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The financial landscape has witnessed a remarkable series of peaks, as both the Dow Jones Industrial Average and the S&P 500 Index have soared to unprecedented levels, with the Dow crossing the 45,000 mark at one point. As of now, the three primary indices in the US stock market—namely the Dow Jones, NASDAQ, and S&P 500—have shown year-to-date increases of 19.16%, 28.02%, and 26.47%, respectively, reflecting the robust health of the market. Corresponding price-to-earnings ratios stand at approximately 33.89, 44.87, and 29.77, indicating a growing investor confidence despite these lofty valuations.

In parallel, the A-share and Hong Kong stock markets have also demonstrated a noteworthy performance this year, though with somewhat more modest gains. The Shanghai Composite Index has experienced an increase of 11.82%, the Shenzhen Component Index has moved upward by 11.41%, and the ChiNext Index has risen by 17.59%. In Hong Kong, the Hang Seng Index has grown by 13.94%, with the Hang Seng Tech Index showing a slightly higher rise of 15.65%.

Despite the favorable conditions within the A-share and Hong Kong markets, their performance pales in comparison to their American counterparts. While valuations in these Asian markets may be lower than in the US, they also exhibit smaller year-on-year increases. The question arises: how can the US stock market, hovering near historic highs and sporting valuations that can be double those in Asia, continue to show greater increases in value?

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At the core of this question lies the fact that the US stock market hosts some of the world’s most successful businesses, many of which conduct operations on a global scale. Iconic companies like Apple, Tesla, Coca-Cola, Procter & Gamble, Johnson & Johnson, and Unilever dominate the market, driving both innovation and investor interest. This selection of elite companies is one significant factor contributing to the persistent bullish trend in the American markets.

Moreover, major US indices are significantly influenced by a handful of superstar companies, often referred to as the "Magnificent Seven." This group, comprising tech titans such as Apple, Microsoft, Amazon, Google’s parent company Alphabet, Facebook (Meta), Nvidia, and Tesla, has a substantial impact on the market indices due to their weight in the overall index calculations. Recent performance highlights their growing influence—both Apple and Microsoft reached all-time highs recently, while Nvidia marked its ascent to become one of the highest-valued companies globally. Tesla, too, has seen considerable appreciation, breaking through the trillion-dollar valuation barrier. The continuous rotation of performance among these giants fosters an environment ripe for market growth.

It is also worth noting that leading companies in the US excel in managing their market capitalization. Analyzing the actions of these top-performing companies reveals a concerted focus on maintaining and enhancing their stock prices. Many firms are not shy about using substantial funds for stock buybacks and dividends—often quarterly. This contrasts with the A-share market, where leading firms may not employ the same proactive strategies in shareholder returns. The combination of stock buybacks and generous dividends serves to bolster stock prices, reflecting an unwavering commitment to shareholder value. Thus, the prioritization of capital management is a primary factor behind the recurring highs in stock prices among top firms in the US.

The structural framework of the US stock market also contributes toward favoring shareholders over mere fundraising efforts. Should misconduct like financial fraud occur, companies face dire repercussions, reinforcing the need for accountability. There is a pattern of firms choosing to go private to escape regulatory scrutiny, where premium buybacks enhance shareholder value in mutually beneficial terms.

In addition, the ability of the US stock market to maintain a competitive edge can be traced back to its rigorous processes of weeding out underperforming firms, as highlighted by the relatively liberal criteria for listing and delisting companies. Annually, a significant number of firms opt for delisting, with many choosing to do so voluntarily. This constant underpinning of the market ensures that only the strongest contenders benefit from the investor pool, while those unable to perform may rapidly exit.

As the US stock market climbs to and exceeds the 45,000 mark, valuations creeping above 30 times earnings present an interesting scenario. Considering the stark differences in valuations—American markets frequently trading well over their Asian counterparts—the potential for convergence in valuation suggests substantial room for growth in China’s A-share and Hong Kong markets. As the gap narrows, a broader upward adjustment could empower these markets to gain traction against their US peers.

In contrast to the US market's dynamics, the primary competitive edge for the A-share and Hong Kong stock markets remains their valuation advantage. Notably, domestic capital markets are not short on liquidity. As local savings increasingly transition into investment, it is plausible for daily transaction volumes in the A-share market to reach norms of 2-3 trillion yuan. A return of investment confidence and positive sidelined sentiments will mitigate liquidity concerns and usher in a period where capital flows smoothly into promising assets.

Investigating the driving forces behind the significantly lower valuation levels of the A-share and Hong Kong markets relative to the US uncovers essential elements of the investment landscape. A determining factor lies within the persistent "heavy financing, light returns" paradigm prevalent in the A-share market structure, which has shown slow improvement in recent years yet still struggles under the weight of inadequate liquidity. With over 5,400 listed companies, the sheer scale of operational demands often leads to liquidity drenched in competition for funding.

As daily trading volumes barely hit the 2-3 trillion yuan benchmark, market dynamics generate pressure, with numerous major shareholders taking the opportunity to sell their stakes in times of highs, which can stifle further market upward movement. Additionally, the A-share environment is perpetually influenced by policy changes, alongside broader external dynamics. The myriad of constraints affecting market movements further complicates the attainment of sustainable upward direction.

Moreover, it is interesting to note that institutional investors in China are often subject to a habit of bandwagon trading. As the index crosses the 3,500-point mark, there’s a tendency for institutional investors to sell off positions. Conversely, when the market sinks below 3,000 points, they often seize the opportunity to increase holdings. Such cyclical behavior not only intensifies market volatility but can also create a paradox where, amidst a significant breakout opportunity, sellers abundantly flood the market, thereby preemptively quashing chances for sustained upward movement.

Thus, when the A-share market breaches 3,500 points, a prevailing bearish sentiment tends to emerge, effectively capping the market within a range of 3,000 to 3,500 points. However, if investors can shift this entrenched mindset and move beyond limitations tied to the 3,500-point ceiling, the valuation levels of the A-share could gradually align closer to those of the US market, allowing for an expansion in upward potential. By incrementally increasing market valuations from an existing 15 times earnings to over 20 times would amplify the opportunity for market growth.