news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

summary

the current decline in the a-share market is mainly due to two reasons: first, investors are pessimistic about the expectations of incremental funds; second, they are still concerned about future economic uncertainties.

text｜ zhang xinpei cheng mengqi

edit ｜ yang xiuhong

on september 18, the a-share market once fell below 2,700 points. but then, with the rapid rise of real estate, automobile, banking and non-bank financial sectors, the shanghai composite index finally held the important mark of 2,700 points.

as of the close, the shanghai composite index closed at 2717.28 points, up 0.49%; the shenzhen component index closed at 7992.25 points, up 0.11%; and the csi 300 rose 0.37%. the science and technology innovation 50 and chinext index fell 1.17% and 0.11% respectively. the total turnover of the shanghai and shenzhen stock markets was 479.3 billion yuan. the market performance was weak.

the performance of the hong kong stock market in the previous two days once raised investors' expectations for the a-share market after the mid-autumn festival. during the mid-autumn festival when the a-share market was closed, the hong kong stock market was not closed. the performance of the hong kong stock market when the a-share market was closed is often given a "barometer" meaning by the market, and becomes a window for investors to gain insight into investment sentiment in advance. on september 16 and 17, the three major hong kong stock indexes rose for two consecutive days, especially the hang seng china enterprises index, which rose by nearly 2% in two trading days. from the rise of the hong kong stock market during the mid-autumn festival, it can be seen that the external environment has a positive impact on the a-share market. however, the performance of the a-share market on september 18 was somewhat unexpected to the market.

there are many factors contributing to the decline of a-shares. many institutional insiders believe that the market is pessimistic about incremental funds, and this lack of confidence is an important reason for the recent continued decline of a-shares.

"it is difficult to find a reasonable explanation from the fundamentals at this time. the market has fallen into a downward spiral of negative feedback. before it is completely cleared out, concerns about a repeat of the plunge at the end of the decline dominate the mainstream and are also the core reason for suppressing market confidence. driven by this sentiment, all reasons for bearishness are magnified exponentially." said xia fengguang, manager of rongzhi investment fund.

it is worth noting that the federal reserve will announce its latest interest rate decision in the early morning of september 19th, beijing time. the market expects the federal reserve to announce a rate cut at this meeting.

2700 points lost and regained

on september 18, the shanghai composite 50 plunged straight into the red, and rose nearly 0.7% in the morning. the major a-share indexes also went down unilaterally after the opening. in the afternoon, the shanghai composite index fell below the important mark of 2,700 points, and nearly 4,600 stocks fell, and the market sentiment was very depressed.

however, after falling below 2,700 points, a-shares began to rebound. driven by the strong performance of major sectors such as real estate, automobiles, banks, and non-bank financials, the shanghai composite index saw a large increase in a short period of time. subsequently, the shanghai composite index, shenzhen component index, and csi 300 index all rose.

as of the closing, the shanghai composite index held above 2,700 points, closing at 2,717.28 points, up 0.49%; the shenzhen component index closed at 7,992.25 points, up 0.11%; the csi 300 rose 0.37% and the wind a-shares rose 0.06%.

although the science and technology innovation 50 index and the chinext index also rebounded, the momentum was not strong. in the end, the science and technology innovation 50 closed at 647.41 points, down 1.17%; the chinext index closed at 1533.47 points, down 0.11%.

in terms of sectors, 14 of the 31 shenwan first-level industries saw increases, with coal leading the way with a 2.42% increase, followed by home appliances and real estate, which rose by 2.37% and 2.36% respectively. the automobile sector rose by 1.22%, and banks and non-bank financial institutions rose by 1% and 0.81% respectively.

it is worth noting that these sectors were rapidly pulled up shortly after the afternoon opening. driven by these sectors, a-shares also quickly turned positive.

in terms of falling sectors, agriculture, forestry, animal husbandry and fishery saw the largest decline, down 2.33%, followed by food and beverage, down 1.49%. environmental protection and electronics also saw declines of more than 1%.

why do a shares continue to fall?

regarding the current decline of a-shares, cheng liang, fund manager of thirty-three degrees capital, believes that the current market decline is caused by the dominance of short-selling forces and concerns about future economic uncertainties, and the overall manifestation is lack of confidence and shrinking trading volume.

huang cendong, a strategic analyst at the wealth center of guotai junan securities, told caixin that various tourism and consumption data during the mid-autumn festival have declined compared with 2023; the recently released inflation, financial, and macroeconomic data all point to a weakening of the current macroeconomic recovery. these factors have affected the performance of a-shares.

"near closing, the shanghai composite index was able to turn positive. the momentum for the rise may come from the market's positive expectations for recent economic meetings and policy support for the financial and real estate industries. in particular, the expectation of reducing interest rates on existing mortgages may have a positive impact on the recovery of the consumer market," said chen xingwen, chief strategy officer of heisaki capital.

recently, the global capital market has focused on the federal reserve's interest rate decision and economic forecast summary. in the early morning of september 19th, beijing time, the federal reserve will announce its latest interest rate decision, and the market expects the federal reserve to announce a rate cut at this meeting.

the market generally predicts that the fed will make a decision to cut interest rates at this meeting. the key question is whether it will be cut by 25 basis points or 50 basis points. considering the fundamental factors of the us economy, industry insiders believe that the fed is still likely to start this round of interest rate cuts at a pace of 25 basis points.

"in the short term, we cannot rule out the possibility that the market will bet on a domestic interest rate cut. but we need to weigh the backlash if policies fall short of expectations," said huang cendong.

in fact, the shanghai composite index has been on a downward trend since it reached a high of 3174.27 on may 20 this year.chen xingwen believes that the deep-seated reason lies in the market's doubts about the incremental space for the stock market and its doubts about long-term strategic stability, which fundamentally stems from a lack of market confidence.

after the european and american central banks entered the interest rate cut cycle one after another, the global market risk appetite increased, but a-shares continued to decline.

xia fengguang said that it is difficult to find a reasonable explanation from a fundamental perspective at this time.to some extent, the current market has fallen into a downward spiral of negative feedback. before the market is completely cleared, the concern about the reappearance of the plunge at the end of the decline is the mainstream, which is also the core reason for suppressing market confidence.

"lack of market confidence is an important reason for the continued decline of a-shares," said chen xingwen.

"driven by this sentiment, all reasons for bearishness are magnified exponentially, while positive factors are seen as signals to exit at every rebound. emotional tension often means that the bottom is approaching. this downward spiral is like a spring that is constantly suppressed. when it is suppressed to the extreme, a correction may break out at any time." xia fengguang said.

chen xingwen believes that the low sentiment may be due to many factors. first, there is a lack of policy incentives that can significantly enhance investor confidence and real and strong market growth; second, the instability of the international political situation has increased market uncertainty. these factors together may have led to a continued decline in the stock market, even when some stocks showed investment value.

when will the “bottoming out” end?

regarding the future performance of a-shares, chen xingwen believes that the market may be in a relative bottom area at present, and investors can wait patiently for the improvement of market sentiment and the clarification of policies.

in his opinion, after the introduction of multiple favorable policies, the market will have a relatively certain chance of rebounding. after all, it is now at a historical low. investors can adopt the "eating fish in the middle" strategy of "watch more, do less, and wait for action". any large position bottom-fishing may be able to be copied to the "halfway up the mountain" at this time, and positions can be added step by step. now is a period of confidence restoration, and there will definitely be ups and downs in the middle, so it is better to spend some time and be patient.

it is worth noting that no matter what view is held, when stock market sentiment is depressed, whether expectations can be guided appropriately and confidence can be boosted becomes the key during the "bottoming out" period.

"at the current point in time, although the market volatility is weak and there is no clear main market trend, there is no need to be overly pessimistic from a relatively long time perspective. first, the high probability of a rate cut by the federal reserve in september is expected to open up room for flexibility in the rmb exchange rate and domestic interest rate policies; secondly, efforts to stimulate domestic demand represented by real estate policies are expected to continue to increase; finally, new quality productivity represented by artificial intelligence and low-altitude economy is in the ascendant." wu haijian, manager of western profit fund, believes.

qiu xiang, co-chief strategist of citic securities, said that from the perspective of the market bottoming out, central huijin has continued to reduce the scale of its purchases of stock etfs in the past two weeks. the reduction in "bottoming" capital inflows may accelerate the progress of stock prices fully reflecting market expectations and sentiments, shortening the bottoming out period of a-shares. in addition, from the perspective of allocation strategy, in an environment where economic fundamentals are still weak and long-term government bond interest rates continue to decline, the bottom position value of dividends still exists, but in terms of structure, it is necessary to avoid varieties with fundamental volatility risks; at the same time, excellent companies in the overseas sector that have fully reflected the risks of overseas recession and trade frictions have allocation value.

citic securities research believes that china's policies have entered a critical observation window period. in the short term, the a-share market sentiment is extremely depressed, and strong stocks have made up for the decline, which has the characteristics of a market bottom. the subsequent market turnaround still depends on the increase in policies to expand domestic demand.in the past three years, the platform economy has actively rectified and accelerated its transformation, entering a new starting point. the online growth rate has been restored first, and attention should be paid to the internet platform economy; the stage of sharp decline in real estate sales is gradually passing, and relevant support policies can be expected; the domestic policy of expanding domestic demand through old-for-new policy has begun to show results, and we wait for the policy of expanding domestic demand to continue to take effect.

the price-performance ratio of the current stock market bottom itself is not as good as the historical bottom in 2018. huatai securities said that it is necessary to wait for the fed to cut interest rates or earnings to rebound, which will drive the numerator and denominator. in addition, the regulatory authorities have significantly increased their control over the stock market supply, but the means of expanding foreign investment are still relatively limited, and new means are needed to provide incremental funds, such as the recent establishment of private equity funds by insurance companies, the promotion of the issuance of theme funds by the beijing stock exchange, and the acceleration of listed companies' repurchases. finally, the changes that the market is most concerned about have not yet been fully seen, including the recovery of core sectors such as real estate, the improvement of overall a-share earnings, new domestic scientific and technological achievements, the fed's monetary policy shift to easing, the central government's positive attitude towards the capital market, and whether the economic transformation can be successful.

a-shares have bottomed out several times in history, and there are the following rules. huatai securities research report summarized: first, the high-level "prescription of the right medicine" is a policy prerequisite, and the time to bottom out depends on the comparison between the attractiveness of the stock market itself and the strength of the policy; second, in most cases, the most direct reason for bottoming out is the improvement in supply and demand; third, the policy bottom and the market bottom are not the most critical information, and the bottoming period is also difficult to predict due to the influence of the background of the times.

drawing on history, huatai securities believes that for this round of a-shares to bottom out, it still needs to wait for core changes such as the federal reserve’s interest rate cuts, earnings recovery and incremental funds.

the judgment that the federal reserve will most likely start a rate cut cycle in september has been recognized by most institutions. so, what impact has the rate cut had on the chinese market? yang fan, chief macro and policy analyst at citic securities, said that the united states had two rounds of rate cut cycles in the past: from 2007 to 2008, the federal reserve implemented a recession-style rate cut. the outbreak of the financial crisis caused china's economy to cool suddenly. subsequently, china launched the "four trillion" plan to successfully boost the economy, but the improvement in exports will not appear until the rate cut supports the warming of the us economy. in 2019, the federal reserve launched a preventive rate cut, and the decline in china's external demand was generally controllable. after the domestic stable growth policy was increased and the improvement of the us economy in the fourth quarter boosted china's exports, the chinese economy showed signs of stabilization at the end of the year.

focusing on the present, yang fan believes that this round of us interest rate cuts tends to be preventive rate cuts, and china's export growth is expected to decline moderately in the fourth quarter.however, the difference in this round of interest rate cuts is that china's problem of insufficient domestic demand is more prominent, so there is a greater need to increase the policy of stabilizing growth, and both monetary and fiscal policies are likely to be strengthened within the year.