply and demand relationship since the beginning of this year,but the long-term expansion leading to an imbalance in the supply and demand relationship.

In fact,since the beginning of this year,only 49 new stocks have been listed on the Shanghai and Shenzhen markets,raising 36 billion yuan.

A large number of IPO companies have been terminated and voluntarily withdrawn,with a proposed fundraising amount of up to 365 billion yuan.

The number of companies in the IPO queue has been reduced from thousands to around 300.

Secondly,it is related to the reform of the capital market.

Reform is a challenge to vested interests,and the continuous improvement of various systems will inevitably bring a lot of selling pressure.

The acceleration of delisting,but the construction of the compensation mechanism has not kept up,leading to the spread of panic in the market.

Finally,it is related to the growth rate of listed companies' performance.

For example,after 2008,China's economic growth rate was between 8% and 10%.

Except for 2015,the net profit growth rate of listed companies' annual reports was between 10% and 20%.

However,after 2022,the performance growth rate entered a downward channel,especially after the first quarter of 2023,with a growth rate of 2.6%,there has been a negative growth for five consecutive quarters.

The main reason for this is closely related to the downturn in real estate,and the economy's dependence on real estate is relatively high,but the market lacks new economic growth points,and the past reliance on real estate to drive the economy is unsustainable.

If the profitability of companies cannot improve,the market will naturally not go up.

Therefore,this round of adjustment is more a reflection of the expectations of the company's fundamentals.

And the weak market will amplify the impact of many adverse factors.

After sorting out the main reasons for the decline,what signals need to appear in the market to indicate that the market has bottomed out and rebounded?

From the perspective of some market veterans,the following three points can be observed: First,PPI turns positive from negative,and CPI remains above 2%.

If PPI does not increase,it means that companies cannot expand production,and without expanding production,the profitability of companies naturally cannot increase.

The PPI announced not long ago showed a significant decline in both year-on-year and month-on-month terms.

For more than a year,PPI has always been below -2%,and CPI rarely exceeds 1%.

If consumer spending does not increase,corporate demand will not increase,and this is a chain reaction.

In terms of increasing CPI,many policies to stimulate consumption have been introduced,but the results are not ideal.

It is almost impossible to achieve a year-on-year CPI growth rate of %,and under such circumstances,where does the corporate profit growth rate come from?

Second,the PMI returns to above 50 and stays above 50 continuously.

The manufacturing PMI has been below the boom-or-bust line for four consecutive months,with only 49.1 in August,down 0.3 percentage points from the previous month.

If the new order index and employment index in the PMI can continue to be above 50,it means that the economic prosperity has improved.

Third,the real estate data shows an improvement.

Real estate has a great impact on the economy.

A strong real estate market means a strong economy,and a strong real estate market means a strong stock market.

The trend of real estate has basically reflected the overall economic situation and the current situation of the stock market.

Has real estate reached the worst period and bottomed out?

At least most people do not believe that the adjustment of real estate will end.

From Wang Shi's point of view,it will take at least three to five years to say that the adjustment has ended.

Of course,the market is concerned about an opportunity for a turnaround in difficulties.

The sales area and amount of real estate have been growing at a rate of -20% for more than half a year,or -20%,at least this growth rate needs to continue to return to above -20%.

If the price narrows the decline before the sales area,this will be a positive signal,indicating that real estate will gradually warm up.

The market will not fall for no reason,and we cannot blindly attribute the fall to the return of valuation,cycle,and other reasons.

The decline is the result of a combination of multiple reasons.

Data can speak,and only by understanding the data and fully understanding the data can we possibly be prepared in advance and successfully escape the top and bottom.

At the same time,we will have an objective understanding of the market trend,and after having a big picture,we will not blindly bottom out.