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Recently, the A-share market has been stirred up by a Shanghai uncle nicknamed "Big A Love in Late Autumn". This uncle quickly became popular on the Internet for his bold and eye-catching market predictions, especially his optimistic prediction about CITIC Securities, claiming that CITIC Securities will continue to rise in the short term, and the target price has been raised from the previous 450 yuan to 700 yuan. He even predicted that the Shanghai Composite Index will break through 3,300 points by the end of July, which has attracted widespread attention and discussion.

CITIC Securities surges, boosting the entire securities sector

The uncle's video went viral on TikTok, in which he stressed that investment strategies should focus on leading companies with core technologies, especially those backed by state-owned enterprises, while resolutely avoiding junk stocks. He is particularly optimistic about CITIC Securities, believing that its share price will usher in explosive growth, and predicts that the stock will hit the daily limit for three consecutive days between July 22 and 25, and eventually become the company with the largest market value in the A-share market.

The uncle's remarks not only made CITIC Securities a hot topic on social media and stock forums, but also directly boosted the popularity and price of the stock. In the morning of July 22, CITIC Securities' share price rose by more than 4% at one point, with H shares performing even more strongly, driving the entire securities sector to become active.

In the stock forum, CITIC Securities has become the number one hot search. On the community platform, stockholders hold two completely different views. One believes that this uncle will lead retail investors to defeat the short sellers, and his concept of "Love in Late Autumn" can be called a god. A stockholder in Liaoning strongly responded, praising the uncle as the backbone of the stock market and the backbone of retail investors, and called on retail investors to unite, prevent short sellers from acting recklessly, and jointly overcome difficulties in the current difficult times.

Another view is that the opinions of the new self-media are not important, traffic is the most important, and the key is to say what everyone wants to hear. The stock market has been falling for many years, and everyone urgently needs someone to speak out their hearts and hopes that the stock market will enter a bull market. So this part of people think that the uncle is sensationalizing and is a new way to harvest leeks. After all, when the popularity rises, it is easy for the place he points to to hit the daily limit. Even Sichuan University Zhisheng and Saudi Arabia ETF can hit the daily limit. There is no reason why the top brokerage in A-shares is worse than them.

The concentration of leading companies is expected to increase

It should be pointed out that although the uncle's remarks have aroused the optimism of some investors, there are also voices questioning whether this "divine prediction" may just be sensationalism, reminding investors to remain rational, pay attention to risks, and not blindly chase high prices. Historical experience shows that there are endless stock market "prophet" like the uncle, but they are ultimately difficult to sustain, such as Yang Baiwan, Yin Baohua, Lei Lijun, Zhao Xiaoyun, Xu Xiang, Wang Yawei and others. There is no eternal myth in the stock market, and investors should pay more attention to the fundamentals of the company and the real dynamics of the market.

CITIC Securities' strong performance is not just due to the uncle's remarks, but other factors are at work. For example, on July 22, the People's Bank of China announced a reduction in the loan market benchmark rate (LPR), with the one-year and five-year LPRs lowered by 10 basis points respectively, which is good for interest rate-sensitive brokerage stocks. In addition, the price-to-book ratio (PB) valuation of the brokerage sector is at a historical low, and the introduction of the new "Nine National Policies" has brought new development opportunities to the brokerage industry, so brokerage stocks generally performed well.

Soochow Securities mentioned that the "Decision" of the Third Plenary Session of the 18th CPC Central Committee sent an important signal. On July 21, 2024, in order to implement the strategic deployment made at the 20th National Congress of the Communist Party of China, the Central Committee of the Communist Party of China made a decision on further comprehensively deepening reforms and promoting Chinese-style modernization. It mentioned "improving the function of the capital market that coordinates investment and financing", "supporting the entry of long-term funds into the market", and "establishing a long-term mechanism to enhance the inherent stability of the capital market". It follows the previous policy statements, shows strong policy continuity, and helps to improve capital market expectations and standardize securities companies' business activities.

However, the market remains divided on the short-term prospects of brokerage stocks. On the one hand, public funds reduced their holdings in the second quarter, showing a cautious attitude under market adjustments; on the other hand, the CSRC's decision to suspend the securities lending business is also seen as having an impact on brokerage business in the short term, but in the long run, strict supervision may become the norm, and the impact on the sector is expected to weaken marginally. Kaiyuan Securities predicts that the net profit attributable to shareholders of listed brokerages in the first half of 2024 will drop by 27% year-on-year, but the improvement of FICC (fixed income, currencies and commodities) business and cost efficiency is expected to support full-year performance.

Shenwan Hongyuan Securities Research Report pointed out that the valuation of the securities sector is at a historical low. With the improvement of regulatory expectations and the subsequent quarterly recovery of performance, we are optimistic about the valuation recovery of the securities sector. Capital market reform and mergers and acquisitions (especially among large securities companies) will still be the two main themes of securities industry investment in 2024.

The research report of Changjiang Securities also pointed out that under the wave of supply-side reform in the securities industry, leading companies are expected to achieve an increase in concentration. At the same time, under the policy orientation of supervision to support the best and limit the worst, they are expected to usher in the optimization of risk control indicators, further open the upper limit of leverage supervision, and improve ROE levels.

This article comes from: Financial World

Author: Gui Lin