Last week, the A-share market continued to callback, and the Shanghai stock index was close to the phased low in mid March again. Trading sentiment has cooled significantly, and the average daily turnover of Shanghai and Shenzhen stock markets has shrunk to less than 800 billion yuan. At the same time, in the overseas market, the interest rate of 10-year US bonds rose, and the US dollar index was close to the high level two years ago. Under the expectation of raising interest rates, US stocks fell across the board last Friday.
This week, the institutional view is that the current A-share market shows the characteristics of the bottom in many indicators such as capital and sentiment. From a medium and long-term perspective, with the weakening of the impact of the epidemic, the end of quarterly disclosure, and the landing of three factors such as the Federal Reserve’s interest rate hike on schedule, the medium-term repair market is expected to gradually approach in May.
Fed’s expected rise in interest rate hike and contraction
In the context of high inflation, the Federal Reserve’s expectation of raising interest rates sharply has heated up, leading to the continuous decline of US stocks in the near future. On Friday, the three major stock indexes of US stocks fell by more than 2.5%. Among them, the Dow plunged nearly 1000 points, the largest one-day decline since the end of October 2020. At the same time, the yield of US bonds continued to rise, and the yield of 10-year US bonds once rose to 2.94% during the day, a new high in three and a half years.
On the news front, Powell, the interim chairman of the Federal Reserve, said on the 21st that in the environment of high inflation and loose monetary policy, he would consider raising interest rates by 50 basis points at the interest rate meeting in May, and said that a similar interest rate increase might be needed thereafter.
China Industrial Securities Co.Ltd(601377) said that through the performance of the NASDAQ index during the previous fed interest rate hikes, it was found that in the early stage of the Fed interest rate hike cycle, under the expectation of the rise of long-term interest rate, the NASDAQ index dominated by forward cash flow discount fell, that is, first of all, the expectation of interest rate hike was reflected in the stock price; In the middle and later stages of the interest rate increase cycle, due to the weakening of economic momentum, the NASDAQ will have a greater adjustment, that is, the concern about future corporate profits will be reflected in the stock price.
With regard to the Fed’s interest rate increase cycle, China Industrial Securities Co.Ltd(601377) believes that compared with history, the Fed’s repeated delay in raising interest rates and shrinking the schedule may make the United States face the embarrassing situation of weakening economy and tightening liquidity in the future. The grasp of the speed of interest rate increase and table contraction requires the fed to constantly weigh between “long pain” and “short pain”. However, regardless of the outcome of the trade-off, the horn of substantive tightening will always sound, and the assets dominated by forward cash flow discount in the future may enter a negative “heavy” forward stage.
a-share multiple market indicators show bottom characteristics
Last week, the A-share market also adjusted significantly and showed signs of general decline. The undervalued “steady growth” sector with relative performance in the early stage also corrected, and the average daily turnover shrank to less than 800 billion yuan, which has fallen to the low level since June 2021. In this regard, a number of institutions believe that the A-share market shows the bottom characteristics in terms of capital, mood and other indicators.
China Securities Co.Ltd(601066) securities strategy team said that on the one hand, the “policy bottom” and “credit bottom” of A-share market may have been roughly confirmed, and the subsequent “profit bottom” will be gradually completed in the medium term; On the other hand, the market valuation and sentiment indicators have also entered the bottom area of the market. Although there is still the possibility of continued decline in the follow-up, the space is relatively limited in terms of odds. Therefore, from the medium-term perspective, although the market bottom grinding process may continue to repeat, investors do not need to be too pessimistic and should patiently wait for the market to complete the construction of “U-shaped bottom”.
China International Capital Corporation Limited(601995) strategy team also said that from the perspective of trading, the corresponding turnover rate of recent market transactions has been close to about 2%, which is at a historical low, and the scale of net reduction of industrial capital has also decreased significantly; In terms of valuation, after adjustment, the equity risk premium of CSI 300 is close to twice the standard deviation above the average value again, close to the extreme valuation level at the low point in March 2020; From the perspective of market behavior, the theme of “stable growth” with relative performance in the early stage showed signs of making up for the decline.
Overall, China International Capital Corporation Limited(601995) believes that at present, the market has partially shown the bottom characteristics in terms of policy, valuation, capital and behavior signals, maintaining the judgment that the current market is in the “bottom grinding period”. Although the short-term market may still be repeated, the medium and long-term opportunities are gradually greater than risks, and there is no need to be too pessimistic about the future performance.
In judging the duration of the “bottom grinding period”, China Securities Co.Ltd(601066) securities expects that reviewing the experience of five rounds of economic recovery from 2005 to 2020, the probability of A-Shares will confirm the “bottom profit” in the second and third quarters.
Citic Securities Company Limited(600030) strategy team said that it is expected that the policies related to investment expansion in the second quarter will be accelerated, supply chain dredging and consumption stimulation will be carried out simultaneously, and the fundamentals are expected to improve gradually. It is expected that the three main lines of real estate, infrastructure and consumption will gradually recover synchronously in May.
focus on the low-risk characteristic sector
Under the overall background of vague profit expectation and declining risk appetite, the seller’s organization has continued to focus on the low-risk characteristic sector recently.
Guotai Junan Securities Co.Ltd(601211) securities strategy team said that at present, the “certainty of growth” of A-share market performance is better than the value of performance “growth” itself, and the low-risk characteristics should focus on stocks with undervalued value, performance and definite performance. Investors are advised to pay attention to the industry direction with physical assets and stable cash flow, such as coal, chemical resources, banking and other sectors; And the public investment direction dominated by government expenditure, such as construction, power grid, wind power, photoelectric, etc.
Citic Securities Company Limited(600030) continue to recommend investors to stick to the main line of “steady growth” and firmly layout the varieties with low valuation and low expectation. In addition, the recent focus can be focused on a quarterly expected to exceed expected varieties, and it is suggested that focus on photovoltaic, semiconductor, Baijiu, Chinese medicine and construction sectors.
Western Securities Co.Ltd(002673) strategy team said that the recovery of market sentiment in the second quarter will be deterministic. However, from a longer perspective, investors need to pay attention to the changes in the overall investment style of the market in the future after the rebound. In terms of structure, it is suggested to pay attention to three main investment lines: first, with the gradual rise of inflation expectations, CPI related agriculture and mandatory consumption sectors are still the main market of the whole year; Second, express logistics, catering tourism, airport aviation and other sectors with strong performance recovery expectations after the epidemic are expected to lead the market rebound; Third, with the gradual recovery of the economy, traditional consumption sectors such as food and beverage, household appliances and medicine, which are less disturbed by the epidemic, are also expected to usher in a turnaround.
