After the continuous decline of a shares, do you copy the bottom or leave?
On March 9, the A-share market reappeared a rare sharp correction. Although it finally showed a “Shenzhen V” rebound curve after pulling up in the late trading, 3600 individual stocks still fell in Shanghai and Shenzhen. Based on the views of a number of interviewed institutions, Chinese journalists from securities companies found that the market generally believed that the current round of A-share decline was affected by the superposition of overseas geographical conflicts and concerns about China’s growth.
Generally speaking, the conflict between Russia and Ukraine has shown signs of slowing down, and the stage of the strongest disturbance by overseas factors may be in the past. At the same time, the central economic work conference and the government work report have clearly set “steady growth” as the main tone of 2022. The internal supporting factors for the good are gradually strengthening. The oversold varieties with performance support may be surprised in the future.
internal and external concerns strengthen pessimistic expectations
“Recently, the conflict between Russia and Ukraine has promoted the spread of pessimistic logic of A-Shares (continued stagflation and de globalization), and the weak market has become a consistent expectation. In particular, the absolute beneficiaries lack safety cushion since the beginning of the year and have closed their positions passively.” China Securities Co.Ltd(601066) chief strategist Chen Guo said bluntly that the direct impact of the conflict between Russia and Ukraine is still to exacerbate inflation / stagflation / tightening concerns, which is even worse in the United States. However, the decline of A-Shares in this round of conflict between Russia and Ukraine has significantly exceeded that of U.S. stocks, and the decline of this nature is expected to be repaired.
Zheng Xiaoxia, deputy director of Huaan Securities Co.Ltd(600909) Research Institute and chief analyst of strategy, further explained that it has been nearly half a month since the outbreak of the conflict between Russia and Ukraine on February 24, and the duration is far longer than the previously expected “blitz”. The continued geopolitical conflict has led to significant adjustments in the global market, the rise and rapid transmission of risk aversion in the global market, and China’s A-share risk appetite has been restrained.
She believes that as the US House of Representatives plans to propose a bill to ban Russian oil imports, abolish normal trade relations and raise tariffs on Russian imported goods… Energy prices continue to soar, and the prices of metals and other raw materials rise in an all-round way, causing global stagflation concerns. Moreover, the Federal Reserve is about to raise interest rates, global capital flows are facing uncertainty, and the market has strong wait-and-see sentiment.
Dacheng Fund also mentioned that the National Bureau of statistics had just released the inflation data in February, in which the PPI rose to 8.8% year-on-year higher than expected, ending the previous two consecutive months of decline, which raised the market’s concern about the uncertainty of China’s inflation outlook to a certain extent. The outflow of funds going north exceeded 20 billion for three consecutive trading days, and the central bank recovered liquidity for seven consecutive days, which also dragged down market sentiment.
overseas conflicts show signs of easing
However, it is gratifying that, as the most obvious inducement of this round of market decline, the inhibition of the Russian Ukrainian war on global risk appetite seems to be gradually lifting.
Zheng Xiaoxia analyzed that on the one hand, according to reports, Ukrainian President Zelensky said he was no longer keen to join NATO, which makes the Russian Ukrainian war expected to usher in a major turning point; On the other hand, European and American stock markets have stabilized recently, and the upward slope of crude oil price has decreased significantly, which also indicates that the inhibition of war on market risk appetite is getting farther and farther.
Dacheng Fund also believes that the strongest disturbance stage of overseas factors may be in the past, and the mood is expected to gradually usher in repair. Russia and Ukraine are still important factors affecting the recent situation of commodity supply and demand and the geopolitical conflict between Russia and Ukraine, but they also remind that Russia and Ukraine have not ended the recent commodity price negotiations. However, with the rise of inflation expectations, the Fed will also face greater pressure to raise interest rates, and the change of market risk appetite may still be variable.
Cinda Aoyin fund also said, “from the medium and long-term perspective, we are still relatively optimistic. Compared with the overseas market, A-Shares have accumulated sufficient adjustments in the past year, and the current valuation has been at a reasonably low level.” As the overseas situation becomes clearer in the future, the uncertain factors in the market will gradually weaken, and the effects of various policies in China will gradually show up, and the capital market will gradually improve.
However, China Industrial Securities Co.Ltd(601377) global chief strategist Zhang Yidong reminded that under the complex global political and economic environment, the stock market in 2022 will be more complex than when judged at the end of the year. The Russian US war will not end abruptly, and the black swan incident will not be ruled out in the overseas economic and financial system. It is expected that the medium-term risks of the global stock market this year have not been completely released, especially the medium-term bottom of US stocks may not come yet. For the impact of A-Shares and Hong Kong stocks, there may still be the impact of fish in the pond, constantly doing push ups, concussion and grinding the bottom.
steady growth year, A-Shares are expected to return to the upward
Turning back to China, the policy level continued to release a clear signal of “stable growth”, which also brought more support to the follow-up trend of a shares.
“At present, the release of investment demand is imminent, and the fundamental situation will improve month by month. Under the unprecedented employment pressure, there is no doubt about the steady growth in 2022.” China Merchants Securities Co.Ltd(600999) macroeconomic analyst Zhang Yiping said that the main means of the steady growth policy before the Spring Festival is to ensure the main body of the market by reducing taxes and fees, so as to stabilize the stability of the post holiday employment market. Therefore, the improvement of investment high-frequency data and credit data expected by the capital market did not appear before the festival. The suspicion of stable growth policy is the fundamental reason for the low volatility of the current A-share market.
According to his analysis, the number of new college graduates in China this year is about four times the average level from 2002 to this year, and the employment market is facing unprecedented pressure in the middle of the year. Therefore, effective measures must be taken to accelerate the expansion of total demand level and drive the improvement of enterprise profits and expectations, so as to increase employment demand. The real estate market and export market, which previously played a strong role in the expansion of total demand, decreased their influence in 2022. From the perspective of stabilizing employment, March will be the starting point for the significant improvement of the investment situation.
China Merchants Securities Co.Ltd(600999) chief strategist Zhang Xia further said that 2022 is a big year of steady growth, and fiscal expenditure will rise significantly, driving the stabilization and recovery of infrastructure investment. Ensuring the acceleration of real estate construction and the shift of real estate policies to promote the virtuous cycle and healthy development of the real estate industry are conducive to the stabilization and recovery of real estate investment.
At the same time, steady growth is gradually verified by fundamentals and financial data. The growth rate of new social finance in January has become positive and will gradually enter the upward cycle, which is conducive to improving investors’ pessimistic expectations of profits. With the convening of the national two sessions, the goal of steady growth has been further emphasized, and China is likely to enter a period of steady growth in the second quarter. The new social finance will accelerate the improvement, and A-Shares will re-enter the upward cycle.
In addition, the recent government work report made it clear that the tax rebate and tax reduction of RMB 2.5 trillion for the whole year, and then the central bank made it clear that the balance profit with a total amount of more than RMB 1 trillion has been handed over, which shows that the policy has entered a period of intensive development, which will effectively boost economic growth. According to the calculation of Huaan Securities Co.Ltd(600909) Research Institute, the 1.5 trillion value-added tax rebate will benefit nearly 300 billion listed companies, increase the overall roe by about 0.54%, and A-Shares will usher in strong support.
a shares oversold may be the entry point
“Emotional selling pressure often brings better entry points, focusing on the financial investment field with high certainty in the short term.
”Song Jin, a strategist at Nomura Oriental International, believes that there is no fundamental problem in China’s economy that cannot be solved by stimulus policies. The emotional selling pressure of A-Shares often brings better entry points. However, the digestion of emotions often takes time, and there is still the possibility of repeated shocks in the follow-up market, but from the perspective of medium and long-term allocation, A-Shares already have excellent opportunities.
In his view, for A-Shares that still focus on growth in the medium and long term, high growth certainty can often provide more effective defense, and become a safe haven in the short-term market and the preferred area for rebound after stabilization. Especially after the venting of emotions, the market capital structure is often fragile, and the more fragile market capital may centralize the performance of the industry. Special attention can be paid to the financial investment field with high certainty and growth, especially the new infrastructure related industries (digital infrastructure + energy infrastructure).
“The next counter attack time window may open at any time and may run through to the eve of the next FOMC meeting. It is not suitable to reduce positions in the short term.” Chen Guo also believes that in the next counterattack, growth stocks and gem will perform better than the counterattack market in February. It is expected that from late March to early April, the focus of A-Shares will return to the first quarterly report. Since the beginning of the year, growth stocks with large adjustment range and good first quarterly report will have more performance space.
In Zhang Xia’s view, with the investment style of steady growth as the main line, the undervalued sector of the market may have a better performance. Traditional real estate plus infrastructure industry chain related sectors such as finance and cycle are expected to perform better. In the growth field, new energy infrastructure, such as photovoltaic, wind power, energy storage, hydrogen energy, etc; Digital infrastructure, such as data center and industrial Internet, will also benefit from steady growth.
Zheng Xiaoxia suggested that the configuration should be carried out around three main lines: first, new and old infrastructure fields such as building materials, architectural decoration and urban pipe network transformation on the steady growth chain, as well as relevant opportunities such as real estate and banking; Second, there are performance supported oversold opportunities in the growth track, including the growth main line represented by double carbon and semiconductor, as well as national defense, military industry, communication and computer under the growth diffusion; Third, continue to pay attention to the travel chain of airport, tourism, catering, leisure and other services and the overall opportunities of the pharmaceutical sector in the short term; Seize the opportunities related to dairy products, planting industry and chemical fertilizer with smoother price rise in the medium and long term.
