China’s epidemic situation is severe, and the main A-share stock index shows a downward trend: in mid April, the Bureau of statistics released the economic data of the first quarter, the GDP growth rate was lower than expected, the pressure for steady growth increased, and the urban survey unemployment rate rose. Since late March, China’s epidemic situation has been severe, and production in many places has been affected under the general policy of dynamic zeroing. The A-share market is expected to be weak. As of April 25, it showed a volatile downward trend throughout the month. Among them, there has been strong risk aversion in the market since the latter half of the year, and the decline of A-Shares has increased.
In terms of structure, the main indexes of A-Shares fell collectively, and the performance of Shanghai Stock Exchange 50 and Shanghai and Shenzhen 300 were relatively strong, falling by 2.92% and 4.96% respectively in the same month. The performance of small and medium-sized enterprises was sluggish. The Kechuang 50 and gem index fell by 13.66% and 13.65% respectively, and the CSI 500 fell by 9.23% in the same month.
The profit performance of industrial enterprises is significantly differentiated: according to the data of the National Bureau of statistics, from January to March, the total profit of Industrial Enterprises above designated size increased by 8.5% year-on-year. But the structural differentiation is more obvious. Among them, international geopolitical conflicts and other factors have led to a sharp rise in commodity prices, and the profits of industries related to the production of energy products such as coal have increased rapidly. However, the performance of the midstream manufacturing industry was lower than expected under the high base and high cost, while the profit growth rate of the power and heat supply industry fell sharply.
With the increase of internal and external disturbances, the net outflow of funds from A-Shares is expected to improve the liquidity of the market in May: Recently, with the US dollar index rising above 100, the US Federal Reserve’s vote Committee has frequently expressed its hawkish position, and the RMB exchange rate has weakened rapidly. As of April 26, the RMB exchange rate against the US dollar is close to the 6.6 mark, and the pressure of foreign capital outflow has increased. At the same time, China’s epidemic has been fermented in turn in first tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen, the industrial production and service industry have been hit hard, and the market confidence is weak, The funds showed an outflow trend. However, recently, with the convening of the central financial and Economic Commission meeting and the voice of articles such as China Securities News, professional institutional investors have expressed their determination to maintain market stability, and market liquidity is expected to improve in May.
General trend research and judgment and industry configuration suggestions:
Overall, the current global political and economic environment is still unstable, and the tightening of major overseas developed economic currencies has a negative impact on China’s capital flows. The downward pressure on China’s economy is increasing, market expectations are weak, and the growth rate of enterprise profits continues to be revised down. If the epidemic prevention and control effect is good, it is expected to be improved by the end of the second quarter. After continuous correction, the current valuation risk of major industries has been significantly reduced. It is expected that investor sentiment will gradually stabilize after the accelerated release in the short term. There are periodic correction opportunities for a shares, and the market has entered the stage of contraction and shock. In terms of industry allocation, 1) at present, China’s demand is declining, economic growth is under pressure, the task of “stabilizing growth” is heavy, infrastructure investment will be strengthened and accelerated, and the main line allocation idea will continue; 2) If market sentiment is repaired, focus on rebound opportunities in growth, hard technology and other fields.
