This week is a super heavy data week. After the market closes today, the central bank will announce the financial data for May, tomorrow the US will announce the CPI data for May, on Thursday the Federal Reserve will hold its June interest rate meeting and the Bureau of Statistics will announce the economic data for May. It is expected that this week will not be dull. Today, the A-share market opened low and dived, with the large financial sector falling sharply and dragging down the index performance. In the afternoon, the A50 suddenly soared, and sectors such as baijiu saw a surge, leading to a rebound in A-shares and Hong Kong stocks, with a slight dive at the end of the day. Specifically, today's heavy news includes:
Public funds reduce management fees
The most intense development over the weekend was the adjustment of management fees for public funds. According to media reports, regulatory authorities are brewing a reduction in fixed management fees for public funds. The latest reduction plan may be introduced within a month, and some fund company executives have also confirmed the authenticity of this information, stating that the fee reduction will adopt a "new and old cut-off" measure.
The so-called "new and old cut-off" means that the management fee rate for existing public funds remains unchanged, while the management fee rate for newly issued funds is reduced. This is bearish for securities firms that rely on wealth management business, such as Oriental Wealth and Oriental Securities. In addition, the banking and securities industries are also facing interest rate spread pressure and salary reduction pressure, with increasing business pressure. Today, the banking and securities sectors fell sharply at the opening.
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The yield on the ten-year Chinese government bond fell below 2.7%
Due to the further confirmation of the weak economy by the export data and PPI data announced last week for May, with consumption, investment, and exports all coming to a halt, the market's expectation for further policy stimulus is increasing. Moreover, the central bank governor Yi Gang mentioned at a research symposium that "strengthen counter-cyclical adjustment and fully support the real economy". The monetary policy report for the first quarter mentioned cross-cycle and counter-cyclical adjustments, and now it has become counter-cyclical adjustment, which means that the monetary policy will be intensified.
Due to market expectations that the central bank may cut interest rates this week, the yield on China's ten-year government bonds fell sharply last Friday, with government bond futures strengthening. Today, in the morning, the yield on China's ten-year government bonds fell below 2.7% for the year. This has led to a further expansion of the US-China interest rate differential, and the depreciation pressure on the yuan will also increase. In the morning, the offshore yuan exchange rate fell nearly 200 points, breaking through 7.15 to set a new low.
Tesla refutes rumors
During the trading day, it was rumored that Shanghai, China, will be the first pilot city for Tesla's full version of FSD. Stimulated by this news, the auto and intelligent driving-related sectors surged, with Sanhua Smart Control, Desay Westward, and Wenchan Shares hitting the daily limit. However, Tesla later refuted the rumors.Wind Power Sector Plunges
Last Friday, a tender for an 800MW offshore wind farm and submarine cables was launched in Dafeng, Jiangsu, including 220kV export cables and 35kV infield cables. The tender documents stipulated that the first batch of 35kV submarine cables should be delivered before September 15, 2023, and the first batch of 220kV submarine cables should be delivered before August 31, 2023. This news spurred a significant rise in the wind power sector on Friday.
However, over the weekend, the tender was suspended, and additionally, Orient Cable announced a share reduction, leading to a double negative impact. As a result, Orient Cable experienced a heavy trading volume and a limit-down today, with companies like Dajin Heavy Industry and Haili Wind Power also following suit with declines.
As of the market close, the Shanghai Composite Index fell slightly by 0.08%, while the ChiNext Index rose by 0.44%. The total turnover of the two markets slightly shrank to 0.96 trillion, with net sales of nearly 3 billion by Northbound capital.
Looking at the industry breakdown, sectors such as automobiles, home appliances, food and beverages, light manufacturing, and beauty and personal care led the gains, while public utilities, banking, construction and decoration, non-bank financials, and defense and military industries led the declines. In the first-level automobile industry of Shenwan, 22 stocks hit the daily limit up today, mainly concentrated in auto parts. On one hand, this is due to the stimulus from Tesla's intelligent driving, with Tesla's stock price doubling this year and the Tesla industry chain having an expected difference. On the other hand, current policies favor new energy vehicles, which may lead the industry to trade off price for volume, benefiting auto parts.
Since May, a series of economic data have fallen short of expectations, leading to a plummet in market expectations for domestic economic recovery, with market sentiment once being very pessimistic. Industries such as consumer goods, real estate chains, and new energy vehicles have experienced consecutive declines, setting new lows.Firstly, the pessimistic expectations themselves have room for correction. The current economy is not as gloomy as the market previously thought. The bond market and commodity markets have stabilized, and the economy can slowly recover solely through its internal momentum, with the CPI and PPI expected to bottom out in the third quarter. The market bottom generally precedes the economic bottom, and time is on the side of recovery. The longer it is delayed, the greater the possibility of recovery. At worst, we can wait for the resonance of the inventory cycles between China and the United States.
Secondly, consumption, investment, and exports all stalled in May, enhancing the expectation of policy to stabilize growth, which also provides room for speculation.
Undoubtedly, the main theme of the A-share market is still AI, but we have observed that consumption, the real estate chain, and even new energy have emerged or are in the process of forming a bottom structure. We believe this is more about expectation repair or a rebound from oversold conditions based on long-term odds. The current style of the A-share market still favors technology, growth, and themes, and for consumption and the real estate chain to turn around, it implies a shift in market style, which we have not yet seen in macro turning point events.
In the short term, we maintain the view of the AI main line, with rotation and rebound in low-position sectors such as consumption, real estate chain, and new energy. However, as we mentioned above, time is on the side of recovery. There is no market that only rises without falling, nor one that only falls without rising. The longer the AI hype lasts, the greater the likelihood of a reckoning. The longer the recovery line remains in a slump, the greater the possibility of a reversal. The further we go, the more attention we need to pay to style shifts.