[Red Envelope] Themes and Hot Topics — How are themes generated? How to judge the speculative expectations of a theme?

Hello everyone, I am Xiao Xin. My trading system can be summarized with words like “timing, main line, leading stocks, low frequency,” which is the Longkong Long model. [Taoguba]
Previously, I shared with you the related content of leading stocks and timing, and I believe everyone has gained something. Today, I will start sharing my thoughts and insights on themes and hot topics.

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1. Themes and Hot Topics - The Soul of the Market**

Humans are social animals, and stocks also exhibit social behavior. The development of market trends often takes the form of themes and hot topics; the grand market trends are composed of themes and hot topics, which can be said to be the soul of the stock market. If the market lacks continuous themes and hot topics, even if the index is in an upward trend, the profit-making effect may not be good. However, if the market has hot topics, even if the index is in a sideways fluctuation phase, it can still yield good profit-making effects.

For example, from July 9 to August 5, 2024, although the index was in a downward trend during the sideways phase, due to the emergence of the sustainable theme of autonomous driving, the profit-making effect was very good.

In the first half of 2022, it was even more evident that the market could be said to be in a bear market, with the index declining all the way. However, during the two sideways fluctuation phases I outlined, there was explosive profit-making effect because of the very strong theme of major infrastructure, making that year known as the “Year of Infrastructure.”

The current popular theme in the market is the hot topic. The profit-making effect of the market is closely tied to themes and hot topics; every time there is a chance to strike hard, it is because a major theme has emerged in the market. In my trading system, themes are placed first, more important than index analysis and individual stock technical analysis. Understanding themes before selecting stocks can help avoid falling into the trap of technical analysis and prevent exiting during a washout.
Since themes are so important, how are they generated? Let’s move on to the main topic of this article.

2. Ways to Generate Themes

3. Policy Driven
   Policy driving is the easiest way to generate thematic speculation. The A-share market is a policy-driven market, where policies have a direct and powerful impact on the stock market. Every time the state issues a new major policy or holds an important meeting, it directly influences the speculation of themes in the stock market. The sustainability of a theme is often closely related to whether there are relevant policy benefits to repeatedly catalyze it.

The recent mainstream theme in the market - electricity - was speculated upon due to repeated policy catalysis:
The report on government work proposed at the Fourth Session of the 14th National People’s Congress focuses on building a new type of power system, accelerating the construction of smart grids, developing new energy storage, and expanding green electricity applications.
In the government work report on March 5, it was proposed to implement ultra-large-scale intelligent computing clusters, computing-power collaboration, and other new infrastructure projects, strengthening the nationwide integrated computing power monitoring and scheduling. From that day on, the speculation around electricity rose to the level of national new infrastructure, and began to receive real market attention, giving rise to a new term, “computing-power collaboration.”
Following this, there were still relevant policy messages catalyzing electricity:
The Ministry of Industry and Information Technology, the National Development and Reform Commission, the State-owned Assets Supervision and Administration Commission of the State Council, and the National Energy Administration jointly issued the “Implementation Plan for the High-Quality Development of Energy-Saving Equipment (2026-2028).”
On March 23, the National Data Bureau stated that it would work with relevant departments to vigorously promote the computing-power collaboration project, ensuring that the proportion of green electricity applications in newly constructed computing power facilities at hub nodes reaches over 80%, maximizing the supporting role of green electricity.
It is precisely because of continuous policy benefits catalyzing this that the speculation around electricity could transcend the bear market and lasted almost a month.

The major infrastructure operations in the first half of 2022 were also driven by repeated policy benefits:
The National Development and Reform Commission: appropriately advance infrastructure investment;
China’s major water conservancy projects are investing hundreds of billions;
The list of major projects in the Chengdu-Chongqing Economic Circle for 2022 has a total investment of 2 trillion;
The National Development and Reform Commission and four departments: promote the green and efficient development of environmental infrastructure;
The Ministry of Finance has advanced the quota for new local government bonds in 2022 by 1.79 trillion.
This wave of major infrastructure speculation spanned three waves, basically lasting half a year and giving birth to many leading stocks like Zhejiang Construction Investment, Tianbao Infrastructure, Hunan Development, and Jianyi Group.

The digital economy speculation in October 2022 was also driven by repeated policy benefits:
Continuous catalysis from national-level messages:
The Central Bank: solidly carry out pilot projects for digital RMB research and development;
The 20th National Congress: first proposed the modernization of the national security system and capabilities;
Accelerating procurement in party politics, finance, energy, and other sectors.

There are many such cases. It can be said that the speculation of a major theme is basically inseparable from policy driving. Even though many thematic speculations belong to emerging industries, they also have policy support, such as the low-altitude economy in 2024, and commercial space in the second half of 2025.
The speculation of themes is inseparable from policies; any major policy will stir up waves in the stock market. Therefore, as traders, we must understand policy trends and follow them closely to avoid getting lost.

2. Emerging Industries and Technological Innovation
   Emerging industries and technological innovations are the largest fertile ground for generating thematic speculation. With the rise of each new industry and breakthrough in technology, it is easy to generate new themes in the stock market, which are easily pursued by investors. Generally speaking, the more revolutionary and original the technological innovation, the larger the theme it generates; the broader the impact of the technological innovation, the more themes it generates.
   In recent years, the most impactful emerging industry in the world has been artificial intelligence, hailed as the Fourth Industrial Revolution. Since its rise in early 2023, it has been the mainstream of speculation in the stock market, generating a vast number of themes such as computing power, liquid cooling, PCB, optical fiber, etc. Each breakthrough in technology brings forth a wave of thematic speculation. In terms of AI applications, many new themes have also emerged, like AI medical, AI marketing, AI agents, AI e-commerce, deepseek, and so on.
   Looking back further, there was the internet revolution, when stocks associated with the internet saw significant rises. As the internet developed further, it spawned many new themes, from early portal websites to later search engines, instant messaging, online gaming, e-commerce, entertainment, and social networking, then to mobile internet, big data, and cloud computing; every step of technological advancement brings about a wave of speculation in themes.
   Both artificial intelligence and the internet are revolutionary industries. Looking at smaller examples, low-altitude economy, innovative drugs, autonomous driving, Huawei concepts, and commercial space are all emerging industries or technological innovations that have seen sensational speculation in the stock market over the past few years, generating significant profit-making effects.
   I am personally very enthusiastic about thematic speculation triggered by technological innovation. Whenever the market presents new imaginative themes, I choose to participate at the first opportunity because I believe that technological innovation can lead social progress. If we do not support such relevant themes, then what else should we support?

3. Major Events
   Major events can directly catalyze related thematic speculation. Major events refer to events with significant social impact, such as wars, the Olympics, major epidemics, etc. For example, the recent Middle East conflict has driven speculation in oil and chemicals, and the 2024 Russia-Ukraine conflict gave rise to the major stock Hainengda. The speculation around cross-strait themes at the end of last year was also driven by expectations of the major event of Taiwan’s return.
   The bigger the event and the greater its impact on people’s lives, the larger the themes it generates, leading to more bull stocks. The Olympic theme almost spanned the entire bull market from 2006 to 2007, giving birth to countless bull stocks like Zhongti Industry, Xidan Shopping Mall, Beijing Tourism, Quanjude, Beijing Urban Construction, etc. The last stock with the most consecutive gains, Beichen Industrial, was also born from the Olympic theme, pulling up 22 consecutive gains, a record that was only broken this week by Huadian Energy. The Wenchuan earthquake in 2008 was also a major event, leading to a surge in bridge construction stocks; the avian flu in 2009 was also a major event that favored biopharmaceutical stocks in the market.
   There are also extraordinary events that generate even larger themes; for example, Hong Kong’s return gave birth to a tenfold bull stock, Shen Development. The reunification of East and West Germany was also an extraordinary event; renowned investor Soros seized this opportunity to go long on the German mark, becoming a legendary figure in a single battle and gaining fame worldwide. The YQ outbreak was also an extraordinary event, subsequently driving speculation in masks, virus prevention, and other related themes, which continued for several years, giving birth to a tenfold big stock like Jiuyan Medical. The return of Taiwan also belongs to an extraordinary event, so remember to seize the opportunity.

4. Price Increases
   Price is the most sensitive factor for products. Once prices surge, it immediately triggers corresponding thematic speculation, and due to the irrefutable logic of price increases, it is easy to give birth to major bull stocks. Such themes come simply and directly, and the main players will naturally not let them go. For example, the rare earth speculation in 2010 was precisely because the state strictly controlled rare earth exports that led to a continuous rise in rare earth prices.
   Looking at the related price increase speculation in the market in the past two years, the chemical price increase in the first half of last year triggered a sensational wave of chemical speculation, giving birth to major stocks like Zhongyida and Hongbaoli, Youfu Co., and Yuzhong Sanxia. In the second half of last year, the price increase of lithium hexafluorophosphate drove speculation related to lithium batteries, giving birth to major stocks like Tianji Co. and Haike Xinyuan.

The above four methods are the most common ways to generate thematic speculation that I personally strive to grasp. There are also other methods, such as asset restructuring and performance, but due to their unpredictability, I will not elaborate on them. The thematic speculation driven by policy is the most frequent, speculation driven by technological innovation is the most valuable, speculation driven by major events is grand but tends to be short to medium-term, and speculation driven by price changes is the most direct.

3. Judging Thematic Speculation Expectations
   There are countless themes; which themes are more favored by market funds? Which themes have better speculation expectations? I primarily judge from the following aspects:
4. The level of the theme: The larger the theme, the higher the expectation for speculation. The internet and artificial intelligence belong to super large themes, and the speculation expectations are naturally high, lasting for a long time; whereas an event like Mo Yan winning the Nobel Prize is a relatively small event, and related thematic speculation fizzles out in a day; last year’s Xiaohongshu becoming popular overseas is also an event whose speculation ended in just a few days. The size of the theme determines its speculation intensity and sustainability.
5. The novelty of the theme: The stock market loves novelty; fresh things are more favored by investors. When the low-altitude economy first emerged, it was a very new industry that had never been heard of before, resulting in a long speculation period. However, when the deep-sea economy later emerged, investors no longer found it fresh, and speculation ended quickly.
6. The imaginative space of the theme: Stocks speculate on the future, on expectations; themes with greater imaginative space have greater speculation expectations. The commercial space speculation at the end of last year was an example of this. This also applies to individual stocks; if a company develops a new product or has expectations for asset injection, it can also unleash significant imaginative space. Chongqing Beer developed a hepatitis B vaccine, rising from 7 yuan to 82 yuan; Yinzhijie’s asset injection expectations rose from 8 yuan to 66 yuan.
   However, whether a theme can be speculated upon ultimately depends on whether the market recognizes it and whether it can withstand the test of divergence. How is a theme specifically speculated upon? How do we judge when a theme becomes the main line? I will discuss this later; interested students can follow me first.

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