In terms of choosing structural opportunities in the medium and short-term, Shanghai Securities recommends paying attention to the following in the short term: the rebound opportunity for real estate stocks after the announcement of a list of second- and third-tier cities with purchase restrictions; trading opportunities for broker stocks as margin trading business approaches normal regulation after nearly 17 months of piloting; and mid-term opportunities in the white wine industry. Special attention is advised for the development plan for new material industries during the "12th Five-Year Plan" period, which will provide extremely broad space for future applications of neodymium-iron-boron permanent magnet materials. Related listed companies that have already reached turning points in performance are also suggested for attention.
Based on the judgment of a 'short-term weak rebound, mid-term entry into a strategic stalemate stage' in the medium and short-term trend, the current investment strategy recommendation is to focus on a medium-term buying strategy, and implement a flexible swing trading strategy amid short-term weak fluctuations to reduce the cost of medium-term holdings.
Compared to concerns over the slowdown in economic growth triggered by interest rate hikes and intensified property market regulation policies, the mid-term positive effects of Renminbi Qualified Foreign Institutional Investors (RQFII) have almost been neglected by the market. The sensitivity to negative news and numbness to positive news further highlight the market's pessimistic sentiment.
On the other hand, the Ministry of Housing and Urban-Rural Development announced the 'five criteria' for second- and third-tier cities subject to purchase restrictions. Although it did not exceed market expectations, in the currently pessimistic market atmosphere, it has caused two negative impacts on the market: First, the upcoming release of the list of second- and third-tier cities under purchase restrictions may further exacerbate market concerns about the retreat of investment growth in the second half of the year. A temporary drop of 20-30 yuan/ton in cement prices in East China last week once triggered market panic. Second, against the backdrop of increased risks of a global economic double-dip, continuing tight property market regulation at this time will further increase the risk of economic downturn, with memories of the pain from 2008 filling the market.
On one hand, last week, central bank bill issuance rates rose across the board, once again stirring the market's sensitive nerves regarding interest rate hikes. Shanghai Securities believes that Standard & Poor's downgrade of the U.S. rating was mainly due to policy risks brought about by partisan struggles in the U.S., rather than substantive changes in the fundamentals of the U.S. economy. After the brief event-driven impact, judgments on the direction of China’s monetary policy should still return to the important task of controlling overall price levels. Inflationary pressure remains relatively high in the medium and short-term, so there is a need for monetary policy to maintain a certain degree of tightening. The People's Bank of China's second-quarter monetary policy report has already placed interest rates at the top of the policy tool mix. It is a rational choice for the market to tighten its focus on interest rate hikes, and pressures from subsequent tightening policies still exist. However, under the backdrop of inflation nearing its peak and then retreating, another interest rate hike could very likely become a turning point for marginal improvement in policy. Therefore, interest rate hike expectations are unlikely to form sustained downward momentum.
The report states that a major reason for the A-share market's rebound being stalled and returning to weakness last week was the disturbance caused by negative policy expectations, reflecting even more the overly pessimistic sentiment in the market.
Shanghai Securities recently released a strategy report stating that there is an over-correction phenomenon in the market's revision of overly optimistic expectations for earlier policy improvements. Market sentiment is rapidly switching from optimism to excessive pessimism. Considering other influencing factors, the short-term index will continue with a weak rebound above the 2500-point level, while the mid-term market may enter a strategic stalemate phase within the 2400-2600-point range.
Shanghai Securities: A-shares Show Excessive Pessimism Signals
Similar views exist to some extent among institutions. Due to continued tensions in policy and liquidity, institutions generally predict that the short-term market will remain in a weak fluctuation pattern. (Shanghai Securities News ⊙ Reporter Pan Shengtao ○)
Guotai Junan believes that under the dual pressures of domestic policies and external shocks, the current market is already at a mid-term low point, with limited downside potential. However, inflation constrains the relaxation of policies, making a substantial market rebound unlikely. Overall, A-shares have limited upside or downside space, but the probability of upward movement is increasing.
Furthermore, since the start of this week, the linkage effect between A-shares and the external markets has significantly weakened, with core factors affecting the market reverting back to policy and liquidity considerations. Overall, although institutions acknowledge the current valuation levels of the market, they generally adopt a cautious stance on whether a rebound will take place.
After fully closing the upper gap, the market showed signs of volatility and retreat, delivering a significant blow to the recently restored market confidence. From the perspective of intra-day hotspots, small and medium-sized thematic stocks remained active, while blue-chip stocks lacked luster, indicating that investors are primarily treating the current market from a speculative angle.
Relevant statistical data also shows that large-scale capital outflows reoccurred yesterday, with net outflows amounting to 6.2 billion yuan. In sector capital flows, pharmaceuticals, computers, and electronic information sectors saw significant inflows, while non-ferrous metals, chemical fibers, brokers, insurance, and real estate became major sources of capital outflows.
Despite some strong stocks experiencing profit-taking, the market maintained its small-cap stock style seen since the start of the week. The ChiNext Index and SME Board Index continued to outperform the main indices, though individual stocks were somewhat divided, with more than ten stocks reaching their daily limit highs. Sector-wise, IoT, e-payment, and computer-related thematic sectors gained favor, while cement, construction materials, insurance, and non-ferrous metals sectors, which led gains on Tuesday, lagged behind.
At the close, the Shanghai Composite Index stood at 2541.09 points, down 12.93 points (-0.51%); the Shenzhen Component Index was at 11238.95 points, down 4.47 points (-0.04%). Total turnover for both markets amounted to 146.8 billion yuan, slightly higher compared to Tuesday.
A sharp rebound in U.S. stocks on Tuesday failed to effectively stimulate the domestic market. The Shanghai and Shenzhen indices opened only slightly higher yesterday. They subsequently attempted to rally, with the Shanghai index approaching the 10-day moving average line, fully closing the gap left on the previous Friday. However, due to insufficient volume, the rally failed, leading to a retreat. In the afternoon, pressured by earlier gains, the indices continued to decline in a volatile manner.
A-shares exhibited a rebound followed by a retreat on Wednesday, with reduced individual stock activity and lack of willingness to chase gains indicating continued market weakness. Institutions generally adopted a cautious stance, expecting A-shares to maintain weak fluctuations near the bottom in the short term.