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since 2024, the a-share market has continued to fluctuate, and recently entered the "2700-point defense battle" again, attracting the attention of investors.

as we enter the last quarter of 2024, how will the market develop? is it expected to stop falling and rebound? which sectors are expected to develop independently, and what important risk factors need to be vigilant?

in this regard, china fund news reporter interviewed six chief economists and chief strategy analysts of securities companies to gauge the subsequent market trend. they are: chen guo, chief strategy officer of citic construction investment securities, wang yi, chief strategy analyst of huatai securities research institute, yan xiang, chief economist of huafu securities, yang chao, strategy analyst and team leader of china galaxy securities, wu kaida, head of tianfeng research policy institute and chief strategy analyst, and li meicen, chief strategy analyst of caitong securities.

the following are the key points of the guests:

chen guo:judging from the valuation and risk premium levels, the hong kong stock market has extremely high cost-effectiveness, and the a-share market also has a relatively high cost-effectiveness. however, an important condition for valuation support is that profit growth can turn from negative to positive. if the subsequent combination of monetary, fiscal and real estate policies can be implemented, the market will have the basis to stop falling and rebound.

wang yi:there are more and more signals that a-shares are approaching support levels, and the price-performance ratio has reached a relatively high level. looking forward, the current index bottom position is relatively solid, and the spatial bottom has been initially formed, but the time bottom still needs to pay attention to the new variable of incremental policy release.

yan xiang:it has now dropped to a historical low. looking ahead, monetary policy will most likely remain loose, interest rates may remain low or even continue to decline, and the "interest-earning" value of dividend assets with low valuations and high dividends will be highlighted. dividend strategies still have allocation value.

yang chao:with the improvement of liquidity and earnings expectations, market sentiment is expected to gradually recover, and a-share valuations are expected to increase, which will promote a rebound in market indices.

wu kaida:from the perspective of calendar effect, the winning rate and average monthly rise and fall in october and november during 2010-2023 are both good, while august and september are weaker. september is often the month when match points are brewing.

li meicen:current economic expectations are at a relatively low level, the overall monetary policy is relatively loose, and assets have a high cost-effectiveness ratio. if the overseas economy picks up again in the fourth quarter, driving china's exports to rebound, and the domestic policy effects are realized, the recovery of domestic and foreign demand is expected to become the core driver of market changes.

see the details——

the global economy is turning to a resonant downward trend

suppressing the recent performance of a shares

china fund news: since september, the main market indexes have continued to fall, and the battle to defend the 2,700-point mark has begun. what is the reason for this market change? how do you evaluate the market situation this year?

chen guo:the market's early adjustment was mainly due to the fact that domestic demand data was lower than expected. the second quarter report showed that the revenue and profit of listed companies showed negative growth overall, and the macro and medium-term data in the third quarter made the market expect that the third quarter report would be difficult to be better than the second quarter. the market has responded positively to the new round of capital market reforms emphasizing shareholder returns this year, but it is still affected by multiple factors such as the real estate cycle, capacity cycle and us dollar cycle. therefore, some earnings are relatively less correlated with the economic cycle or benefit from external demand.

wang yi:since september, the main market indexes have continued to adjust. we believe that the key background of this round of adjustments lies in the resonance between the continued pressure to repair the macro fundamentals and the weak performance verification of micro-enterprises. on the one hand, the latest macro indicators such as social financing and inflation data show that domestic demand still needs to be repaired; on the other hand, the 2024 interim report shows that the revenue of all a-share non-financial stocks is still declining year-on-year, net profit is flat at a low level, and the turning point of inventory and production capacity cycle is yet to be verified. in addition, assets such as banks and utilities that were strong in the early stage have started a round of deep declines and clearing since the end of august, coupled with the accelerated rotation of themes, market sentiment has also declined.

since the beginning of this year, the rhythm of a-share market has mainly followed the game between the recovery of domestic effective demand, policy expectations and overseas liquidity. the current fed interest rate cut cycle has begun, and the recovery of domestic fundamentals and the release of incremental policies have become key variables.

yang chao:since september, the market trading activity has dropped to a low level, and the shanghai composite index has fluctuated downward and hit new lows. that is, the market has shrunk and fallen, and the bottoming trend has become prominent. the main reasons are: first, the mid-year performance of a-shares disclosed at the end of august was weaker than expected, and a-share earnings continued to grow negatively year-on-year, especially in the non-financial sector. second, the macroeconomic data did not exceed expectations too much, which dragged down the stock market. the manufacturing pmi index in august continued to be in the contraction range and declined from the previous month. most of the inflation levels, economic data, and financial data in august showed a downward trend. third, investor sentiment is low and more cautious, and they are in a wait-and-see mentality. in general, the market situation since the beginning of this year has been greatly affected by the macroeconomic fundamentals. the macroeconomic and microeconomic data that need to be repaired urgently make investors not very optimistic overall.

yan xiang:the continued decline of the market since september is mainly due to the resonance of internal and external factors. in addition to the relatively weak recovery of corporate profits, the market was also worried about the us economic recession and the impact on external demand. at the same time, the biden administration's tariff increase on china in september was implemented, including steel and aluminum, semiconductors, electric vehicles, lithium-ion batteries, battery components and key minerals, solar cells, port cranes and medical products. the increased tariff rates ranged from 25% to 100%, and the market's concerns about the domestic export chain intensified.

li meicen:the overall market volatility this year is large, mainly due to the large disturbances in the external environment and the large fluctuations in the expectations of the federal reserve's interest rate cuts. as a result, the global economy turned to a resonant downward trend for nearly two quarters in the middle of the year, which suppressed the performance of china's economy and stock market to a certain extent. at the same time, domestic policies focus on long-term transformation, hedge the pressure of smoothing the economic transition period, vigorously encourage equipment renewal and transformation and consumer goods replacement, continue to relax and implement real estate policies, and continue to exert efforts in fiscal debt. there is a certain time lag from the introduction of policies to the effect, and the rhythm is out of sync. a-shares themselves have brought quantitative funds due to large fluctuations, and some 3-year closed-end funds are facing redemption pressure upon maturity, resulting in certain micro-liquidity pressure in the a-share stage, making the market volatile.

pay attention to the release of incremental policies in the fourth quarter

a-share valuations are expected to improve

china fund news: after the recent shocks and differentiation, is the current market at the bottom of the high cost-performance range? looking ahead to the fourth quarter of 2024, how will the a-share market perform? what factors will become the driving force for the market to stop falling?

chen guo:at present, the net asset value ratio of the a-share market exceeds 16%, the highest level since 2005. from the perspective of valuation and risk premium, the hong kong stock market is extremely cost-effective, and the a-share market also has a high cost-effectiveness, but an important condition for valuation support is that profit growth turns from negative to positive. if the subsequent combination of monetary, fiscal and real estate policies can be implemented, the market has the foundation to stop falling and rebound.

wang yi:data from various dimensions of the current market show that there are more signals that a-shares are approaching support levels, and the price-performance ratio has reached a relatively high level: first, the august social financing and inflation data show that the endogenous demand of the real sector still needs to be repaired, but investors are not sensitive to this negative information, indicating that the market may have reached the bottom range; secondly, the degree of compensatory decline of strong assets (dividend industries) may also be one of the observation indicators of the market bottom. at present, the clearing of floating funds may be nearing the end, and the price-performance ratio of stocks and bonds has fallen back to the bottom level of last year, which may indicate that the price-performance ratio of dividend asset investment has rebounded; in addition, the pressure of margin liquidation may be nearing the end, and the valuation differentiation coefficient has also fallen back to the level of 2018, but from the perspective of the bottom characteristics of the capital side, the net increase in industrial capital holdings in the past month has not turned positive, and it may still be slightly lacking compared with the previous bottom construction. looking forward, the current index bottom position is relatively solid, and the spatial bottom has been initially established, but the time bottom still needs to pay attention to the new variable of incremental policy release.

yang chao:at present, the valuation of core assets in the a-share market is at a historically low level. from a long-term perspective, it has a very high allocation value. looking ahead to the fourth quarter, as the federal reserve begins to cut interest rates, the rate cuts in overseas economies will further increase, which will be conducive to improving liquidity in the a-share market. china's monetary policy easing space will be further opened up, and more measures to promote economic growth are expected to be introduced. therefore, with the improvement of liquidity expectations and earnings expectations, market sentiment is expected to gradually recover, a-share valuations are expected to increase, and the market index will rebound.

wu kaida:according to our statistics, during the period of 2012-2014, the erp value exceeded 1 standard deviation many times, but soon recovered to below 1 standard deviation. the longest recovery time was 76 days, the shortest was only 10 days, and the average recovery time was 36 days. at the same time, we found that the 1-month, 3-month, 6-month, and 12-month yields of the all a index after the extreme erp values ​​over the years have all performed well. the current erp of wind all a is at a historically high level. as of august 30, 2024, the erp of wind all a is at 4.34%, which has rebounded compared to the erp level in july and is 3.38% higher than one standard deviation.

yan xiang:from the perspective of valuation, as of september 20, the current market valuation is at an extremely low level in history, at the bottom of the high cost-performance ratio. looking ahead to the fourth quarter, the current positive factors in the a-share market are constantly accumulating, and we can be more optimistic in the future: first, with the shock recovery of the year-on-year growth rate of ppi, the suppression of price factors on corporate profits will gradually weaken, and the profits of a-share listed companies are expected to bottom out and rebound; second, the market valuation is at a historical low, and the investment value is prominent; at the same time, the continued decline in macro interest rates and the easing of liquidity are expected to catalyze the denominator of the a-share market.

li meicen:looking ahead to the fourth quarter, a-shares are expected to turn from bad to good. the current economic expectations are at a relatively low level, the overall monetary policy is relatively loose, and the asset cost performance is high. if the overseas economy rebounds again in the fourth quarter, driving china's exports to rebound, and the domestic policy effects are realized, the recovery of domestic and foreign demand is expected to become the core driving force for market changes.

focus on dividends, central state-owned enterprises, overseas expansion and other sectors

china fund news: the overall market style will switch quickly in 2024. which styles and sectors do you think will perform better in the fourth quarter? which industrial fields and sub-sectors are expected to develop independent trends?

wang yi:there are four high-winning clues that can be grasped in the fourth quarter: first, the ah premium is converging, and the allocation of hong kong stocks can be increased; second, the a50 with stable roe and dividends and low valuations, and insurance with relatively good fundamentals and chips; third, industries with two-way improvement in supply and demand, such as general automation, ships, communication equipment, inverters, packaging and printing, papermaking, etc.; fourth, as expectations of interest rate cuts rise, the pharmaceutical and hong kong-listed internet companies will benefit greatly from the interest rate cut.

wu kaida:wait for the volatility to increase after the ground volume, grasp the big volatility in the consumption stage, and pay attention to hang seng internet. first, the a-share market since august shows the market's high sensitivity to domestic demand policy expectations. second, in the second half of this year, in the possible repeated overseas recession transactions + us election transactions, the domestic demand consumption sector may have an advantage over the overseas chain. in the long run, there may be two types of conditions for high dividend excess reversal: one is that the central axis of long-term treasury bond interest rates no longer declines, and the other is that the dividend rate of the high dividend sector is further hindered. long-term style switching requires patience to wait for more right-side signals, and high-dividend assets with monopoly and scarcity are expected to be revalued.

yang chao:in terms of sectors, first, we continue to be optimistic about the dividend sector with strong risk aversion properties. before the trend of macroeconomic data improves and before the results of the us election are released, investors' risk appetite is expected to remain low overall, so they will continue to invest in high-dividend dividend stocks. second, we are optimistic about state-owned enterprise reform concept stocks and merger and acquisition concept stocks. this year, the merger and acquisition process of listed companies has accelerated, and there are particularly many investment opportunities in mergers and acquisitions in the financial and technology fields. third, we are optimistic about the overseas sector with higher performance growth.

li meicen:with the implementation of the us interest rate cut, the overall market is expected to rebound. in this process, you can follow the logic of buying interest rate cuts first, and growth performance, such as gold, us bonds, and global equities, are all investment opportunities; then look at the logic of recovery, and the direction of economic recovery, such as copper and aluminum, oil chains, engineering machinery, oil and shipping, etc., are all good performance opportunities.

from the perspective of sub-sectors, dividends are weak but growth is strong. for growth sub-sectors, we can focus on the three logics of macro-friendliness, capital switching, and performance implementation. for performance, we can focus on ai computing power and consumer electronics. at the mid-term report level, the profits of electronic components, optical optoelectronics, etc. continue to improve. for valuation elasticity, we can focus on low-altitude economy, robots, and scientific and technological semiconductor sectors, which are strong themes in the past two years.

yan xiang:at the style level, the current dividend strategy still has allocation value, and low valuation + stable earnings are the long-term effective sources of the dividend strategy. in recent years, my country's long-term interest rates have continued to decline and have now fallen to a historical low. looking forward, the monetary policy is likely to remain loose, and interest rates may remain low or even continue to decline. the "interest-bearing" value of dividend assets with low valuations and high dividends is highlighted, and the dividend strategy still has allocation value.

at the sector level, the technology growth sector represented by tmt is also worthy of special attention. from an industrial perspective, ai is gaining momentum globally. ai still has broad development space and is expected to become another major industrial revolution after new energy. from a cyclical perspective, the semiconductor cycle is still in its rising stage. from a policy perspective, developing new quality productivity is the top priority.

chen guo:after the fed enters the interest rate cut cycle, if it cooperates with the policy of expanding domestic demand and earnings expectations stabilize, the market style will gradually shift from defensive style to offensive style. the internet, military industry, non-bank financial industry, automobiles, home appliances, etc. are worth paying attention to.

the fed's rate cut is positive for the us dollar, gold and a-shares

china fund news: the fed has recently cut interest rates. which asset class do you think will perform better? what investment opportunities will the a-share market have?

chen guo:the fed's interest rate cut cycle marks the u.s. economy turning from strong to weak, and the u.s. real interest rate will further decline. the subsequent demand for fiscal deficits is still there. from the perspective of major asset classes, gold and digital currencies will benefit. from the perspective of the chinese stock market, hong kong stocks will benefit more directly and obviously. since the fed's interest rate cut is conducive to the opening of china's policy space, it is also good for the a-share market, especially the expansion of domestic demand transactions is expected to start.

wang yi:a review of previous rounds of preventive rate cuts shows that gold and bonds (except japanese bonds) have a higher winning rate in preventive rate cuts, equity has high elasticity, emerging markets have performed well, and the relative resilience of the fundamentals of the united states also supports the us dollar. focusing on the a-share market, considering the triple impact of the fed's rate cut on the fundamentals, discount rate and funding of a-shares, we believe that the intersection may be in the pharmaceutical sector.

yang chao:after the fed started the interest rate cut cycle, the pressure on the depreciation of the rmb was reduced, and the space for china's monetary policy easing was opened up. the monetary policy environment became more relaxed, which promoted valuation repair on the one hand, and stimulated economic growth to drive the improvement of a-share performance on the other hand. at present, the trend of my country's economic growth rate recovery and rising inflation level is not obvious. in the short term, a-shares may continue to fluctuate as a whole. after the policy stimulus effect is apparent, a-shares will have more upward momentum. in addition, the fed's interest rate cut can promote the return of foreign capital to china, and consumer stocks and financial stocks preferred by foreign capital are expected to be increased, especially consumer stocks that are oversold in the first three quarters of 2024.

li meicen:in the short term, we are optimistic about growth rebound and gold. in the medium term, we will observe which path the global economy will take, a soft or hard landing. the fed meeting cut interest rates by 50bp, and asset prices may rise across the board in the short term, with greater elasticity in growth and gold expectations. in the future, we will mainly look at the specific direction of developed economies around the world, represented by the united states: 1) if it is a soft landing, it is recommended to allocate in the direction of economic recovery, i.e. copper, aluminum, oil, home appliances, construction machinery, and the us real estate chain; 2) if it is a hard landing, it is recommended to buy various types of debt assets in a defensive posture, and pay attention to gold, us bonds, treasury bonds, and low-valuation high-dividend assets. at the same time, the strengthening of the rmb exchange rate brought about by the us interest rate cut is also expected to drive rmb assets to actively obtain opportunities for increased allocation in this process.

yan xiang:for global assets, in terms of u.s. assets, the fed's rate cut is usually good news for u.s. treasuries, but the rate cut is usually "priced in" before it is implemented, which means that the short-term u.s. treasury bond interest rate may continue to decline or be limited. for u.s. stocks, from historical experience, as long as there is no major economic recession, the fed's rate cut is usually good for u.s. stocks; in terms of global equity assets, after the fed's rate cut, driven by the tide of the u.s. dollar, the risk appetite and valuation of equity assets are expected to increase. for non-u.s. currencies, the fed's rate cut means that the interest rate gap between non-u.s. and u.s. funds is expected to narrow, and the depreciation pressure of non-u.s. currencies is expected to be significantly alleviated.

for a-shares, after the federal reserve started the interest rate cut cycle, on the one hand, the pressure on the depreciation of the rmb exchange rate has significantly eased, opening up space for domestic monetary policy easing. on the other hand, domestic market risk appetite is expected to be boosted, and the pressure of continued outflow of foreign capital is expected to improve marginally.

uncertainties such as the us election and geopolitics still need attention

china fund news: looking back at the first three quarters of 2024, have the uncertainties that disturbed the market faded? what other risk factors need investors' attention in the future?

wang yi:looking back at the first three quarters, the uncertainties that disturbed the market have faded, such as the start of the overseas interest rate cut cycle and the pressure of margin liquidation approaching the end. looking forward, we believe that the market still has three medium-term constraints: ① credit cycle → the profit cycle has yet to bottom out and rebound, the export chain is differentiated, and final consumption is not strong, or the g-end fiscal expansion may be needed to break the deadlock; ② domestic actual interest rates are high, and it may be necessary to wait for the fed to open the interest rate cut window before the domestic focus on monetary expansion; ③ high prosperity is scarce → the overall wait-and-see sentiment of funds is strong, and some funds are reduced in volume.

chen guo:the market is still affected by the real estate cycle, capacity cycle and dollar cycle. the dollar cycle has clearly reversed, the capacity cycle is still adjusting, and some industries will gradually move towards supply and demand balance. the real estate cycle is a longer cycle, and we need to wait patiently for its negative drag to gradually weaken. the chain reactions caused by this process, such as negative mortgage assets and default risks, are still worth paying attention to. other factors such as the us election and geopolitical uncertainties are still worth paying attention to.

wu kaida:policy expectations will gradually heat up in the fourth quarter of 2024, and we need to pay close attention to important meeting signals in the future. from the perspective of calendar effect, the winning rate and average monthly rise and fall in october and november during 2010-2023 performed well, while august and september performed weakly. september is often the month for brewing match points.

yang chao:first, in the first three quarters of 2024, due to the weak macroeconomic data, investors are more concerned about domestic policies. with the convening of the third plenary session of the 20th cpc central committee and the meeting of the political bureau of the cpc central committee in july, the policy direction and policy priorities have been basically determined, and the catalysis of policy expectations on the market will gradually emerge. second, in the first three quarters, the fed's monetary policy also had a great disturbance to the market. the market paid close attention to the timing and magnitude of the fed's interest rate cuts. after the fed's 50bp interest rate cut on september 18, the fed's policy will gradually reduce the disturbance to the a-share market, and investors may pay more attention to the pace of the fed's interest rate cuts in the future. third, the us election is currently underway, and the results of the us election and the us policy toward china are still facing extremely high uncertainty, which requires investors to pay close attention. fourth, pay attention to the impact of overseas capital markets on a-shares. changes in overseas capital markets mainly affect the trend of a-shares through capital flows and sentiment transmission.

li meicen:at present, with the continuous introduction of economic policies, equipment renewal, new quality productivity, consumption replacement, etc., the downward economic pressure that some investors are worried about is expected to be alleviated to a certain extent. at the same time, the united states has confirmed a decline of 50bp, the uncertainty of overseas liquidity is gradually being digested, and the external friendly window period has arrived. the positive changes in both internal and external aspects have reduced the uncertainty factors of market disturbances, domestic economic policies are constantly being introduced, and external demand is expected to pick up again. economic expectations at the end of the year and the beginning of the year may stabilize, and the market is expected to gradually pick up.

in terms of risk, the most important thing to pay attention to is whether the us economy successfully achieves a soft landing after the interest rate cut. if it achieves a hard landing, it means that the interest rate cut is too late and too small to reverse the us credit contraction. the subsequent single interest rate hike will surge, similar to 2000 and 2007. at this time, the global market will enter a defensive state, and it is recommended to buy low-risk assets such as bonds, gold, and high dividends.

yan xiang:in the first three quarters, market uncertainties have risen and fallen. the biggest internal uncertainty still lies in the strength of economic recovery and the extent of countercyclical policies, which still requires continued attention. the biggest overseas uncertainty before was when the fed’s interest rate cut cycle would begin. now it seems that the fed’s first interest rate cut has started, and the biggest uncertainty has marginally subsided, but uncertainties such as the us election and geopolitical conflicts have marginally increased.

looking ahead, the domestic economy may focus on marginal changes in fiscal and monetary policies. overseas, on the one hand, attention will be paid to the latest changes in trade barriers between europe and the united states. on the other hand, the us election may bring disturbances to the global market.