Market risk appetite is on the rise.
In early trading today, the three major indexes of the A-share market collectively strengthened, and from the perspective of the disk, a lot of funds flowed out of the dividend sectors such as banks and electricity, and entered the growth sectors such as lithium batteries, photovoltaics, and CRO. Analysts pointed out that funds have begun to switch from defensive stocks with high dividends to growth stocks that have been adjusted for a long time, indicating that the market's risk appetite is rising.
Many brokerage analysts said that after the suspension of the refinancing securities business, the short-selling power is limited, and the market stability and long-selling power are expected to gradually recover. This policy adjustment has released a positive signal to care for the market.
So, where will the market go?
Growth stocks are on the rise
On July 11, the three major A-share indexes opened higher, as of press time, the Shanghai Composite Index rose 0.86%, the Shenzhen Component Index rose 1.94%, and the ChiNext Index rose more than 2%. The half-day turnover of the Shanghai and Shenzhen stock markets was 528.2 billion yuan, an increase of 80 billion yuan from the previous trading day.
More than 30 stocks, such as Shengxin Lithium Energy, Rongjie Co., Ltd., Guanghua Technology, Encore, Yihua Co., Ltd., Lushan New Materials, Fenghua Hi-Tech, Yongxing Materials, etc., rose by more than 10%.
CRO concept stocks also rose collectively, Medicilon rose nearly 11%, Zhaoyan New Drugs rose by the limit, Gloria Ying and Proton shares rose by more than 8%, PharmaBlock Technology rose by 7.77%, Pharmaron rose by nearly 6%, and WuXi AppTec and Boji Pharma rose by nearly 4%. Medical cosmetology concept stocks also performed actively, Guangpu shares, Guangzheng Ophthalmology, Aier Ophthalmology rose by more than 11%, and Aimeike rose by more than 6%.
However, dividend sectors with strong defensive attributes, such as banks and electricity, have seen a pullback. As of press time, the banking sector as a whole fell by more than 2%, Qilu Bank fell by 3.84%, Industrial and Commercial Bank of China, Shanghai Rural Commercial Bank, Sunong Bank fell by nearly 2%, and Postal Savings Bank, Agricultural Bank of China, Bank of China, and China Construction Bank fell by more than 1%. Most power stocks also fell, Zhejiang Power, Anhui Power, Huadian International fell more than 4%, Yangtze River Power, Guiguan Power, Shanghai Electric Power, SDIC Power, etc. were all green.
This morning, the Hong Kong stock market also performed well, with Hong Kong's Hang Seng Index up 1.54% at midday and the Hang Seng Technology Index up more than 2%. On the disk, automobiles, semiconductors, and pharmaceuticals led the market, with Remegen Biotech up 12%, Xiaopeng Motors up 10%, and Li Auto up nearly 7%. Xiaomi Group, Alibaba, and SMIC rose more than 2%, and JD.com Group rose nearly 2%.
Regulation protects the market and boosts confidence
Today, the strength of the A-share market is related to the news that the China Securities Regulatory Commission (CSRC) has suspended its refinancing business.
On July 10, the China Securities Regulatory Commission (CSRC) approved CSFC's application to suspend the refinancing of securities in accordance with the law, which will be implemented from July 11, 2024. In addition, the China Securities Regulatory Commission (CSRC) also approved the stock exchange to raise the margin ratio for securities lending and borrowing from no less than 80% to 100%, and the margin ratio for private securities investment funds to participate in securities lending and borrowing from no less than 100% to 120%, which will be implemented from July 22, 2024.
Many brokerage analysts said that the adjustment released a positive signal to protect the market and helped boost market confidence. Luo Zuanhui, chief analyst of Shenwan Hongyuan Research Non-Bank, said that the new policy responds to investors' concerns and releases a signal to care for the market. Previously, the China Securities Regulatory Commission (CSRC) has adopted a number of policies for securities lending/refinancing, and the regulatory authorities have strengthened the supervision of securities lending and borrowing business, which has directly reduced the scale of securities lending and borrowing in the market, especially for high-risk private equity quantitative institutions that rely on securities lending and hedging, so that investors have less worries about private equity funds and other institutional investors selling through securities borrowing and lending, which is of great significance to activating the capital market and boosting investor confidence.
China Securities Construction Investment pointed out that in essence, the impact of securities lending and refinancing on the market is neutral, but under the market shock, investors have questioned the legitimacy of "fairness of bond source distribution" and "restricted stock lending". First, due to the scarcity of securities borrowing and lending, it is difficult for public investors to obtain securities sources, while quantitative private placement can make it easier to borrow and lend securities and implement T+0 transactions, resulting in systemic unfairness. Second, whether there are loopholes such as "self-selling and self-buying" and joint short-selling of restricted shares lent by strategic investors have aroused investors' concerns. Therefore, the CSRC's ban on securities lending and lending of T+0 and restricted shares in the early stage is a timely response to investors' concerns. The direct suspension of refinancing securities directly releases a positive signal, which is conducive to boosting market confidence.
Dongguan Securities said that the China Securities Regulatory Commission further strengthened the supervision of securities lending and refinancing business, and is expected to increase high-frequency quantitative transaction costs, combined with a series of counter-cyclical adjustment in the early stage of the active capital market and measures to boost investor confidence, showing the regulator's determination to listen to investors' demands and care for market stability, which will help boost market sentiment.
Soochow Securities pointed out that since August 2023, the China Securities Regulatory Commission has continued to strengthen the counter-cyclical adjustment of securities lending and borrowing according to market conditions and investor concerns, and specific measures include restricting strategic investors from placing shares for lending, raising the margin ratio of securities lending and lending, reducing the efficiency of securities transfer in the market-oriented declaration of securities refinancing, and suspending the scale of new refinancing securities. The further suspension of refinancing and the increase in the margin ratio of securities lending and borrowing further confirm that "activating the capital market and boosting investor confidence" is the consistent focus of the financial regulatory authorities. The suspension of refinancing and raising the threshold for securities lending and borrowing are conducive to curbing the interference of the short-selling mechanism on the normal operation of the market in the process of panic spreading, and are also conducive to effectively safeguarding the rights and interests of small and medium-sized investors, which is expected to drive investor confidence to stabilize and rebound.
The strategy group of Ping An Securities Research Institute believes that the China Securities Regulatory Commission's approval of the suspension of refinancing business and further strengthening the supervision of programmatic transactions in accordance with the law reflects the intention of caring for the steady operation of the market, adhering to the problem-oriented and goal-oriented, and effectively maintaining the fairness of market transactions and improving the internal stability of the market. In the short term, the A-share market has continued to fluctuate at the bottom since June, and the introduction of this policy will help promote market stabilization and boost market confidence. In the medium and long term, the new "National Nine Measures" will promote the high-quality development of the capital market, the expectation of deepening the reform of the Third Plenary Session is gradually rising, and the structural opportunities in the market are expected to continue to increase.
First, enterprises go overseas, that is, the mainland's globally competitive advantageous industries, such as consumer electronics, automobiles, home appliances, machinery and equipment, ships, etc.;
the second is the price increase sector, which is greatly affected by the contraction of the supply side and is expected to improve marginally in demand, such as nonferrous metals, shipping, chemicals, public utilities, etc.;
the third is new quality productivity, that is, emerging industries driven by policies and industrial trends, such as TMT and intelligent manufacturing represented by electronics;
Fourth, the dividend strategy, focusing on the diffusion opportunities of high dividend stable allocation value and conversion to earnings expectations, such as banks, electricity, coal, etc.
Editor-in-charge: Yang Yucheng
Proofreader: Liu Xingying