Rapid rebound after sharp fall, market gradually grinding bottom

Rapid rebound after sharp fall, market gradually grinding bottom

Wednesday A shares both Hong Kong stocks rebounded sharply, the Shanghai Stock Exchange index closed up 3.48%, the Hang Seng Index rebounded sharply 9.08%, the Hang Seng Technology Index is a rebound of 22.2%. Overnight U.S. stocks rebounded, Wednesday lunchtime media reported that the State Council leaders chaired the State Council Finance Committee meeting to study the current situation, talking about stable growth, real estate, Chinese stocks, platform economy and other market concerns on a number of topics.

1️⃣ Policy stabilization signal first appeared, the market rebound. After the recent continuous market pullback, market sentiment continues to turn weak, and according to historical experience, the possibility of a short term market rally increases accordingly. Wednesday's market rally was a similar situation. On the board, both A-shares and Hong Kong stocks rebounded sharply, with the Hang Seng Technology Index rallying 22.2% in a single day, likely a result of the sharp dip in the previous period, driven by short selling to cover the performance. On the plate, the early retracement of more sectors rebounded more, including consumer services, power equipment new energy, transportation, brokerage, etc., while agriculture, pharmaceuticals and coal rebounded relatively huge after; Hong Kong stock market before the heavy setback in technology stocks, pharmaceutical stocks rebounded ahead, finance, utilities, etc. relatively lagging behind. a single-day turnover of A shares reached 1.22 trillion yuan, after a significant setback to grab the rebound positive. From the perspective of Shanghai-Shenzhen-Hong Kong Stock Exchange funds, northbound funds turned from a large net outflow at the beginning to a net inflow, slowly turning to a small net outflow at the close; southbound was a large net inflow of HK$7.87 billion. The RMB also appreciated slightly against the USD. Wednesday's market rally was driven by a number of factors. On the one hand, the market had the momentum to rebound after a sustained and rapid decline in the earlier period, and on the other hand, there were positive internal and external developments, including the retreat in key commodity prices, the official message of market stability as reported in the intraday media, and information about talks between Chinese and US officials, among others.

2️⃣ Has the market bottomed out? After today's sharp rally, a natural question for investors is: has the market bottomed out. Although there is greater uncertainty in judging the bottom in the short term, we try to synthesize historical experience and current market conditions to give a judgment. We tend to think that the market may still be repeated in the short term, but a phase similar to the sharp decline in the previous period may have ended, and the subsequent market may gradually enter the bottoming phase, and the volume may shrink. Follow-up according to the internal and external situation, including the geopolitical situation, stagflation situation interpretation, Sino-US relations, China's stable growth and real estate industry situation, the progress of the epidemic to grasp the structural opportunities, stock selection is more important. On the one hand, cumulatively, the Chinese market has reached 13 months from the top in February last year, which is one of the longer adjustment periods in the history of the Chinese stock market, and the cumulative adjustment is not small; on the other hand, the market valuation has also reached a relatively low level in history, regardless of A shares and Hong Kong stocks; and the cumulative digestion of negative internal and external factors has been more. Of course, the subsequent market is still facing a lot of internal and external uncertainties, including geopolitical, stagflation situation, the epidemic, China's stable growth and real estate industry interpretation, China-US relations, the market is likely to be repeated. Only the medium-term perspective of opportunities compared to risks may be more favorable to opportunities. The follow-up still needs further attention to the progress of these aspects to update the judgment of the market trend.

3️⃣ Chinese markets are expected to show relative resilience in the medium term and gradually focus more on structural growth. Macro factors may be the main contradiction that dominates the market in the near future. We still need to pay attention to the supply risks caused by geopolitical events and other factors to confirm the mitigation and overseas "stagflation" scenario, domestic epidemic and the interpretation of stable growth. From a medium-term perspective, the Chinese market is expected to show relative resilience. China is in a relatively favorable growth and policy cycle, with relatively ample room for "growth stabilization" policies; secondly, the absolute valuation of the Chinese market is at a relatively low historical level, and the relative valuation is also attractive compared to other major markets; China's inflationary pressure is relatively manageable, and as a major global manufacturing country with the world's largest and relatively complete As long as China continues to pursue technological innovation and industrial upgrading, the Chinese market may be relatively more resilient to global supply risks. Structurally, we believe that the main line of "stable growth" may still have allocation value, and in the future, as the macro level of overseas "stagflation" risk and supply risk gradually eases, growth expectations gradually stabilize, and the higher boom growth style is also worthy of gradual attention. We will continue to follow the geopolitical events, overseas policies and epidemics, China's stable growth on the ground and the epidemic situation to assess the potential path and structure of the market.