Capital Market丨A-shares’ advantages are expected to be highlighted amid global capital market turbulence
2024-08-12
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Stock market analysis and outlook for the second half of the year
Editor's NoteGlobal stock markets have experienced severe fluctuations recently. The Japanese and Korean stock markets have triggered the circuit breaker mechanism, and European and American stock markets have generally fallen. A-shares have also fallen due to the external market sentiment. What are the reasons for the global stock market fluctuations? What changes will there be in the A-share and Hong Kong stock markets in the second half of 2024? Which investment directions can be focused on? This issue of the capital market will make an analysis. Institutional sources said that the advantages of A-shares such as low valuation and high fault tolerance are expected to be highlighted in the global capital market fluctuations, and become one of the options for international investors to diversify their positions.
■ China Economic Times reporterLiu Hui
On August 9, 2024, A-shares fluctuated and fell. The Shanghai Composite Index fell 0.27% to 2862.19 points, the Shenzhen Component Index fell 0.62% to 8393.70 points, and the ChiNext Index fell 0.98% to 1595.64 points. The market turnover was 566 billion yuan, a new low in the past two years. A-shares fell due to the external market sentiment. From a fundamental perspective, 126 listed companies have disclosed their semi-annual reports, with a total revenue of 726.94 billion yuan and a total net profit attributable to their parent companies of 74.18 billion yuan.The A-share market was generally volatile in the first half of the year, with obvious structural differentiation. What changes will there be in the A-share market in the second half of the year?
The overall situation is mainly oscillation, with obvious structural differentiation
Fang Yi, chief strategy analyst at Guotai Junan Securities, said in an interview with a reporter from China Economic Times that from January to July 2024, the total amount of funds raised in the A-share market was 197 billion yuan, of which IPOs raised 36.9 billion yuan and additional issuances raised 112.2 billion yuan, which were significantly lower than the same period in 2023, fully demonstrating the China Securities Regulatory Commission's regulatory orientation of strictly controlling the entry gate and its determination to strengthen counter-cyclical regulation. From the performance of the A-share market, as of the end of July, the Shanghai Composite Index fell 1.2%, and the overall market was dominated by fluctuations. However, the structural differentiation was obvious, among which the Shanghai Composite 50 Index rose 2.1%, the CSI 300 rose 0.3%, and the CSI 1000 Index fell 17.0% during the same period, and the performance of heavyweight stocks was overall in the forefront. From the perspective of industry performance, some sectors with stable cash flow characteristics such as banking, power and utilities, and transportation outperformed the market.Cheng Qiang, director and chief economist of Debon Securities Research Institute, told China Economic Times that since 2024, the "blood-drawing" effect of A-shares has significantly weakened and the amount of funds raised has been greatly reduced. From January to July, the number of A-shares raised and the amount of funds raised were only 36% and 25% of the same period in 2023. In the first seven months, A-shares raised a total of about 197 billion yuan, including 50 IPOs (calculated by listing date), with an initial public offering of 36.9 billion yuan; 90 additional issuances, with additional issuances raising 112.2 billion yuan; convertible bonds and exchangeable bonds raised a total of 47.9 billion yuan. From the perspective of industry, the industries with rising volume and price include electronics, textiles and apparel, national defense and military industry, machinery and equipment, basic chemicals, building decoration, transportation, light industry manufacturing, commerce and retail, social services, petroleum and petrochemicals, food and beverages, communications, banks, and non-ferrous metals.Zhou Hao, manager of Dongxing Fund, told the China Economic Times that since the second half of 2022, under the influence of various factors, the number of listings and the amount of funds raised in the domestic new stock market have generally shown a downward trend. From January to July 2024, A-shares issued a total of 49 new stocks, raising a total of 35 billion yuan, which is only 12% of the same period in 2023. Judging from the data in July, the issuance speed has slowly increased. In July, A-shares issued 6 new stocks, an increase of 1 from the previous month; a total of 4.7 billion yuan was raised, an increase of 9.6% from the previous month. From the perspective of time, the "acceptance-issuance" cycle of Shanghai and Shenzhen IPOs has been extended to an average of 671 days from the previous month. There are many factors that have slowed down domestic IPOs. In the future, IPOs may be tilted towards "hard technology" that is in line with national strategies, including supporting specialization, advanced manufacturing, green development and small and medium-sized enterprises.Zhou Hao said that from January to July this year, the A-share market was significantly differentiated due to internal and external factors. Overall, the market style in the first half of the year was cautious and defensive. Combined with the fundamentals, as of July 19, a total of about 1,632 A-share listed companies disclosed their 2024 semi-annual performance forecasts, with a disclosure rate of 30.5%, of which 727 were expected to be positive, with a positive rate of 44.5%. Structurally, stable assets performed best, cyclical products improved month-on-month, technology manufacturing was internally differentiated, and the electronics, automobile, public and transportation industries were expected to grow rapidly.
Positive factors affecting A-shares are accumulating
Looking ahead to the second half of the market, Zhou Hao said that, combined with domestic and foreign factors, positive factors affecting A-shares are accumulating. Domestically, the policy of stabilizing growth has begun to take effect. In July, the Political Bureau of the CPC Central Committee proposed that "macroeconomic policies should continue to be more effective and more powerful", and proposed that "the focus of economic policies should be more on benefiting people's livelihood and promoting consumption, and increasing residents' income through multiple channels" in the consumption field; in terms of industrial policy, it is proposed that "emerging industries and future industries should be cultivated and expanded"; real estate "insists on combining digestion of existing stocks with optimization of incremental growth"; the capital market once again proposed "boosting investor confidence", etc. Overall, the policy tone of this meeting is more positive, which plays an important role in boosting investor confidence and enhancing the inherent stability of the capital market.On the international front, Zhou Hao said that the US economic and employment data in July triggered market concerns about a US recession, the VIX index climbed, and US stocks pulled back. Against the backdrop of increasing disturbances in the external market, the Federal Reserve is expected to start a rate cut cycle in September, domestic policy easing space has opened up, coupled with expectations of improved corporate fundamentals, the probability of global funds flowing back to Chinese assets has increased, and the A-share market may move up in the second half of the year. Upstream resources, high-end manufacturing, and technology growth companies representing new quality productivity are expected to become the focus of the market.Huang Senwei, senior market strategist at AllianceBernstein, said that from the perspective of global asset allocation, the current valuation of A-share listed companies is low, and the fundamentals are not bad. The annual growth rate of corporate profits in 2024 is expected to reach 13.6%. From the perspective of value investment, investment opportunities in A-shares can be considered at this time. Although the volatility of the US stock market and the slowdown in the US economy will still affect the performance of the global market and economy, A-shares now have the characteristics of low valuation, high tolerance rate, and low correlation with US stocks. In addition, favorable domestic policies are constantly being introduced. Therefore, the advantages of A-shares are expected to be highlighted in the volatility of the global capital market and become one of the options for international investors to diversify their positions.Cheng Qiang said that in the past, China was an important force in balancing the global supply and demand pattern. In the future, China will break through with the strategy of "building a country on manufacturing". From a fundamental perspective, the financial reports of listed companies have been repaired, and the industries with rising volume and price are mainly concentrated in the technology, pro-cyclical and export chain industries. From a capital perspective, the "blood-drawing" effect of A-shares has been greatly weakened since the beginning of this year, which is conducive to the balance of supply and demand on the capital side. Looking ahead to the second half of the year, it is necessary to pay attention to the support of global asset rebalancing forces for RMB assets. For configuration opportunities, it is recommended to focus on dividends and exports, and for trading opportunities, it is recommended to focus on technological growth.Fang Yi said that in recent years, how to understand risks and uncertainties has dominated the market trends and investment styles of the Chinese stock market. Objectively speaking, under the "great changes that have not happened in a century", the current Chinese stock market faces many challenges, which is also reflected in the current low investor expectations. The short-term cycle of the Chinese stock market is still experiencing a volatile stage. From a long-term perspective, after years of adjustment, the decline of the Chinese stock market, the clearing of the trading structure, and the estimation of unfavorable factors have been quite sufficient, which is reflected in the low valuation level of A shares and the high level of net asset value loss, which is an important prerequisite for the stock market to stabilize in the future. In addition, as the central government's fiscal revenue enters an expansionary cycle, the focus of economic policies is tilted towards domestic demand, and China's capacity expansion optimization and structural transformation continue to deepen, coupled with the continuous advancement of the reform of the basic system of the capital market, looking forward to the second half of the year, the reduction of economic, policy, and market uncertainties is expected to become the key driving force for the improvement of the Chinese stock market.In terms of direction selection, Fang Yi believes that the current investment focus is on blue-chip stocks with products, orders, performance and reasonable valuations. The new "Nine National Regulations" and the reform of the basic system of the stock market simultaneously point to the need for investment strategies to focus on operating quality and corporate governance. Stable large-cap value stocks such as A and H dividend assets still have allocation value. As expectations for economic system reform heat up, the allocation of technology blue chips related to "new quality productivity" can be increased marginally.
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Executive ProducerWang Hui Che Haigang
ProducerLi Piguang Wang Yu Liu Weimin
Editor-in-chief: Mao Jinghui Editor: Zou Duo
