Yesterday, the LPR was unexpectedly lowered, but the A-share market performed averagely. Coupled with the fact that the Shanghai Composite Index has achieved five consecutive daily gains, and many indices such as the ChiNext Index have rebounded by more than 10%, there is a general consensus that the A-shares are due for a correction. However, the A-shares are known for taking the road less traveled.
Today, the A-share market experienced bulldozer-like gains in the morning session, with large capital inflows driving the index higher. Ping An Bank hit its upper limit, and sectors like food and beverage, along with other large-cap blue-chip stocks, saw a significant surge, giving off a vibe of forcing a short squeeze straight to 3000 points. This is actually a resonance between domestic and foreign capital, with foreign capital alone purchasing over 10 billion in the morning session. As the Shanghai Composite Index approached 3000 points, the A-shares encountered the first substantial resistance point since this round of rebound. After all, 3000 points hold extraordinary significance in the minds of investors. The rebound from 2600 to 3000 points in just two weeks has made many start to fear heights, leading to a sell-off of a large amount of profit-taking capital, which caused the A-shares to plunge. However, the plunge was not as exaggerated as it might seem, with all three major indices closing in the green.
There are many interpretations and explanations for the morning's surge, and here are a few for your reference: rumors of IPO suspension; issuance of trillion-yuan government bonds, raising the deficit ratio to 3.5%; a major meeting over the weekend with policies beyond expectations; yesterday's quant funds were regulated, leading the market to abandon small-cap stocks in favor of large-cap value stocks; foreign capital has begun to strategically look bullish on Chinese assets; as market interest rates decline, the demand for asset allocation by insurance capital has significantly increased; and speculation on policies from the early March Two Sessions.
For the above explanations, take them with a grain of salt. We would rather explain from the perspective of incremental capital. First, after two months of selling pressure at the beginning of the year, the A-shares have been thoroughly cleared of their chips, and the bottom was essentially scooped up by the national team, which is basically locked in their positions, so these chips are very stable. If there is incremental capital to push them up, it would be quite easy.
However, the current liquidity crisis in the A-shares has been resolved, and the national team's buying strength has also significantly decreased. In the three days after the holiday, aside from Monday when they bought more to ensure a good start, the national team's purchases on Tuesday and Wednesday were relatively small. Therefore, from the perspective of incremental capital, we can no longer expect significant buying from the Central Huijin Investment. Today, Huijin only bought some Shanghai-Shenzhen 300 ETFs and Shanghai 50 ETFs in the morning session, which ignited the fire for the morning's rise, but they didn't buy much after that.
Yesterday, we mentioned that the subsequent incremental capital would depend on insurance capital and foreign capital. Currently, China's market interest rates are continuously declining, and the downward trend in interest rates is a long-term one. In this context of asset scarcity, there is a demand for insurance capital to buy high-dividend assets. The A-shares dividend index has been in a bull market, and bank stocks began to move before the holiday, driven by the purchase of insurance capital. It is expected that the inflow of insurance capital will continue.
In addition to insurance capital, there is a large amount of wealth management funds huddled together in the bond market for warmth. The bond market has been in a bull market for the past two years, which is similar to the logic of dividend stocks being in a bull market. If subsequent policies are actively promoting economic recovery, these funds that are settled in the bond market may also enter the stock market. Of course, this is a more distant thought, and by the time this happens, the stock market would have already risen.
Speaking of foreign capital, last year, against the backdrop of new highs in global stock markets, A-shares experienced a major bear market, and shorting Chinese assets became the most crowded trade after going long on US stocks. For foreign capital, being bearish on A-shares was a politically correct stance.
However, before the Spring Festival, there was a significant change in foreign capital's view of Chinese assets, with their attitude shifting from pessimistic to neutral. Before the festival, we wrote that the call option trading volume of the iShares China Large-Cap ETF (i.e., FXI) soared to the highest level in over a year. According to reports, US asset management companies are actively launching China-themed ETFs, betting on market recovery. "The valuation gap between Chinese and US stock markets has reached the largest ever, and we believe that now is the time to invest in China," said Jonathan Krane, CEO of KraneShares, a New York-based US fund company, in a recent interview.It can be observed that the northbound capital began to flow in continuously before the holiday, and today there was a significant net purchase of 13.6 billion yuan. Since January 22, the net purchase by northbound capital has exceeded 45 billion yuan.
Capital flow is a form of voting, and behind it, there must be a change in market expectations. The unexpected interest rate cut yesterday boosted market confidence, the easing of real estate financing policies mitigated the risks in the housing market, and a series of policies following the change in the Securities Regulatory Commission have also inspired optimism. In general, a series of factors have led to an increase in market risk appetite.
Looking at the market specifically, by the close, the Shanghai Composite Index rose by 0.97%, the ChiNext Index rose by 0.36%, the Hang Seng Index in Hong Kong rose by 1.57%, and the Hang Seng Tech Index rose by 2.66%. The turnover of the two markets increased to 980 billion yuan, with more than 4,100 stocks rising in the two markets.
By industry, the food and beverage, banking, real estate, automotive, and social services sectors led the gains, while the communications, coal, public utilities, and media sectors declined. There may be concerns about Nvidia's earnings tonight, which led to a poor performance in the AI hardware sector.
Today, the strongest sector was undoubtedly the banking sector, with Ping An Bank, valued at two hundred billion yuan, hitting the daily limit up, and China Merchants Bank rising by more than 5%. Many friends may be puzzled as to why banks are rising significantly despite the interest rate cut. In fact, the rise in the banking sector is not a recent occurrence; it has already started before the holiday. If you look at the K-line chart of China Merchants Bank, you will understand. The previous bear market in the banking sector (excluding the four major banks) was actually a chain reaction to the risks in the real estate market. The market was concerned about the explosion of bank assets, but with the continuous introduction of real estate rescue policies, although the housing market has not yet stabilized, the credit risk has been significantly alleviated, and the asset repair of banks will inevitably lead to a valuation repair.
So there is no need to explain so much about Ping An Bank's daily limit up. The valuation of the banking sector is being repaired, and since Ping An Bank has fallen more, the repair space will be greater, naturally attracting funds to rebound.
Do you remember the four clues we gave you during the holiday? On Monday, high-dividend and AI stocks rose, and today it's the turn of consumer stocks and the real estate chain. We can assert that these four directions are inevitable for A-shares this year.Please provide the text you would like translated into English.
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