Market comments: after the emotional disturbance transition, there will still be a restless market

Market events

On January 5, the Shanghai index closed down 1.02% and the gem index closed down 2.73%. At the industry level, the relatively strong defense industry, electronics and power equipment in the early stage led the decline.

During the transition period, the emotional disturbance is superimposed, the short-term liquidity is recovered greatly, and the market volatility is increased

The main reasons for the recent and today’s sharp market decline are: on the one hand, after the end of quarter effect, the central bank has greatly recovered the liquidity of open market operation. After new year’s day, the central bank began to significantly recover the liquidity released before the festival. From January 4 to 7, a total of 700 billion reverse repos expired. On January 4 and 5, the central bank only invested 10 billion a day, with a net return of 260 billion and 200 billion respectively. It will continue to recover short-term liquidity in the next two working days. The substantial return of short-term funds has restrained the strong and high valuation sector; On the other hand, the jump in the yield of 10-year US bonds will also have a short-term inhibition on the holding together plate. In December, the minutes of the Federal Reserve’s interest rate meeting confirmed that the pace of debt reduction was accelerated. At the same time, the market’s expectation of interest rate increase was rising and the time point was advanced, resulting in a phased rapid rise in the yield of the US Treasury market after the beginning of the year. The yield of 10-year US Treasury bonds soared from 1.52% on December 31 to 1.66% on January 4. In the memory that the rapid rise of US bonds in February 2021 led to the adjustment of the holding sector, the recent rapid rise of US bond yields also raised concerns. At the same time, recently, the market has also discussed the concerns about the slowdown of the short-term pace of “double carbon”; Third, today’s large-scale IPO diverted market funds. On January 5, China Mobile went public and raised more than 48.6 billion, the fifth largest A-share in history. Huge fund-raising demand diverted market funds.

The steady growth policy will increase loose liquidity, and the restless market will still be expected after the emotional disturbance calms down

At present, the market is in the transition period from the performance driven market in the second stage of growth to the valuation driven market in the third stage. It is undergoing controllable benign adjustment, but it is more noteworthy that after the benign adjustment, the market will usher in a considerable wave of valuation market, which will be completed through the restless behavior in spring. After the recent emotional disturbance has subsided, the restless market can still be expected: at the growth level, the economy is stabilizing, PMI has rebounded above the boom and bust line, and some signs have been shown. The growth rate of 2022q1 is probably higher than that of 2021q4; At the liquidity level, monetary policy is still releasing a positive and loose signal. It can also be expected to reduce reserve requirements and interest rates. Liquidity will remain reasonably abundant and worry free, which will be the most important support for the restless market; In terms of risk appetite, the overall stability was maintained under the keynote of “steady growth” & “overall stability” of the central economic work conference.

Four main lines grasp the restless market, and growth is still the medium-term optimal allocation main line of the restless market

In the short-term growth style, concerns are rising. According to the rhythm of the growth market, after this benign adjustment, growth will also usher in a round of main rising wave market driven by valuation, and liquidity will provide core support. After this benign adjustment, the optimal allocation opportunities will be more obvious. In the medium term, we will continue to pay attention to the “double carbon” direction of solar hydrogen storage, green power and new energy, and the middle and upper reaches of semiconductors with reverse business National defense, military industry, and diffusion to computers; Steady growth under the second counter cyclical policy of the main line, focusing on power operation, power station construction, transmission and distribution and upstream and downstream of infrastructure real estate, such as building materials, which is more cost-effective in the transitional market; The main line 3 securities companies, as the wind vane of the restless market in spring, rose with the restless market; Main line 4 consumption follows the rise, mainly along the price rise chain.

Risk statement

The development of Omicron mutant strain exceeded expectations; There is a deviation in China’s economic forecast; China’s policy tightening exceeded expectations; Sino US relations deteriorated more than expected.

 

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