He Xun Investment Advisor He Mengyi: When Will Market Conditions Improve?

Black Monday: Should you cut losses or buy the dip? To answer this question, first understand the three main reasons behind today’s rapid market decline.

First, the brutal situation caused by quantitative long-short strategies. Many quantitative funds’ product strategies triggered stop-loss clauses when the market fell below key levels of 3,900 and 3,800 points. Currently, quantitative trading accounts for 30% to 40% of daily trading volume in the A-shares market, making it one of the most important trading forces. Additionally, because domestic quantitative private funds are large in scale and their strategies are highly similar—especially in small-cap and micro-cap stocks—when the market turns, almost all models send similar sell signals, creating a “sell more as it falls, fall more as it sells” death spiral.

Second, foreign capital withdrawal. Today, northbound funds sold 4.218 billion yuan, with a total daily turnover of 352.341 billion yuan, accounting for 14.49% of the total A-share market turnover. Among the top ten traded stocks, Zijin Mining, Ping An of China, CATL, and Xinyi Glass were all sold off.

Third, the strengthening dollar. The dollar rose 0.5% today, the first increase since February this year. The appreciation of the dollar has intensified capital flow back to the U.S. from emerging markets and has also put pressure on tech growth stocks.

（Editor: Zhang Yan）

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