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the chips are finally loosened!

in the morning trading today, the blue-chip stocks with the code "601" at the beginning of the day fell across the board. the controversial banking sector continued to fall, with agricultural bank of china falling more than 4%, and industrial and commercial bank of china, bank of china, construction bank of china, bank of communications, and postal savings bank of china falling more than 3%. china power construction, china national nuclear corporation, sinopec, petrochina, daqin railway, etc. all weakened. the dividend etf was clearly broken.

at the same time, we can also see that the performance of individual stocks in the entire market is much better than before. nearly 4,000 stocks rose in the morning. there were only two stocks that hit the limit down, while 46 stocks hit the limit up. so, why did the blue-chip stocks in the market weaken across the board? will this sell-off bring about a change in style?

elephants collapsed across the board

in the morning trading today, bank stocks fell collectively. recently, the six major banks that have been hotly discussed in the market also fell collectively, with a general decline of more than 3%, among which agricultural bank of china fell by more than 4%.

it is worth noting that today, not only bank stocks fell sharply, but most of the stocks with chinese characters in their names also weakened sharply. china shenhua, sinopec, petrochina, china national nuclear corporation, powerchina, china communications construction, china railway construction, china metallurgical group, etc. also fell sharply. the dividend etf even showed a clear breakout trend.

from the direct reasons for the sell-off, there are two main reasons:

first, the recent performance of some companies has been under pressure, which has caused market concerns. for example, china power construction's 2024 semi-annual report showed that the total operating income was 285.383 billion yuan, a year-on-year increase of 1.29%; the net profit attributable to the parent was 6.338 billion yuan, a year-on-year decrease of 6.49%; the basic eps was 0.35 yuan, and the average roe was 3.87%. these have caused market concerns about the corresponding sectors.

second, the recent changes in public opinion are not conducive to the continued performance of large-cap blue-chip stocks. some people believe that value investment in a-shares is not only reflected in large-cap blue-chip stocks. in addition, the stocks of state-owned banks have the nature of treasury bonds, but treasury bonds have also fallen from high levels recently due to supervision. moreover, as market liquidity shrinks, the circle of the dividend sector is also shrinking, and most funds flow to a very small number of stocks, resulting in an obvious siphon effect in the market, and the overall performance of individual stocks is relatively bleak.

the future of dividends vs. changes in style

so, how will dividend assets perform in the future after today's sell-off?

analysts believe that from a trading perspective, the main reason for the asset sell-off is often the high crowding of chips. according to quantitative research by boc securities, before this sell-off, the crowding of dividend style was at its highest point since 2016. this can be seen from the trend of the consumer sector after the 2021 spring festival.

however, dividend assets are different: first, the essence of investment is actually the pursuit of dividends and capital spreads, so dividends are also one of the purposes of investment, but the previous consumer sector group did not have this feature; second, in the economic downturn, investors' risk appetite decreases and they tend to pursue treasury-like assets, so the treasury bonds have risen a lot in the past two years, and the stocks that have been grouped together recently basically have treasury-like characteristics. if the downward trend of the economy cannot be reversed, such assets may continue to be pursued.

in addition, the market is full of expectations for the capital spillover effect brought about by the plunge of large-cap blue-chip stocks. the recent market has also been interpreting a pattern: large-cap blue-chip stocks plunged, while small- and medium-cap stocks rose. and vice versa. so, can the plunge of large-cap blue-chip stocks really stimulate the overall long sentiment of small- and medium-cap stocks? analysts believe that, overall, this is not a very smooth logical deduction. although the valuation of small- and medium-cap stocks is not high, their earnings growth rate is obviously limited, and future expectations are also unclear. it is worth mentioning that in the current environment, narrative logic (including artificial intelligence) has also come to a gap period. of course, the market may be more lively, and some stocks like shenzhen huaqiang will come out more, but for most investors, the money-making effect will not be too prominent.

to solve the fundamental problem of the market, we must start with liquidity. the transaction volume of around 500 billion yuan is not enough to support the market to go too far, even if all the stocks that rose are small tickets. today's market may release a large amount, but only in the context of huge fluctuations in large-cap stocks. therefore, it is necessary to further observe the sustainability of this level of volume. in the next few days, the semi-annual reports of a-shares will be disclosed one after another, and msci will also have a major position adjustment.

in fact, objectively speaking, the current a-shares (including hong kong stocks) are not cheap enough, but need to strengthen confidence. recently, the head of citibank asia pacific said that the next round of china's bull market will last for a long time and have a large increase, but it will take some time to brew.

everything goes round and round. the economic cycle is like this and cannot be escaped. at present, both the market and individuals may be in the stage of accumulating energy. after the trough, there will eventually be a stage of climbing up.