Financial News Agency, October 8 (Reporter Chen Junlan) On the eve of National Day, a series of policies to stabilize the economy were introduced intensively, which injected a boost into the Chinese economy and stock market. A-shares experienced a long-awaited surge, market optimism was high, and the stock market Activity is significantly improved. The extreme trend on the first trading day after the National Day also confused investors. What changes does the trend on the first trading day foreshadow in the future market?
With the further increase and implementation of the incremental economic stimulus policy, how will the market trend in the future? Which sectors are worth investing in? These are issues of general concern to the market. Cailianshe reporters have summarized the research reports of various brokerages and believe that the pulse-like rise will continue in the short term, but in the medium and long term, the market cannot always be driven by emotions. After the policies are gradually implemented, the market may observe the effects of the new policies. In terms of sector allocation, the views given in the brokerage research reports are almost unanimous that it is necessary to develop around the dual lines of incremental funds and policy-driven.
In addition, CITIC Securities believes that from the essence of the market, this round of bull market is a "confidence revaluation bull", which is fundamentally different from the previous rounds of bull markets and cannot be simply compared. There are three main special features of this round of market: first, Chinese assets, especially A shares, have been systematically undervalued for a long time; second, the household sector has accumulated a large amount of excess savings and is facing an asset shortage; third, strong policies have been introduced, and foreign capital has been forced to chase into Chinese assets.
The pulse-like rise may continue in the short term
Since the end of September, the A-share market is currently experiencing a wave of "witnessing history". After the long holiday, for the future market trend, based on the views of various brokerages' research reports, this round of rise is mainly the result of the combined effects of policy expectations, capital promotion and market sentiment. In the short term, due to the large increase in Hong Kong stocks during the holiday, it is possible that they will continue to rise after the holiday, but if we want to make a judgment on the medium and long-term trend, we need more market signals to verify it.
The research team of CITIC Securities said that there have been major changes in policy signals and a major reversal in market expectations. The continued increase in domestic demand policies in the future may push price signals to arrive ahead of schedule, and the market will usher in a major turning point. After the expected major reversal, the incremental funds, mainly retail investors, will enter the market in a concentrated manner, and the pulsed rise will continue in the short term. We are currently in the transition stage from the expected reversal to the major turning point of the market, with low P/B and domestic demand recovery as the core. After the price signal is confirmed and the market reaches a major turning point, it will usher in an annual bull market with the core feature of the credit cycle re-upward, and institutional investors will have a better opportunity to enter the market.
The investment strategy team of CITIC Construction Investment believes that from a series of indicators, the Chinese stock market has completed the transformation from bear to bull. The most important thing for investors now is to change their mindset and face the market with a bull market mindset. They believe that the current A-share market is ushering in a round of "confidence revaluation bull", which is a bull market under the resonance of multiple backgrounds such as China's assets are systematically undervalued, the household sector has accumulated a large amount of excess savings and is facing an asset shortage, a strong revitalization policy is about to be introduced, the Federal Reserve's interest rate cut cycle has begun, the global stock market is at a high level, and foreign capital is chasing Chinese assets. This round of bull market will reflect the global funds' revaluation of confidence in China's economic prospects and Chinese assets. The fundamental verification of this round of bull market will take time and will not be achieved in one step. Investors should have confidence in the bull market in the early stage and patience in the medium term.
The strategy research team of Industrial Securities mentioned that there is still room for growth in the short term, and the medium term will enter a new stage of volatile but sustainable growth. First of all, from historical experience, when a bull market starts, most of them will go through a stage of rapid bottom repair. After that, it will gradually enter a window with a relatively gentle rising slope, longer duration, and stronger money-making effect. Since this round of market has risen rapidly from the bottom in mid-September, the Shanghai Composite Index has risen by 27.2% so far, which is close to the bear-bull reversal in 2019 and lower than the early stages of the previous bull markets. Secondly, from the valuation perspective, the current major broad-based indexes are still only repaired to the vicinity of the historical median. From the perspective of PE valuation, the ChiNext Index, CSI 500, CSI 1000, and Shenzhen Component Index are still below the historical median. From the perspective of PB valuation, all indexes are below the historical median.
In addition, the research team of Industrial Securities also believes that under the general framework of reversal logic, what needs to be paid attention to is how long this round of market will last, rather than how high it will be in the short term. From the perspective of the medium term, we should abandon the bear market mentality, firmly believe in the bull market mentality, and do not set limits on the time and space of the market, because the capital power is still endless. Looking back at history, abundant incremental funds are an important driving force for the market to eventually develop into a bull market.
As for whether the market trend will continue, the analyst team of Guojin Securities gave a relatively cautious view. The team analysts pointed out that looking forward, the policies announced by the Political Bureau and the State Council Information Office will be implemented one by one. Before the policy is implemented, the market may be desensitized to short-term economic data. The Mid-Autumn Festival consumption and the high-frequency economic data in September are not ideal, and the economic peak season in September is expected to be insufficient. In addition, the PPI data in September will still show a wider decline, which means that corporate profitability is weak. At the micro level, October will also enter the period when listed companies begin to announce the third quarterly reports. Therefore, in mid-October, the economic data seen by the market may still show that the economic growth rate is slowing down. However, the market may have anticipated this, or it may be less sensitive to the September data in the short term.
At the same time, Guojin Securities also mentioned that from a medium-term perspective, the market cannot always be driven by emotions. After the policies are gradually implemented, the market may observe the effects of the new policies. In addition, it should be noted that the recent strong trend of Hong Kong stocks is due to the recovery of profits and the Hong Kong Monetary Authority following the US interest rate cut. From a historical perspective, if Hong Kong stocks can continue to strengthen, it may also drive the recovery of the sentiment of A-share participants.
Huajin Securities believes that the rapid rise of A-shares has not yet reached its peak. The rise after the holiday is likely to continue, and there may be fluctuations, but it is difficult to reach the peak. On the one hand, there are no signs of policy tightening or shifting. First, in terms of economic policy, it is highly likely that it will be difficult to shift in the medium and short term, and fiscal policy may be further strengthened. Second, in terms of capital market policy, it is highly likely that the short-term focus will still be on boosting and being positive.
Regarding the future trend of the Hong Kong stock market, the macro research team of Huafu Securities believes that the recent outstanding performance of Chinese assets represented by Hong Kong stocks is the result of multiple factors. On the one hand, various favorable policies have been frequently introduced in China, which has greatly boosted market confidence; on the other hand, the overseas Federal Reserve cut interest rates in September, and the global liquidity environment has tended to be marginally loose. In the early stage of the Fed's interest rate cut, the global equity market often benefited from the logic of the denominator and generally performed well. Therefore, on the whole, Huafu Securities believes that the current Hong Kong stock market is still on the way and there is still room for further growth. Structurally, if international intermediary funds continue to flow back to the Hong Kong stock market in the future, the growth sector represented by Hang Seng Technology is expected to continue to dominate.
Brokerage firms give configuration suggestions
The current market is at a stage where the relationship between supply and demand of funds has improved, but the credit recovery is not yet clear. The preference for incremental funds may be the "barometer" of market performance. Most securities firms are almost all making allocations around incremental funds and policy-driven dual lines.
The strategy team of Soochow Securities believes that the essence of this round of market is that the factors that have caused A-shares to price downward in the past three years have reached a turning point. In the rebound phase of the market, the oversold sectors/individual stocks suppressed by the above pricing factors have greater room for valuation repair and stronger rebound. It is recommended to pay attention to the growth direction whose valuation is sensitive to the US dollar interest rate, as well as the branches and stocks with the largest foreign investment reduction and the most obvious valuation decline under the suppression of the US dollar interest rate since 2022, such as pharmaceuticals, new energy, semiconductors, etc. in the dual innovation sector, as well as varieties of foreign investment reduction in the consumer sector.
The strategy team of China Merchants Securities said that with the sharp rise of the index in September confirming the mid-term low, the overall market will be dominated by an upward trend in the future. However, if the short-term increase is too large, it is not ruled out that there will be periodic intensification of volatility. Since this round of market conditions is largely related to the policy efforts, whether the policy strength in October can exceed expectations will become the key to the subsequent market upward height. ETF is the main incremental funds for this round of market stabilization and recovery, and it is expected to continue to maintain the incremental trend in the future, which is beneficial to the leading and heavyweight stocks in various industries. Structurally, if the mid-term upward trend is policy-driven economic growth, choose the best industry leader CSI A50 or 300 quality; if the industry trend chooses the direction with the largest space, looking forward to the next three years, the whole society will be intelligent, the population will be aging, and national security will still be the direction with the largest space. Artificial intelligence, medicine, military industry, independent control and other security-related fields (Intelligent Security and Medicine) are the mid-term main lines that can be considered, and the representative index can choose Science and Technology Innovation 50.
Li Meicen's team at Caitong Strategy believes that although there will be pressure on the macro economy in the third quarter of 2024, the policy side has been exerted in advance, and the performance of the A-share market is expected to stabilize and gradually recover. Structurally: First, dragged down by the sharp decline in commodity prices, the marginal decline of the upstream raw material sector may be the largest. Second, financial housing construction has bottomed out against the trend, and its resilience is prominent among the five major sectors. Third, the decline in downstream consumer goods is relatively small due to the support of unexpected exports. In the fourth quarter, with the implementation of a package of domestic policies and the easing of overseas liquidity to drive economic recovery, the performance of listed companies is expected to pick up. It is recommended to pay attention to two major directions: First, the continuation of high prosperity overseas, the volume and price of non-ferrous metals, machinery and equipment, and automobile overseas business have increased; second, policy catalysis + domestic demand for economic recovery, machinery at the bottom of the corporate credit cycle, home appliances and automobiles for old-for-new exchanges, and real estate (chain) that the Politburo meeting set the tone of "stopping the decline and stabilizing".
Looking ahead, CITIC Securities Research Report judges that the valuation repair trend of the Hong Kong stock market since early August this year is expected to continue until early November, and the growth style is expected to continue to outperform the dividend strategy, against the backdrop of the gradual implementation of policies and continued expectations for fiscal policies. It is recommended to pay attention to two main lines: First, the non-bank financial sector that benefits from the continued implementation of monetary easing, real estate and policies to boost the capital market, especially insurance with strong beta attributes; second, consumer and technology-related industries where valuation repair is expected to continue, including: Internet (fundamentals are expected to bottom out, repurchases are increased), biotechnology (overseas interest rates are down, downstream demand has bottomed out and rebounded, and dividend yields have reached historical highs), education and training (policy adjustments, low valuations + gradual performance realization, investor confidence has recovered), and consumer electronics (improved business climate, domestic trade-in, and US inventory replenishment).