Today, the A-shares were once again seesawing around the 3890-point mark. The Shanghai Composite Index hovered around this level all day, grinding back and forth, but ultimately managed to hold steady. The entire market felt entangled—unable to break higher or lower, a classic year-end stalemate. Behind this are multiple factors at play; let’s break them down.

First, the root of the volatility boils down to three words: funds are timid. As the year-end approaches, institutions begin to settle accounts, and some are cashing out gains from sectors that have risen too much earlier. Today, the total market turnover was only 1.61 trillion, down more than 280 billion from the previous day. With liquidity shrinking like this, it’s obvious that wait-and-see sentiment is spreading. Looking at valuations, the overall A-share PE ratio has reached the 84.98th percentile since 2010—in plain terms, it’s getting a bit expensive, and further upward movement would require stronger catalysts. Meanwhile, several key meetings in December have yet to take place; before any policy cards are revealed, everyone is waiting for the dust to settle. Another interesting phenomenon: average daily northbound capital turnover this week dropped by 3.34 billion, but margin financing balances unexpectedly rose by 10.6 billion—domestic and foreign investors clearly aren’t on the same page, and this divergence is intensifying the volatility.

As for sector performance? In a word—polarized. Fujian local stocks absolutely exploded today, with over ten stocks hitting the daily limit thanks to regional policy boosts, and the sector as a whole rising nearly 10%, making it the clear focus. Pharmaceutical retail continued to rally, with Haiwang Bio hitting five consecutive limit-ups, and stocks like Renmin Tongtai also hitting the daily limit. Consumer electronics benefited from the AI smartphone trend, with main funds showing a net inflow of 856 million. On the downside, energy metals dropped more than 6.5% due to futures price pullbacks, with stocks like China Tin Group and Shengxin Lithium Energy falling sharply. Education and training, as well as the battery industry chain, also underperformed, showing clear structural divergence.

Faced with this kind of market, don’t panic. The worst thing to do is chase highs and sell lows—constantly flipping positions racks up fees and rarely pays off. My advice is to focus on asset allocation: put the bulk (about 70% of your position) into defensive sectors like banks and utilities to stabilize your portfolio; the remaining 30% can be allocated to imaginative sectors like technology growth and consumer, so if one side underperforms, the other might shine. Also, pay close attention to several key December dates. The US Federal Reserve meeting and China’s Central Economic Work Conference will both influence the next steps. At that time, watch whether trading volume can climb back above 1.7 trillion—this is an important indicator of market strength.

Year-end volatility isn’t a bad thing; it often means new opportunities are brewing. At this point, the risk-reward ratio for A-shares is actually becoming reasonable. As long as you pick the right assets and maintain balanced allocation, you can actually gain the upper hand amid the volatility.