As of the close, the Shanghai Composite Index rose 0.5% to 3305.41 points; the Shenzhen Component Index rose 0.95% to 12137.76 points; the ChiNext Index rose 1.05% to 2575.09 points.
Since April 27, A-shares have ignored the turmoil in the external market and walked out of a wave of independent market. However, it is worth noting that on June 15, the major indexes all plunged before the close, and the market showed concerns about the outcome of the Fed’s meeting on interest rates.China Asset Management believes that the current market is in a favorable environment for post-epidemic economic recovery. With ample liquidity, risk appetite has continued to recover from historically low levels. Although the short-term overseas macro factors are still relatively unfavorable, the core elements of the A-share trend are still internal. The time is approaching July, and the market will shift from the general rise brought about by sentiment recovery to the structural differentiation led by the performance of the interim report. Operation and tactics should be appropriate. Be patient.
A shares out of the independent market
Recently, European and American stock markets have suffered continuous losses, especially the Nasdaq and S&P 500 fell into a technical bear market.
On June 10, the U.S. Department of Labor released data showing that in May, the U.S. consumer price index (CPI) rose 1.0% month-on-month and 8.6% year-on-year, higher than market expectations of 8.3%, a year-on-year increase of 40% since December 1981. year high. The data exceeded market expectations, triggering a sharp drop in U.S. stocks.
In contrast, the A-share market has reversed its trend since the market reached a staged bottom on April 27. As of the close of trading on June 15, the three major A-share indices, the Shanghai Composite Index, the Shenzhen Component Index, and the ChiNext Index, have already risen. Respectively reached 14.51%, 18.92% and 19.74%.
Data source: WIND
“Because the economic cycle and monetary policy of China and the United States are not synchronized, there is a seesaw effect in the capital market and global capital flow.” Zhao Yurui, chief investment adviser of GF Securities, said.
In Zhao Yurui’s view, the reasons for A-shares to go out of the independent market are firstly the “decoupling” of the economic environment, policies and capital markets between China and the United States; secondly, the implementation of domestic policies to stabilize growth and promote consumption has also boosted investors. Confidence, showing the characteristics of “I” dominated.
“We can clearly feel that most investors have gradually stepped out of the previous big drop thinking and began to enter the shock thinking after the big drop; of course, we still have to emphasize that, after all, there are still many uncontrollable internal and external factors, and now It is too early to say that the market has reversed, we need to wait for a clearer signal from the right, and it is not yet time to be fully radical.” Zhao Yurui further said.
Yang Delong, chief economist of Qianhai Open Source Fund, also believes that there are three main reasons for the recent A-share market to rise against the trend.
First, the financial cycle between China and the United States has been dislocated, and monetary policies have diverged, which has given a strong impetus to the trend of the A-share market. The U.S. inflation level has reached a 40-year high. The rapid transition from easing to tightening had to deal a heavy blow to U.S. economic growth and the stock market. However, my country’s inflation level is not high, and stable growth is an important policy goal. China’s monetary policy maintains a certain independence and adopts a relatively loose policy based on me. This is a monetary environment that supports the A-share market to move out of the independent market.
Second, the valuation of A-shares is at a historically low position, and it is also at a low position from a global perspective. The price-earnings ratio of the Shanghai Stock Exchange is less than 13 times, and the price-earnings ratio of the CSI 300 is less than 12 times, which is far lower than the Dow Jones Industrial Index and even lower than the Nasdaq Index. Therefore, the A-share market has become a valuation depression in the global capital market, attracting foreign capital inflows. .
The third is that A shares have fallen in place ahead of schedule. Affected by internal and external negative factors, the A-share market fell sharply in the first four months, the Shanghai Stock Exchange fell sharply at one point, and fell by 21% this year, and the ChiNext Index fell by 36%, releasing risks ahead of schedule.
China Asset Management believes that the current market is in a favorable environment for post-epidemic economic recovery. With ample liquidity, risk appetite has continued to recover from historically low levels. Although the short-term overseas macro factors are still relatively unfavorable, the record high inflation has raised the market’s expectations for the subsequent Fed tightening, and the external stock market may continue to be disturbed under the wide fluctuations. However, the core elements of the A-share trend are still internal. As the time approaches July, the market will shift from the general rally brought about by sentiment recovery to the structural differentiation led by the performance of the interim report. It is advisable to have some patience in operation and tactics.
Fed hikes rates by 75 basis points
At 2 a.m. Beijing time on June 16, the Federal Reserve announced that it would raise the target range of the policy rate, the federal funds rate, by 75 basis points, from 0.75% to 1% to 1.5% to 1.75%. This is the first time in 27 years that the Fed has raised interest rates by 75 basis points.
At the subsequent regular press conference, Fed Chairman Powell said that the inflation situation caused the Fed to raise interest rates by 75 basis points in June, which is not expected to become the norm, and denied that there will be multiple consecutive and large interest rate hikes.
As of the close, the Dow Jones index rose 1.00% to 30,668.53 points; the Nasdaq Composite rose 2.50% to 11,099.16 points; the S&P 500 rose 1.46% to 3,789.91 points.
CICC pointed out that the source of renewed turmoil in the global market lies in the inflation data in May, which was significantly higher than expected. Not only did it change the original expected decline path, but also the main sub-items basically strengthened in an all-round way. Prompting the Fed may need to lead the market to “believe” in a steeper path of rate hikes to achieve its policy objective of controlling inflation.
The move toward 3.5% on the U.S. 10-year Treasury note yield indicated growing concerns that the Fed could fall further behind the yield curve, according to the UBS Wealth Management Investment Director’s Office (CIO). That, in turn, would give the Fed less room to “declare victory” and ease rate hikes.
“Therefore, we believe that the risk of a recession triggered by the Federal Reserve has increased, and the possibility of a recession in the next six months has also risen. The latest economic forecast, one of the most important meetings in recent years, is crucial to the outlook for financial markets. Investors may need to adjust assumptions based on the Fed’s rate vote, and market volatility may be high in the coming days. In addition to preparing for liquidity, investors can also consider continuing to invest in value-based strategies, build a defensive layout, and diversify through alternative investments,” UBS Wealth Management Investment Director’s Office pointed out.
Bosera Fund pointed out that in the future, inflation expectations have risen again. It is expected that U.S. inflation will remain high in the third quarter and will fall in the fourth quarter, but the overall decline may be limited. The Fed’s pursuit of a balance between growth and inflation through moderate tightening has become increasingly unrealistic, and asset prices will be more volatile in the short term.
Bosera Fund said that the first-quarter performance of U.S. stocks, especially the weaker-than-expected guidance of some leading retail and technology companies, has triggered market concerns about the subsequent slowdown in growth, while tightening financial conditions and high inflation will also increase the pressure on growth.
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