In the article over the weekend, we mentioned three major pieces of news:
Although the U.S. June ADP employment data significantly exceeded expectations last week, the non-farm employment data fell short, leading to a moderation in market expectations for a Fed rate hike. This caused a significant drop in the U.S. dollar index, which eased the depreciation pressure on the Chinese yuan.
According to a report by Caixin, on Friday evening, the financial regulatory authorities imposed fines (including the confiscation of illegal gains) totaling 7.123 billion yuan on Ant Group and its subsidiaries. The financial regulatory authorities announced that they have successfully completed the rectification of financial services for platform companies, shifting the focus to regular supervision. Ant Group has also completed its rectification and entered a new stage of development.
Additionally, there has been a reduction in fees for public mutual funds. This has a limited impact on the A-share market in the short term, but in the long run, it can attract more institutional capital and household wealth to enter the market through funds, which is beneficial for a sustained bull market in A-shares.
We also studied the CMF macroeconomic forum over the weekend. There is a consensus on the lack of effective demand in society and the need for interest rate cuts to stimulate the economy. The disagreement lies in the degree of stimulus. It has been almost a month since the State Council proposed "to study and propose a batch of policy measures" on June 16th, but there has been no particularly significant policy introduced. It may have to wait until the end of the month for a major conference. The market has certain expectations for policy, but there is no anticipation for a significant easing of monetary policy, as various management speeches have emphasized stability.
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Originally, due to the favorable news over the weekend, the A-shares opened high and surged, but after the release of the June CPI data, they plummeted, only rebounding at the end of the day. Specifically, according to data released by the National Bureau of Statistics, the June CPI remained unchanged year-on-year, with a month-on-month decline of 0.2%, and the PPI declined by 5.4% year-on-year, both below market expectations. The CPI was mainly dragged down by pork, and some institutions believe that the July CPI may show a negative growth.
As of the close, the Shanghai Composite Index rose by 0.22%, the ChiNext Index rose by 1.37%, the Hang Seng Index in Hong Kong rose by 0.62%, and the Hang Seng Technology Index rose by 1.13%. The turnover of the two markets shrank to 0.76 trillion, and the net purchase of Northbound funds was 1.23 billion.
Looking at the industry breakdown, the power equipment, commercial retail, media, basic chemical, and social service industries led the gains, while the communications, household appliances, automobiles, machinery equipment, and electronics industries led the declines.
Over the weekend, El Niño has once again become a hot topic. According to statistics, Beijing has already experienced its fifth day with temperatures above 40°C this year. Since June, there have been 19 days with temperatures of 35°C or higher in Beijing, the most since the station was established in 1951, a true "once-in-a-century" meteorological event. The World Meteorological Organization announced on July 4th that the tropical Pacific region has formed El Niño conditions for the first time in seven years, and it is expected that temperatures in most parts of the world will continue to rise. There is a high probability of record-breaking extreme high temperatures within the next five years, and governments around the world should be prepared to deal with related climate events.Influenced by this, the futures prices of soybeans, soybean oil, and soybean meal at the Chicago Mercantile Exchange have recently soared across the board. The U.S. soybean contract 2311 has set new high marks in stages this week, with a cumulative increase of over 20% since June, and domestic futures market soybean-related varieties have also risen significantly in tandem.
This morning, the power sector saw a significant increase, but some individual stocks have already risen a lot. Here, there was a case of good news being realized, but instead, it was the low-positioned photovoltaic and energy storage sectors that surged, with Longi Green Energy seeing a substantial increase of 8.52%.
On Friday, China Duty Free announced its performance express. In the first half of 2023, it achieved a total operating income of 35.858 billion yuan, a year-on-year increase of 29.68%, an operating profit of 4.947 billion yuan, a year-on-year decrease of 6.60%, and a net profit attributable to the shareholders of the listed company of 3.864 billion yuan, a year-on-year decrease of 1.87%. Today, China Duty Free opened high, once hit the daily limit, and closed with a significant increase of 7.20%.
Finally, regarding the outlook for A-shares, we believe that the current various pessimistic expectations have essentially been reflected in the stock prices. Regardless of valuation, risk premium, or indicators such as public fund issuance, A-shares are in a medium to long-term bottom range, with limited downside risk and high cost-effectiveness. However, in the short term, there is a lack of strong expectations and upward momentum, and the market continues to shrink in volume. Although it is a consensus that there is insufficient social demand and the need for policy stimulus, the market does not dare to expect strong stimulus.
Nevertheless, we believe that even without considering strong stimulus, the economy itself is expected to stabilize in the third quarter, which is the foundation for the bottoming of A-shares. If there is policy, it would be a pleasant surprise.
According to a report by Caixin, on the morning of July 10, Zheng Shanjie, the head of the National Development and Reform Commission, once again convened a symposium for communication and exchange with private enterprises, earnestly listening to the operational development of private enterprises, the difficulties and problems they face, and their relevant suggestions and opinions. Zheng Shanjie, the head of the National Development and Reform Commission, stated in a publication that there should be an increase in the income of urban and rural residents through multiple channels, stabilization of bulk consumption such as automobiles, and promotion of the rural deployment of new energy vehicles.