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since the introduction of the “9·24 new financial deal”, the a-share market has continued to gain popularity. after the rapid rise, how the market will change after the holiday is also one of the current focuses of the market.

recently, a reporter from brokerage china conducted an exclusive interview with chen guo, chief strategy officer of citic securities. chen guo believes that this round of performance of a-shares is a reversal rather than a rebound, and he continues to be optimistic about the mid-term trend of the market. however, he also pointed out that due to the rapid growth, the market may experience a technical correction at any time after the holiday.

in chen guo's view, the chinese stock market has entered a bull market of "confidence revaluation", but this market will also be divided into three stages. for ordinary investors, he gave "three do's" and "three don'ts" suggestions.

chen guo said that if a package of targeted solutions can be continued, asset pricing in china's stock market will be significantly revalued, especially in terms of fiscal policy. in this regard, he put forward many suggestions such as vigorous subsidies to support and encourage enterprises and residents.

continue to be optimistic about the market's medium-term trend

"first of all, we continue to be optimistic about the medium-term trend of the market. we believe that this round of market prices is due to policies facing difficulties and making every effort to revitalize the economy." chen guo told a reporter from the brokerage china.

chen guo said that factors affecting market performance can be mainly divided into profit expectations, liquidity and risk premiums. in his view, this market is a rare market that combines the three factors of upward revision of profit expectations, falling risk-free interest rates and rising risk appetite. chen guo believes that the performance of a shares this round is not a simple oversold rebound, but a reversal.

chen guo said that the policy combination since september 24 has had three impacts on the a-share market. the first is that the policy signal is clear and market risk appetite has improved first. secondly, in terms of liquidity, a-shares are expected to usher in a new batch of incremental funds.

"judging from the scale of the first phase of the securities, funds, insurance company swap facilities and stock buybacks, holdings, and re-loans created for the first time, it is expected to bring no more than 800 billion in incremental funds, but the specific implementation effect remains to be seen ( the quota may not be exhausted). based on the current funding situation of a-shares, if it can exceed 500 billion, it will be a major benefit and promote a sharp rebound in a-shares.” he also said that from a fundamental perspective, this round of favorable policies is expected to improve. stimulate household consumption and ease pressure on the real estate chain.

looking forward to the market outlook, chen guo's judgment is that "the bottom has been established, and the correction is an opportunity." in terms of industry configuration, he suggested focusing on four aspects:

the first is to benefit from the central bank’s support for the capital market: non-bank finance.

the second is those that benefited from interest rate cuts and real estate support policies and experienced larger declines in the early stage: real estate chain, steel, coal, etc.

the third is consumption that benefits from the reduction in existing mortgage interest rates: home appliances, cars, social services, etc.

the fourth category has seen a larger decline since late may and has benefited from increased market risk appetite: light industry, building materials, food, beauty, etc.

investors are advised to have “three do’s” and “three don’ts”

chen guo also said that the main contradiction in the market in the short term is the transaction dimension. due to the rapid growth of the market, the increase in trading volume also shows that selling has begun to rise, and the market may experience a technical correction at any time after the holiday.

drawing on the words of qing dynasty scholar wang guowei, he concluded that this round of "confidence revaluation bull" bull market will be divided into three stages: the first stage is often the easiest to make money in the bull market. even entering the stock market is like picking up money, which is basically exponential. with the general rise in the market, consensus on the expected level is quickly formed, but the first period often does not last long. chen guo said that overall, we are currently in the second half of the first period.

the second period is the market recurrence stage. generally speaking, the index will no longer rise rapidly, showing a tendency to fluctuate, which is also a stage where it is more difficult to make money. investors' performance will be divergent, and it is easier to have a wavering wait-and-see mood. the third period is the real successful stage of "confidence revaluation bull", when the economic difficulties of reversing deflation are completely overcome.

"there is no shortage of money-making opportunities in bull markets, but often after a bull market, only a few ordinary investors who participate in it end up making money." chen guo mentioned that for ordinary investors, three "don'ts" are recommended: don't be blind to chase the rise, don't buy indiscriminately and don't use leverage.

at the same time, chen guo also suggested "three things" for ordinary investors: use the remaining money to invest that will not affect daily life consumption. it is necessary to select high-quality companies within the circle of competence, consider target valuations, and strictly implement stop-profit and stop-loss operation records. if the circle of competence is insufficient, consider choosing index funds or products from outstanding fund managers in related fields.

if a package of measures is launched, a-share asset prices will be significantly revalued

the stock market is a barometer of the real economy, and the final key to china's stock market is medium- and long-term fundamentals. before the launch of the policy package on september 24, the market generally believed that the valuation level of a-shares was at a historically low level. chen guo pointed out that this core reflection is that its profit expectations are at historically low levels, which is related to the extrapolation of market trends. if the current environment of negative revenue and profit growth can be significantly improved, then from the perspective of pb (price-to-book ratio), the overall valuation of a-shares will be attractive.

as mentioned earlier, factors affecting market performance can be mainly divided into profit expectations, liquidity and risk premiums. in chen guo's view, the current factors affecting profit expectations include the intensity of fiscal policy at the macro level, the progress of the production capacity cycle and the occurrence of the innovation cycle at the meso level, etc. factors affecting liquidity include the u.s. dollar cycle and china's monetary policy's trade-off between exchange rate stability and achieving inflation targets. factors affecting risk premiums include whether the market's expectations for a balance sheet recession can be improved.

although the market is more concerned about the global financial market, especially the impact of external factors such as the federal reserve's interest rate cut in the second half of the year on a-shares. however, chen guo pointed out that from the perspective of core logic and historical experience, the fed's interest rate cut has a marginal improvement in the growth style of a-shares, but this is an indirect and secondary factor. the a-share style must first consider the profit advantage, then the valuation position, and finally the liquidity environment. the fed's interest rate cuts are just one factor affecting the liquidity environment.

"the difficulty in the current economy is the expectation of balance sheet deflation, and the balance sheet problem is a legacy of decades of development. but if we promote a targeted package of solutions, asset pricing in the chinese stock market will be significantly revalued. ." chen guo said.

it is recommended to vigorously subsidize and encourage enterprises and residential sectors

in fact, since the introduction of a package of favorable policies on september 24, whether incremental fiscal policies will add "fire" to a-shares has become the focus of discussion in the industry.

chen guo believes that to completely reverse the current deflationary expectations of social balance sheets, fiscal force is not a panacea, but it is absolutely impossible without fiscal force. he mentioned that if the fiscal force does not throw out a very large-scale plan at the beginning, it can also tell the society and the market that the total amount is not a problem. the key is to try it step by step to see whether the fiscal use is optimal. in the end, it will be it will be enough until deflation is reversed.

chen guo told reporters from brokerage china that around the world, monetary policy and fiscal policy have a considerable impact on the short- and medium-term performance of the stock market. currently, china's real interest rates are at historically and internationally high levels, and inflation is far from the target level. at the same time, businesses and residents have experienced factors such as the impact of the epidemic and falling housing prices, which also require significant fiscal efforts. this has a negative impact on corporate profits and future expectations are crucial.

"the market is very concerned about the intensity and use of finance, and expects to focus on vigorous subsidies to support and encourage enterprises and residents." he believes that the market expects to further relax controls on enterprises, reduce taxes and fees, provide various types of subsidy support, and further strengthen the stability of industry policies. we are also looking forward to the private economic law and related supporting measures to further boost the enthusiasm and confidence of entrepreneurs and further improve the business environment.

regarding the residential sector, in addition to stabilizing asset prices and property income, the market is also looking forward to more subsidy support on the income side. chen guo said that especially low- and middle-income people who have consumption needs but insufficient spending power are most in need of subsidies. at the same time, we can put forward a goal of increasing the fertility rate, actively provide maternity subsidies, focus on subsidizing families with multiple children, and improve society's expectations for population issues.

in terms of specific measures, chen guo gave various suggestions. this includes vigorously liberalizing and supporting the development of the service industry, issuing additional ultra-long-term special government bonds to subsidize low- and middle-income groups, subsidizing the capital costs of local state-owned enterprises' acquisition and storage, and strengthening guaranteed delivery; local household registration restrictions in first-tier cities are fully liberalized; and personal tax credits are provided to home buyers with loans. deduction; significantly extend the 70-year period of residential property rights or even modify it to permanent; provide a clear expected management of whether the real estate tax will be levied; speed up the establishment of equalization funds, increase the purchase funds and tax-free limits of personal pension funds, etc.