On April 25, the three major A-share indexes collectively fell sharply. The Shanghai index fell by 5.13%, the Shenzhen Component Index fell by 6.08%, and the gem index fell by 5.56%. The total turnover of the two cities was 896.9 billion yuan, and the net sales of northbound funds throughout the day was 4.397 billion yuan. In terms of industries, the coefficients of all sectors fell, with non-ferrous metals, national defense and military industry, electronics and other industries leading the decline. Our comments are as follows:
Today, worried about the spread of the epidemic, coupled with the approaching of the interest rate meeting of the Federal Reserve in May, the pressure on the depreciation of the RMB exchange rate increased, causing the accelerated outflow of foreign capital, leading to the killing of three stock and bond dealers. In terms of the epidemic situation, 14 cases of covid-19 pneumonia and 5 cases of asymptomatic infection were added in Beijing on the 24th. The improvement of control measures in some areas of Chaoyang District triggered a further escalation of market concerns about the impact of the epidemic on the economy, resulting in a general decline in commodity futures prices and driving down the cyclical industry.
On the other hand, as the interest rate meeting of the Federal Reserve in May approaches, non US currencies are under pressure, which leads to the depreciation of the RMB exchange rate and the accelerated outflow of foreign capital. In the early morning of April 22, when attending the IMF discussion, Powell affirmed that the interest rate meeting in May talked about raising interest rates by 50 basis points, and pointed out that it was appropriate to speed up the pace of interest rate increase. Martins Kazaks, an ECB official, said the ECB could raise interest rates as early as July. The Bank of Japan, which still insists on easing, faces an 11.6% depreciation of the yen this year. In this context, the differences between Chinese and foreign monetary policies have also triggered market concerns about the exchange rate.
The valuation adjustment is close to the limit, and the more important thing in the future is the profit expectation. On the whole, the current market valuation adjustment is close to the historical limit level. From the price comparison relationship between stocks and bonds, the difference between the current implied yield of A-Shares and the yield of 10-year Treasury bonds has also reached a new high since the 2008 financial crisis, indicating that the investment value of equity assets is prominent. With the promotion of the epidemic policy and the landing of the Fed's interest rate hike boots in May, the market is expected to usher in a rebound window in the future. In the medium term, investors need to pay attention to the change of market investment style from peg based industry rotation to pb-roe based value investment style under the revision cycle of profit expectation.
Risk tip: the spread of the epidemic in China exceeded expectations, the pace of the Fed's monetary policy exceeded expectations, and the pace of China's policy promotion was less than expected.
