Core conclusion: there are three main driving forces supporting this cross year market: Valuation rebound + steady growth + seasonal rebound of resident funds. The first driving force is the “valuation rebound”. Since March, the adjustment time and amplitude of some sectors are large, so it is necessary to repair the valuation. The second driving force is the “optimistic policy before and after the new year”. With the implementation of the RRR reduction, the new year’s market will enter the second wave of rise dominated by stable growth expectations. Only the first two forces can support the market up to January, and then it is necessary to verify the activity of residents’ funds. If it can recover, the cross-year market can continue until March. Our current judgment is still optimistic, and we suggest investors to actively participate in the cross-year market.
(1) The rhythm and main influencing factors of the new year’s market. Recently, investors have paid more attention to the new year’s market and the agitation in spring has begun to increase. Statistically, the spring market generally lasts for 1-3 months, and there are uncertainties in the length and increase. We believe that there are three main driving forces supporting the new year’s market. The first driving force is “valuation rebound” , since March, with the macroeconomic downturn, the decline of real estate boom, the double killing of consumer industry valuation and fundamentals, the time and range of adjustment of some sectors are large, and there is a need for valuation repair, even if it is only technical repair, it will last for some time. The second driving force is the “optimistic policy before and after the new year”. Due to the macroeconomic decline, the direction of steady growth is more and more determined. At present, the main differences among investors are the mode and strength. With the implementation of the standard reduction, the cross year market will enter the second wave of rise dominated by steady growth expectations. The power of the second wave of rise can only push the index to near the high point of the year. If you want to make a further breakthrough, you need a third driving force – the recovery of residents’ funds. Otherwise, the index may face adjustment in mid and late January. From the perspective of probability, since January to march is the time when residents’ funds are more active every year, the third driving force can still be expected. Once the recovery of residents’ funds is observed in mid and late January, the cross year market will usher in the third wave of rise, which can rise to march in the most optimistic case.
(2) The first driving force for the rise has been completed, and the second driving force has started to relay. From the performance of the sector, in the last month, in addition to the two hot sectors of new energy and semiconductor, the food and beverage, agriculture, forestry, animal husbandry and fishery, computer and media that have been adjusted greatly since this year have successively shown great valuation repair, which shows that the first driving force (valuation rebound) has lasted for 1-2 months. Although the market has expected steady growth for a long time, it has not formed a very strong force from the performance of the sector. The RRR reduction may ignite steady growth, and the central economic work conference in December will also be an important catalyst.
(3) Whether the index can break through depends on the third driving force: Residents’ funds. Since February, the all a index and valuation have not broken through upward. During this period, the overall profitability of listed companies has continued to improve. This year’s valuation ceiling is just the all a index since 2016 (non-financial petroleum and petrochemical) valuation ceiling. To make a significant breakthrough, only performance or logic is not enough. There must be real incremental funds for residents.
Risk factors: the real estate market fell more than expected, and US stocks fluctuated sharply.
