Market participants believe that the recent market style switching is not smooth. On the one hand, funds have begun to withdraw from the previous hot sectors. On the other hand, financial and other low-value sectors have not been able to show sustained increase due to unsupported fundamentals. The probability of systemic risk in the short-term market is not high, but the possibility of a sharp rise is relatively small, and it is highly likely to continue maintain an oscillating trend.
As of the close on last Friday, the Shanghai Composite Index fell 0.71%, and the turnover of the two markets was slightly enlarged to 1181.6 billion yuan. In terms of market structure, SSE 50 fell 1.21% and the ChiNext index fell 2.96%. In terms of futures, IF2108 fell 1.05%, with a basis of -20.37 points, IH2108 fell by 1.16%, with a basis of -5.50 points, and IC2108 rose by 0.26%, with a basis of -38.52 points. In terms of capital for northbound trading, net sales of Shanghai Stock Connect were 3.398 billion yuan, and that of Shenzhen Stock Connect was 747 million yuan. Analysts believe that the macro background of domestic economic growth decline, the expectations of steady and loosening domestic liquidity and the gradual withdrawal of US loose policies are conducive to the continued expansion of the IC/IH ratio.
The market fell last Friday, and the capital from northward went out again, and the turnover of the two markets continued to remain above the trillion level. " The analyst believes that the stocks of the Hong Kong Stock Exchange rose sharply due to the news that "China is considering exempting companies listed Hong Kong Exchange for the security review". The fall in consumer confidence index and the short-term inflation expectations of soaring have caused US stocks to fall. Although Powell reiterated last Wednesday that “high inflation may continue for a few more months, but it will eventually fall back to near the long-term target of 2%.” “If Inflation expectations are out of control, then the Fed will respond", but the market believes that if the Fed really adheres to this principle, it will be too late.
According to The analyst, the central bank launched a 100 billion yuan medium-term loan facility (MLF) operation and a 10 billion yuan reverse repurchase operation before the market opening last Thursday. The MLF winning bid rate was 2.95% and the reverse repurchase winning bid rate was 2.2%. Taking into account that 400 billion yuan of MLF and 10 billion yuan of reverse repurchase expired on the same day last Thursday, the superimposed overall reduction of 0.5% is expected to release about 1 trillion yuan of long-term funds, and a net liquidity investment of 700 billion yuan will be achieved that day. Economic data shows that the real GDP in the second quarter increased by 7.9% year-on-year, and the two-year average growth rate was 5.5%, which was slightly lower than the market expectation of 5.7%. It’s mainly dragged by the service industry, but the industrial, consumption, and fixed asset investment data are better than May.
The analyst said that since July, the Shanghai Composite Index and the Shanghai-Shenzhen 300 Index have oscillated between 3485-3607 points and 5006-5252 points respectively, and they have not shown obvious trend characteristics. After last Friday's adjustment, the two indexes closed in the lower middle area of the range. Under the current background of no systemic risk, the index is less likely to fall sharply and break through the lower edge of the box. In terms of industry, the ChiNext Index, STAR 50, and new energy sectors fell sharply last Friday. Statistics show that since 2018, the GEM KLCI turnover rate has exceeded 5% three times. Whenever the GEM KLCI turnover rate exceeds 5%, the GEM KLCI will often reach the peak then fall. The turnover rate of the KLCI was 3.5%. Since 2018, the turnover rate of new energy vehicles has exceeded 3% three times. After each breakthrough, it will also reach the peak periodically. The current rate is 3.13%, which is above 3% for 5 consecutive trading days.
"Based on previous information we believe that there are still traders taking profit on GEM, STAR 50 and new energy vehicles and other popular sectors and industries in the second quarter this week. However, we believe that this adjustment is not similar to the adjustment of the collapse of crowed traded stocks after this Spring Festival holiday. It’s just a callback triggered by short-term trading overheating.” The analyst said, at the market style level, recently, there are signs that the market wants to switch styles but failed to change. The reason is as below, funds have begun to withdraw from the previous hot sectors due to short-term trading overheating, but Financial and other low-value sectors have not been able to see sustained increase due to unsupported fundamentals.
The current turnover of the two markets are still at a high level, so the probability of systemic risk in the short-term market is not high, but the possibility of a sharp rise is relatively small, and it is likely to continue to maintain an oscillating trend.
In terms of market structure, under the background of domestic economic recovery momentum declining and economic no longer relying on infrastructure and real estate stimulation, The analyst believes that growth stocks which are not affected by the traditional economic downturn are expected to become the main line of the market.
Besides, foreign investors prefer to hold core assets represented by CSI300, this means that if the Fed announces the Taper timetable at the Jackson Hole meeting in August, In the short term, the market may face the pressure of narrowing the interest rate gap between China and the United States and the devaluation of the RMB exchange rate, this is not conducive to the capital flow into mainland China.
Compared with CSI 500, foreign investment has a greater impact on SSE 50 and CSI 300. Therefore, we believe that from a fundamental perspective, the macro background of domestic economic growth slowing, expectations of stable and loose domestic liquidity, and the gradual withdrawal of US easing policies are conducive to the continued expansion of the IC/IH price ratio. " The analyst said that even though there’re signs of style switching, SSE 50 is still subject to fundamental pressure and its performance is still weaker than that of the CSI 500. Investors are advised to continue to hold long position on IC and short positions on IH.