The resurgence of the A-share market has captured considerable attentionOn February 29, the three major indices in the A-share market opened lower but surged significantly during the morning sessionAs of the time of reporting, the Shanghai Composite Index had gained over 1.5%, the Shenzhen Component Index had risen nearly 3%, and the ChiNext index had jumped more than 3%. A notable area of strength was evidenced in the STAR Market's core chip sector, which soared nearly 5%. Additionally, as seen in the Big Data ETF, it reached a peak increase of 4.05%, while the Xinchuang Index ETF also boasted an increase exceeding 4%. The exceptional performance of refined segments, including photolithography machines and testing services, was especially noteworthy.

The previous day had witnessed a substantial decline across the board in the A-share market, compounded by a lackluster performance in the external markets last night and a dominant downward trend across the Asia-Pacific region during the morning session todayThis backdrop led many financial analysts to predict a continuation of the previous day’s correctionContrarily, the morning session today revealed a robust rally in market activityThis raises a pivotal question regarding the catalysts behind the A-share market's impressive rebound amidst unfavorable conditions.

The dramatic upturn today appeared reminiscent of certain historical instances in A-share market historyOn February 27, 2006, a drastic market drop had preceded a subsequent rally that transformed market sentimentHowever, while a bumper bull market akin to that period seems unlikely, the current market dynamics appear more closely aligned with the trends observed following March 8, 2019. The investors are curious: what fueled this day's market surge?

A significant factor contributing to this surge is the market's sharp rally in the STAR 50 Index, with its ETF at one point realizing a gain exceeding 4%. What precisely catalyzed this explosive movement? Analysts surmise two key rumors might be at play: the recurring speculation concerning reduced investment thresholds, and an extraordinary development within the semiconductor sector, which witnessed a breakthrough today

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The semiconductor ETF soared as much as 6%, marking a robust trend in this domain.

Looking ahead, significant changes are anticipated in the STAR Market due to the impending three-year unlocking peak, projected to reach 844.4 billion yuan starting in July of this yearThis development necessitates new capital inflows to support the STAR Market, which has stringent access requirementsSpecifically, to engage with the STAR Market, investors must have an average daily asset value exceeding 500,000 RMB in their securities or funds account over the previous 20 trading daysDespite these high entry barriers, a relaxation of the investment threshold could significantly boost participation, as expectations in the STAR 50 Index continue to escalate.

In parallel, developments within the photolithography sector have been pivotal, particularly after a revealing report that energized market playersPhotolithography stocks shot up, leading firms such as Zhangjiang Hi-Tech and Aopu Optoelectronics to hit the upper limit of allowable gainsAs a result, the photolithography index itself surged nearly 7%. The synergy between the STAR Market’s optimistic trends and the surging photolithography stakes showcased how interlinked these sectors are in driving market confidence.

The situation surrounding the photolithography industry reflects a critical narrative: it is marked by monopolistic characteristics, and the focus is keenly placed on domestic breakthroughsThe industry is predominantly led by three major players globally—ASML, Nikon, and Canon—all occupying a substantial market share

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ASML, notably, leads in high-end immersion DUV and EUV photolithography technologyIn contrast, Chinese firms are striving to enhance their capabilities, aided by initiatives like the '02 Special Project' which promotes domestic production.

The focal point now pivots to whether the market has stabilized after the considerable sell-off observed yesterdayThe morning hike back above the 3000-point mark raises several questions regarding whether the recovery signifies a true turning point for investor sentiment.

Insights from foreign capital flows indicate a noticeable shift in behavior concerning investment into A-sharesHistorically, there had been an outflow of foreign investments in the latter half of last year; however, a reversal has commenced since January, with notable net inflows being reportedResearch from CITIC Securities highlights that since August 2023, the trend of foreign capital reduction in A-shares appears to be nearing an end, indicating a potential resurgence of interest from international investors amidst improving fundamental conditions in ChinaDuring today’s morning session, net purchases from foreign investors surpassed 10 billion RMB.

Moreover, from a quantitative perspective, the market's previous downturn was largely attributed to rumors surrounding quantitative fundsData suggest that should the restrictions on the net selling of quantitative funds be lifted, selling pressure may persist, but statistical analysis indicates that a significant portion of holdings is concentrated in mid-cap and small-cap stocks, hence posing considerable risks for these segments.

Furthermore, as we look toward the near future, we are approaching a critical period for fiscal discussions in China

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