Approaching 3000 points again, where will the A-share market go?

CBN

2024-06-21 16:27Posted on the official account of Shanghai Yicai

(The author of this article is Huang Dazhi, a researcher at Xingtu Financial Research Institute)

Unconsciously, A-shares have been adjusted for another month.

Judging from the market of A-shares in the past two months, the Shanghai Composite Index broke through the shock range at the end of April, peaking to 3,174 points on May 20, and even once let investors see the hope of breaking through 3,200 points. However, since May 20 (to 20240620, the same below), the Shanghai Composite Index has once again entered a downward range, during which Shenwan's primary industries have fallen across the board except for power and utilities, electronics including chips, etc.

Since the beginning of the year, if you exclude the stock market crash caused by the liquidity crisis of small and medium-sized A-share stocks before the Spring Festival, the decline of A-shares in this round is particularly long, and at the same time, the Shanghai Composite Index has once again appeared a relatively rare weekly K-line "four consecutive yin", and the Shanghai Composite Index has once again come to the "3000-point defense battle". I have to say that 3,000 points is really a love-hate number for A-share investors.

Approaching the position of 3000 points again, where should the A-share market go?

Let's start by reviewing why A-shares were able to usher in a short-lived bull market in mid-to-late April. With the Spring Festival of 2024 as the node, A-shares have entered the stage of intensive policy introduction, and with the efforts of the national team to save the market, the Shanghai Composite Index has steadily stood above 3,000 points. Although there is no official statement, the market generally regards the Shanghai Stock Exchange 3000 points as a crucial point, and the index cannot be below 3000 points for a long time, otherwise many funds in the market will panic, and there may be a risk of a market crash, so when the index deviates from 3000 points downward, there will be many funds entering the market to buy the bottom. However, when the Shanghai Stock Exchange stabilized above 3,000 points, the national team funds were no longer bought, and the market lacked new capital inflows, so in the two months from March to the end of April, the Shanghai Stock Exchange fluctuated between 3,000 and 3,100 points.

However, since the end of April, there has been an intensive "singing more about China's economy" in the market. In particular, foreign-funded institutions have released many views such as raising China's economic growth rate in 2024 and real estate will bottom out ahead of schedule, and there is also a strong expectation of stable real estate policies in China. Under the joint efforts of internal and external forces, from April 30 to May 22, the domestic financing scale increased by about 26.9 billion yuan at most, and northbound funds also bought nearly 21.7 billion yuan. The collective singing of foreign capital, the expectation of policy introduction and better economy, coupled with the trend of Hong Kong stocks entering a "technical bull market", have ignited the enthusiasm of investors, and the Shanghai Stock Exchange has quickly broken through 3100 points all the way up after the May Day holiday.

Through the above analysis, it can be seen that since the end of April, the market has been able to break through the upper edge of the previous consolidation for nearly two months (that is, near 3100 points of the Shanghai Stock Exchange), and the most fundamental reason is the expectation of a better economy in the future, which has driven the inflow of leveraged funds and northbound funds, and A-shares have risen.

The turning point appeared after the "5.17 New Deal" of real estate, the biggest drag on the current domestic economy lies in real estate, and the real estate is stable and the economy is stable, so in the first half of May, there was a phenomenon of resonance between the real estate index and the broader market. Although the implementation of the 5.17 New Deal has briefly stimulated market sentiment, from the perspective of policy guidance, it is still focused on "residents increasing leverage", and the long-awaited real estate acquisition and storage has not met market expectations, and there has been no substantial progress.

With the release of the PMI at the end of May and a series of monthly financial, economic, and export data released in June, to a certain extent, the optimistic expectation of continued economic recovery in the previous period has been falsified, which may be one of the important reasons for this round of adjustment since May 20.

For example, in the May PMI, the manufacturing PMI was 49.5, which was below the 50 line again after two months. Not only is it lower than the same period of the previous year, but it is also significantly lower than the market expectation of 50.5%. As a forward-looking macroeconomic data, the PMI points to a weaker-than-market economic recovery in the future.

High-frequency financial data has also historically been seen as a forward-looking indicator of the economy. The growth rate of social finance reflects the willingness of real economic expansion, with residents' medium- and long-term loans reflecting residents' willingness to buy houses, residents' short-term loans reflecting residents' willingness to consume, enterprises' medium- and long-term loans reflecting enterprises' willingness to expand, and M1 reflecting the vitality of the real economy to a certain extent. However, the financial data in May showed that the year-on-year growth rate of M1 fell off a cliff to -4.2%, although there are many reasons such as "squeezing water" in financial data and "manual interest supplement" by regulatory rectification banks, and the supervision has also explained this particularity in various ways, but the sluggish market obviously did not buy it.

In terms of economic data, there was a mixed bag of economic data for May. For example, the total retail sales of consumer goods increased by 3.7% year-on-year, up 1.4 percentage points from April, which is better than expected, but the core real estate drag problem in the economic recovery has not been alleviated, and real estate investment, sales, prices and other data have not bottomed out, which also indicates to a certain extent that the 5.17 new deal on real estate may not have much stimulating effect.

Although the high-frequency economic data is good and bad, under the already weak sentiment of the market, the disappointment of interest rate cut expectations and policy expectations have caused the market to fall further.

However, after a month of adjustment, the risk of A-shares continuing to decline is already small, and the current opportunities far outweigh the risks.

The capital market is always a game of expectations, and from mid-to-late May to the present, the performance of A-shares has basically reflected a lot of unfavorable news. However, as mentioned above, the 3,000 points of the Shanghai Composite Index have become a very strong support for the market, and the market has limited room to fall.

For the time being, the broad-based index is undoubtedly a choice with a high probability of winning. Whether it is the upcoming Third Plenary Session of the Central Committee of the Communist Party of China in July, or from the perspective of the current regulatory care for the A-share market, the Shanghai Stock Exchange 3000 points is a relatively solid bottom, and the opportunity to hold profits far outweighs the risk of buying index funds tracking the Shanghai Stock Exchange or the CSI 300 Index nearby. Of course, on the other hand, it should also be noted that the volatility of these large-cap indices is getting lower and lower, and the upward elasticity is not large.

Therefore, a strategy that buys a broad-based index with a high probability of winning, but the odds is not high, wins in stability.

For investors who pursue higher odds, there are two angles to refer to:

First, it is the gambling angle of funds. The recent sharp decline in the trading volume of A-shares is the logic of the stock game, and the stock pattern has obvious high-low switching. On the one hand, the reason is that the early rise in sectors such as dividends and nonferrous metals has been quite large, and there are more profit-taking funds. On the other hand, the trend of the AI technology growth sector represented by TMT is significantly weaker than that of the CSI 300, and the rebound is not large. The four major directions of technology stocks in A-shares, namely TMT, new energy, medicine and military industry, lack unexpected fundamental drivers, which leads to a lack of momentum for valuation from the perspective of performance elasticity, and the upward momentum comes more from the perspective of capital and chips. Therefore, the high and low cut of strong concepts may be an opportunity that can be grasped in the future. There are opportunities for staged games such as pig breeding and gold, which are expected to rise in price.

Second, the performance opportunities brought about by the upcoming release of the interim report. For example, in the middle and upper reaches of the raw material sector, the performance growth opportunities brought by the price increase of the chemical chain; The midstream and downstream equipment manufacturing sector focuses on opportunities related to the export chain of manufacturing equipment upgrading, such as power equipment, industrial robots, etc.; Downstream consumption, home appliances, sports and entertainment products, etc., also showed good growth on high-frequency data.

(The author of this article is Huang Dazhi, a researcher at Xingtu Financial Research Institute)

The views expressed in this article are solely those of the author.

View original image 216K

• 

• 

•