On January 16th, the market opened with divergence as the A-shares rose driven by the weighty sectors, with the A50 index surging then pulling back; Hong Kong stocks also followed suit with adjustments, with the Hang Seng Index and Hang Seng Tech Index both declining collectively. This stands in stark contrast to the euphoria caused by the structural tool rate cut the night before.

It may seem like ordinary intraday volatility, but it reflects a deeper change—the market’s perception of the fundamentals is quietly shifting. The key to this adjustment isn’t the rise or fall of the indices themselves, but a change in the pricing logic. At least three important expectation lines have been recalibrated.

**First, let’s look at the liquidity line.** Recently, M1 data has shown a decline, prompting the market to ponder: does abundant money mean active money? In the latest financial data, the year-over-year growth rate of M2 is 8.5%, while M1 is only 3.8%, with the gap widening. What does this imply? It indicates that the willingness of enterprises and residents to hold demand deposits is weak; money is sitting in bank accounts and not flowing into transactions or investments. For credit expansion to effectively transmit to market trading activity, this link is stalled.

**Next, the policy pace line.** After the structural tool rate cut, some funds are recalculating the timing of a comprehensive rate cut. The central bank has explicitly announced that from January 19, it will lower the re-lending and re-discount rates by 0.25 percentage points, and adjust multiple structural tool rates. This move is more targeted and incentivizing, aiming to boost marginal enthusiasm for credit in key areas first. But it could also mean that the window for another large-scale rate cut before the holiday may not be as urgent.

**Finally, the profitability effect line.** Can the market’s recent enthusiasm for chasing gains continue? That depends on how the previous two lines evolve. If liquidity transmission cools off and policy pace doesn’t accelerate as expected, the strength of thematic stocks and hot spots will find it difficult to stay elevated.

In fact, the market is constantly adjusting these expectations in real time. Once expectations change, emotional fluctuations naturally follow.