Multiple Positives Lead to A-Share Market Segmentation
After the National Day holiday, the A-share market experienced a "roller coaster" trend, with a sharp rise across the board on the first trading day, followed by a significant drop on the second trading day. On October 10th, the Shanghai Composite Index rebounded, rising to 3,379 points. On October 11th, the three major indices continued to correct, and the A-shares fluctuated downwards, with the Shanghai Composite Index falling by 2.55%, barely holding above 3,200 points.
Affected by the market fluctuations, investors' sentiments are particularly complex: shareholders who have been trapped hope to recover their capital as soon as possible, seasoned veterans want to earn more, those who have increased their positions hope to invest accurately, and those who have missed out are still entangled in when the best time to enter the market is.
Advertisement
Where will the A-share market go after the surge, and is this a rebound or a reversal? A person related to Golden Eagle Fund said in an interview with a reporter that after the introduction of a combination of policies, the risk preference of A-shares has significantly rebounded. On the monetary policy front, the intensity of reserve requirement ratio cuts and interest rate cuts basically meets market expectations.
Under this background, the market has high expectations for incremental fiscal policies. Wang Tao, Head of Asian Economic Research and Chief China Economist at UBS, believes that a more reasonable expectation is that the government will introduce a relatively moderate fiscal stimulus policy of 1.5 trillion to 2 trillion yuan in the short term.
"If there is indeed a faster introduction of incremental policies in the future, it is expected to play a greater role in many aspects, such as improving people's livelihoods, promoting consumption, alleviating local fiscal pressure, and promoting investment in key areas, in order to better achieve the optimal effect of stabilizing confidence, expectations, and the economy." A person related to Golden Eagle Fund judged in this way. In addition, China's first monetary policy tool to support the capital market has also effectively alleviated market liquidity pressure.
"Chinese-head" collective outbreak
On October 10th, the People's Bank of China decided to create a "securities, fund, and insurance company swap facility" to support qualified securities, fund, and insurance companies to swap bonds, stock ETFs, and Shanghai-Shenzhen 300 constituent stocks as collateral from the central bank for high-grade liquidity assets such as national debt and central bank bills. The first phase of the operation is 500 billion yuan, and the scale of the operation can be further expanded depending on the situation. From now on, declarations from qualified securities, fund, and insurance companies will be accepted.
In terms of market impact, institutions believe that the swap facility is a strong bottoming tool, which helps to stabilize stock market sentiment.
Huachuang Securities fixed income team pointed out that after financial institutions borrow bills from the central bank, they are most likely to obtain funds through the repurchase agreement, so the cost includes two types: the rate paid to the central bank and the pledge cost, which may be beneficial to high dividend equity assets with stable returns.
Benefiting from policy benefits, the "Chinese-head" has collectively erupted. In terms of specific sectors, coal, banking, and power sectors are among the leaders in terms of gains. Wind data shows that China Railway Assembly, COSCO Shipping, and China Ship Emergency Response have collectively risen by 20%, while China Communications Construction, China Aluminum International, and China Harbour Engineering have all reached the daily limit. High dividend assets have performed brilliantly, with Chongqing Rural Commercial Bank once reaching the daily limit, and Jiangsu Bank rising by more than 6%.As of the close on October 10th, the Shanghai Composite Index rose by 1.32%, the Shenzhen Component Index increased by 0.82%, the ChiNext Index fell by 2.95%, and the Beijing Stock Exchange 50 Index dropped by 0.31%.
Regarding the short-term adjustment on October 9th, Guotai Fund believes that the reason lies in the temporary cooling of market sentiment. Guotai Fund pointed out that after several days of continuous rise in A-shares, some profit-taking funds took profits and exited, leading to significant divergence in investor sentiment and a pullback in the market trend. The intensity of fiscal policy and its role in economic growth remain the current market's divergence. "The continuous introduction of policies beyond expectations reflects the high-level's firm strategic layout and strong policy determination, which has a long-term supporting effect on the steady upward movement of the market trend," said a person related to Guotai Fund.
"Whether the index can continue to rise in the future may largely depend on the implementation of incremental policies and the entry of incremental funds in the short term," Jinying Fund believes that "counter-cyclical regulation and more proactive monetary, fiscal, and industrial policies, and a series of positive measures, will help promote the stabilization and recovery of China's economy and further repair market risk preference."
Consumption drives the beauty sector to lead the rise
Looking at the specific sector performance, from September 18th to October 10th, all 31 industry indices of Shenwan achieved an increase, with 26 indices having a growth rate of over 20%. Among them, the Shenwan Computer Index rose by as much as 42.59%, non-bank finance increased by 38.53% to rank second, and the Shenwan Beauty Care Index increased by 36.68% to rank third.
It is worth noting that from September 18th to October 8th, among the 31 Shenwan industry indices, the top three leading ones were still beauty care, computers, and non-bank finance.
In response to this, Guotai Fund said that the industry in this round of market trend showed a general rise, and some industries with leading growth may be due to previous overselling or solid fundamentals. In terms of the technology sector, during the National Day holiday, the technology sector in Hong Kong stocks performed brightly, reflecting A-shares, with technology-related sectors leading. In terms of the consumer sector, policy-driven consumption recovery, consumer product targets have ushered in valuation repair, and the highly elastic sector of beauty care has risen significantly. The real estate sector has also ushered in valuation repair.
Regarding the decline of the beauty care sector on October 9th, Guotai Fund said that under the support of subsequent policies, the beauty care sector may have an expectation of improvement. Guotai Fund pointed out that first, looking at the direction of this policy, the directionality of stimulating consumer demand is relatively clear, and measures mainly aimed at ensuring people's livelihoods are expected to have a more direct impact on mass consumption, and related consumer categories and formats are expected to benefit directly.
Secondly, there is still an expectation for the continuous implementation of fiscal policies in the future, and various consumer promotion policies may form a synergy with the upcoming "Double 11" promotion, providing strong support for the sales of categories with a high proportion of online sales. The listed leaders who mainly benefit from the increasingly clear trend of domestic replacement, have strong product iteration capabilities, and are keenly aware of channel switching are expected to continue to achieve growth performance far better than the industry.
The rise in the stock market is a good opportunity for funds to "regenerate blood," especially active equity funds. Wind data shows that as of October 8th, among the 8,733 active equity funds in the entire market, 6,247 have achieved positive returns, accounting for 71.5%. Among them, there are 813 funds with a monthly increase of over 30%. The highest monthly increase is the Wanjia Independent Innovation Fund A/C shares, with an increase of 57.9%/57.83%.Looking at the performance since the beginning of this year, two digital economy-themed funds have led the way in terms of returns—the Morgan Stanley Digital Economy A/C shares and the East Fortune Digital Economy Select A/C shares, both having increased by more than 50% year-to-date.
"There is a certain difference in the gains across different industry sectors, with a more pronounced sector rotation effect, leading to varying degrees of recovery for funds depending on their investment directions," said a person related to the fund evaluation center of Tianxiang Investment Consulting.
From the specific performance of the Tianxiang Fund Index, stock funds and hybrid funds with higher equity positions have seen considerable overall gains. Among them, the pure index stock fund index rose by 38.39% before the correction on October 9th, showing the largest increase.
Regarding the operations of fund managers, Guotai Fund stated that the trading direction has further expanded. First, they continue to focus on growth stocks that have been oversold in the past and gradually shift towards small-cap stocks, paying attention to growth directions such as technology, electronics, and new energy; second, they seize the rebound trading opportunities of cyclical assets, with durable ones including home appliances, food and beverages, and pharmaceuticals, but they expect greater fluctuations in the post-real estate cycle.
Since the end of September, Golden Eagle Fund has mainly focused on the financial industry and leading companies in various industries. Golden Eagle Fund stated that, benefiting from the alleviation of systemic risks, leading companies have room for systematic valuation repair; the financial industry also benefits from both liquidity easing and the economic stabilization expectations brought about by policy shifts. "We will subsequently pay more attention and allocate to industries that benefit, depending on the implementation of fiscal policy and its direction," emphasized a person in charge of Golden Eagle Fund.
"Three Dos" and "Three Don'ts"
The A-share market is booming, and every trading day affects the hearts of investors. "After the National Day holiday, I plan to invest more, looking at the flow of funds, I feel I can make more money," said a retail investor in a brokerage office to a reporter. "The stock market has been doing so well recently, do you think I should add more positions?" Another investor is eager to try.
For ordinary investors, Chen Guo, the Chief Strategy Officer of CITIC Construction Investment, gave the "Three Dos" and "Three Don'ts" advice: Do not blindly chase the rise, do not buy indiscriminately, and do not use leverage. Invest with surplus money that does not affect daily life consumption, choose high-quality companies within your circle of competence, consider target valuations, and strictly implement profit-taking and stop-loss operations. If your circle of competence is insufficient, consider choosing index funds or products from outstanding fund managers in related fields.
A person related to the fund evaluation center of Tianxiang Investment Consulting pointed out that the market's risk of correction has increased. Due to the large short-term rise and the recent moderate correction in the past two days, there may be greater fluctuations in the future, and investors are advised to control their positions and participate rationally.
"After the market soars, the rotation speed between sectors may accelerate. Sectors that have seen large gains earlier may face adjustments, while some sectors that have performed relatively weakly may have opportunities to catch up," the person said. When the market is booming, investors need to be alert to the premium risk when trading funds in the secondary market. When the intra-market trading price of a fund is higher than its net value, if investors buy fund shares at a high premium, they may face the risk of loss as the premium returns to a normal level.For investors who have been previously caught in a bear trap, Bi Mengshuo, a researcher at Geshang Financial Management, suggests closely monitoring market dynamics and policy changes, as well as the performance and valuation of companies. If they believe that the listed companies they have invested in have a solid foundation and long-term investment value, they may consider holding on and waiting for a recovery. However, if the listed companies have poor performance or overvaluation, it is recommended to cut losses in a timely manner and adjust investment strategies.
Those who are not holding any positions also need to make cautious decisions. "The market has already reached a relatively high level, and there may be pressure for a pullback after a significant rise. Blindly chasing gains could lead to losses," Bi Mengshuo advises investors to focus on individual stocks and industries that benefit from favorable policies, have a solid foundation, and reasonable valuations. Additionally, diversification can be a strategy to reduce risk. Investors should not put all their funds into one sector or stock but should spread their investments across multiple sectors and stocks to mitigate risks.
In terms of investment direction, Liu Yang, Assistant Fund Manager and Senior Strategy Analyst at the Macro Strategy Department of Bosera Fund, suggests investing in sectors that have been超跌反弹 in the early stages, including food and beverages, beauty care, and innovative pharmaceuticals. In the medium term, the pace and intensity of current fiscal stimulus remain uncertain, and dividend assets with relatively stable fundamental expectations still have a high configuration value.
"Looking at the next six months, funds related to science and innovation will align with the long-term structural transformation direction of the economy and will also benefit more quickly from the financing convenience brought about by loose liquidity," said Jinying Fund.