With the gradual improvement of the epidemic prevention and control situation in Shanghai, the gradual introduction of the steady growth policy and the acceleration of resumption of work and production, A-Shares have ushered in a wave of oversold rebound since April 26. We can see that with the rise of the index and the recovery of the bottom of trading volume, there are signs of "people want to rise". We all expect the market to have a continuously stronger sector. (if the market is reversed, there must be a continuously strong sector; if the market does not have a continuously strong sector, it can only rebound.)
From May to now, the strongest market performance is the resumption of work and production sector, which overlaps with the previous high boom track stocks, such as new energy vehicles, photovoltaic, semiconductors, etc. During our previous exchanges with investors, we found that the sharp decline of high boom track stocks came from several major concerns: the negative effect of China's epidemic prevention and control on the obstruction of the supply chain the lower than expected realization of steady growth cost impact the deterioration of the industrial competition pattern the difficulty of increasing penetration and market share the possibility of adjustment of industrial policies. With the recent controllable epidemic, steady growth policy and falling inflation, the first three major anxiety factors (cost impact, supply chain and resumption of work and production) have been alleviated, and the high boom track stocks have rebounded this round.
From the perspective of transaction logic, the sector rotation from 316 to now is in line with the movement process of "steady growth, high prosperity and turnaround" that we have repeatedly stressed before. That is, if the steady growth is gradually implemented and the expectation is fulfilled, the high boom is expected to usher in a turnaround. At the same time, the realization signs of steady growth: 1. The two sessions and the Political Bureau meeting (Policy); 2. Industrial added value (fundamental profit expected inflection point, the end of the second quarter); 3. Real estate stocks and consumer stocks stabilized and rebounded (transaction logic, the real estate excess market was started on March 15, and the consumption excess market has been started since April). In other words, if the high boom can continue to strengthen, it means that the "steady growth and realization" stage is over, and the market is expected to usher in a reversal at that time.
From the perspective of the market as a whole, it is currently in a low equilibrium market and needs to wait for a clearer signal on the right. We have always believed that the turning point of profit expectation at the molecular end of China's fundamentals is the primary core signal of market reversal. The market has always expected "real moves" and "real moves" on the policy side to effectively reverse the current "good moves" expected by China's fundamentals. Does social finance in April mean that the expected inflection point of China's molecular side has come? We believe that the social finance data in April is probably low throughout the year, so there is no need to be overly pessimistic. The pace of social finance recovery may be moderate in the future. Objectively speaking, the current fundamentals are still in a downward trend, and we have not seen the signal of improvement in relevant economic data. It is not sufficient to judge the inflection point of China's molecular end profit expectation only by social finance in April.
For the current four main lines of "steady growth, high prosperity, post epidemic repair and global inflation", we believe that "steady growth" is still the main position (positional warfare, not switching back and forth). Recommended configuration priorities: steady growth (infrastructure, real estate chain and bank) high prosperity (digital intelligence, photovoltaic, military industry, semiconductor, wind power and new energy vehicles)), post epidemic repair (social service, logistics, medical beauty, food and beverage, etc.) global inflation (coal, nonferrous metals and petrochemical).
Objectively speaking, at present, it is in the process of approaching reality to expectation, the market performance revolves around policy expectation, and the correlation between investment income and prosperity is low, which is not the applicable stage of prosperity investment; But in the end, there will be a process of approaching the expectation to the reality, and the market performance will match the prosperity. The prosperity investment will return to the positive relationship between the prosperity and excess return, both from the perspective of attack and defense.
Risk warning: the global economy is down; Global epidemic recurrence; Overseas geopolitical disputes.
