some institutions believe that the market environment in China is expected to improve in the second half of the year. The current valuation of A-Shares is attractive. We should pay attention to the recent meeting and the development of the epidemic and invest cautiously, but we should not be overly pessimistic
During the year, A-Shares experienced several "magic" falls. Yesterday, a "Black Monday" was staged. The investors' mood fell to the freezing point. They asked where the bottom was. Some people cut meat with pain and some people stuck to it uneasily.
Under the favorable information such as the rise and closing of U.S. stocks overnight, A-Shares first "hesitated and fluctuated" in the morning of April 26. During this period, they once rose and became popular, but the overall performance was still weak. In the afternoon, they fell back and accelerated the diving in the late afternoon. The Shanghai index fell 2900 points, the gem index fell to 215051 points, and individual stocks in the sector were green, fat, red and thin, especially the technology sector.
Where will A-Shares go? How do investors view the market rationally? The reporter of the international finance news interviewed several Chinese securities companies and foreign-funded institutions. Some institutions believe that China's market environment is expected to improve in the second half of the year. The current valuation of A-Shares is attractive. We should pay attention to the recent meeting and the development of the epidemic and invest cautiously, but we should not be overly pessimistic.
mood indicator "grinding bottom", the middle line has value
China International Capital Corporation Limited(601995) chief strategist and managing director Wang Hanfeng told the reporter of the international finance news that there are internal and external factors for the current market correction, but mainly internal factors. The market is at the bottom stage and may still be repeated. With the increasing fluctuation of RMB exchange rate, the market has paid more attention to the RMB exchange rate and potential capital flow in the near future, but the growth expectation is the more critical factor.
Wang Hanfeng further analyzed that according to the communication with market investors, in addition to the uncertainty of the overseas market, the factors worried by the market in the near future are mainly concentrated in China, including at least several aspects: first, the effect of "steady growth" is still not significant, especially in key areas such as consumption and real estate, which is still low on the whole, and the low market expectation may further weaken; Second, the rebound of the epidemic has brought greater economic challenges. The new variant Omicron is highly infectious, and it is difficult to ensure that it will not need to be "dynamically cleared" again soon after "dynamic clearing" in one place, which may cause repeated interference to normal economic activities, including supply chain and logistics. The recent epidemic situation in Beijing has also been repeated, which has also triggered similar concerns. Third, in the summary of the first quarterly report of public funds recently disclosed, it can be seen that the overall position of public funds, as an important A-share institutional investor, is still not low and still biased towards the growth style of manufacturing industry. The weakening of expectations and the impact of the epidemic have made the performance of some leading manufacturing companies fall short of expectations. The market is worried that this situation may deepen and expand, which may also exacerbate the pessimism of the market.
"Sentiment indicators' grinding the bottom 'and' steady growth 'have relative returns, and the market has midline value." Wang Hanfeng believes that when "steady growth" encounters "supply shock", the overall valuation of the market has been reduced to a level similar to the bottom in history. However, due to the impact of supply factors such as the landing of steady growth policy and repeated epidemic, there may still be some uncertainty in profits. However, on the whole, the cumulative correction time of the market is long and the range is large, the valuation is relatively low, the market is in the "bottom grinding period" in the short term, and the middle line has value.
From the perspective of sentiment indicators, the daily turnover of the market once fell below 800 billion, which also shows that the market sentiment indicators also show signs of entering the "bottom grinding" range. From historical experience, when this sentiment index reaches the current or lower level, it often means that the market is also entering the middle line value range. From the medium-term perspective, China needs more space, strong resilience, and relatively sufficient policy space. Although the short-term market is more likely to be driven by sentiment and uncertain, it is not appropriate to be overly pessimistic about the medium-term prospect.
From the perspective of structure, Wang Hanfeng continued to emphasize that "stable growth" may have relative benefits, while the growth admission opportunity of relatively overvalued value still needs to be observed. The reason is that the repeated epidemic may also bring some pressure to the supply chain and logistics. At present, these related manufacturing industries are still areas with relatively heavy market positions. Although the valuation is still corrected, the profit uncertainty is still. The recent stock price correction in related fields has been reflected, but the admission time is still judged comprehensively according to internal and external factors. In the follow-up, we still need to pay further attention to the situation and inflation trend in Russia and Ukraine, the overseas tightening situation, China's steady growth and epidemic situation, and the progress of international relations to update and judge the market trend.
A-Shares rebounded effectively or postponed to mid May
"The weak rebound expectation has been broken, and the market is moving in an extreme direction." Kevin, the chief analyst of Huaxin securities, is not fully worried about the process of releasing price to the international market.
Kevin Yan further analyzed the impact of the upside down of China US interest rate spread on a shares. At present, due to the unpredictable schedule of the Fed's annual interest rate increase and the expectation of shrinking the table, it has become the core factor to suppress medium and long-term long-term market investors. Earlier, the minutes of the Federal Reserve meeting and the speeches of officials suggested that the reduction of the table was accelerated and the interest rate was raised in advance. Concerns about the expectation of US monetary tightening were rising rapidly. Since March, the interest rate of ten-year US bonds has risen by more than 100bp, which has been maintained at 2.9%, just one step away from 3%. According to historical statistics, it can be found that the superposition of "table contraction" and interest rate increase is expected to quickly push up the US bond interest rate. If the Federal Reserve raises interest rates by 50bp every month in the future, the inversion of China US interest rate spread may become a normal state, which will be dominant for the suppression of growth stock valuation.
The rapid depreciation of the RMB exchange rate against the United States in the recent stage has also further heated up market concerns. Although through simple historical back testing, the stock market and the exchange rate are not directly causal, the exchange rate is usually a reflection of the basic market. At the same time, the participation of overseas investors in A-Shares has increased, and the impact of foreign capital flows on A-Shares has been increasing. Therefore, in the stage of rapid depreciation of RMB exchange rate since 2018, the impact on A-Shares is obvious. At the same time, in the weak stage of a shares, such impact will be amplified.
The reason, Yan Kaiwen pointed out that generally speaking, economic resilience will form an effective hedge, but due to the unpredictability of this round of China's epidemic, the economic bottom did not appear in the first quarter. On the contrary, in the context of the multi-point distribution of the epidemic throughout the country, some key micro high-frequency data have deteriorated significantly, making China's basic market unable to fully and effectively hedge external risks.
Accordingly, Kevin Yan believes that the effective rebound of A-Shares will be postponed to mid May, waiting for the marginal improvement signal from China's economic fundamentals data. With the impact of the epidemic in China gradually coming to an end, after the resumption of work and production, high-frequency indicators will once again confirm the resilience of China's economy, and the A-share market is expected to usher in a real rebound.
it is expected that the market environment in China will improve in the second half of the year
The reporter learned from Fidelity International that due to geopolitical conflicts, epidemic and inflation, it lowered its expectations for economic growth this year, especially in developed markets, and maintained a cautious defensive strategy against the background of recent weakness. There is still uncertainty in the Chinese market, and the environment is expected to improve in the second half of the year.
Salman Ahmed, global macro and strategic allocation director of Fidelity International, said, "We expect that economic growth will continue to be challenged by weak consumer and industrial confidence, especially in Europe. The timetable of the Russia Ukraine conflict will affect the economic situation of all regions and increase the risk of downward growth, while the pressure on commodity channels will increase the risk of upward inflation. In view of this, we have lowered our expectations for economic growth in 2022 at the beginning of this year, especially in developed markets. Considering The risk of recession in Europe is increasing, and central banks will remain committed to policy normalization in the context of high inflation, so we believe that stagflation will continue in the coming months. "
"Although there is still uncertainty, the Chinese market has shown positive signs, including constructive policies and measures and more favorable financing conditions. Therefore, it is expected that the Chinese market environment will improve in the second half of the year, but the macro-economy is still fluctuated by the policy of clearing the epidemic in the short term." Salman Ahmed further talked about his views on the Chinese market.
Matthew quaife, head of Asia multi asset investment management of Fidelity International, said bluntly, "Against the backdrop of recent weakness, we maintain a cautious view of risky assets and will focus on defensive strategies. Persistently high and expanding inflation remains one of the most severe economic headwinds facing the United States, Europe and several other major economies, but the situation is very different in most parts of Asia. We are optimistic about investment returns in emerging markets and the Asia Pacific region. In terms of stocks, we can still see in the defensive sector Optional opportunities, these companies tend to show resilience under previous rounds of inflationary pressure. In terms of fixed income, due to relatively high yields and diversified returns, Chinese government bonds are more attractive than other sovereign bonds. "
