How long will it take from policy bottom to market bottom?, A-shares rise and fall
Stimulated by favorable policy combinations such as the reduction of stamp duty, the A-share market opened high on August 28th, with the three major indexes rising more than 5% at the beginning of trading. At one point, more than 100 stocks rose by the limit or even more than 10%. In terms of sectors, the securities sector, known as the "flag bearer of the bull market," also opened 10% higher. However, this "boom" has not been sustained. As of the close, the gains of the Shanghai Composite Index, Shenzhen Component Index, and ChiNext Index have all shrunk to around 1%.
Under the protection of policies, the A-share market has been trading hot, with the total trading volume of the Shanghai and Shenzhen stock markets approaching 1.13 trillion yuan, an increase of 360.3 billion yuan compared to the previous trading day. Among them, the transaction volume of the securities sector rapidly increased, with a total transaction volume of 125.7 billion yuan. The theme ETFs of securities firms rose together, with some products having a daily transaction volume exceeding 3 billion yuan. However, this scene did not retain the northbound funds that had fled, with a net outflow of 8.247 billion yuan in a single day.
On August 28th, "A-shares" once again made it onto the hot search list. Can the market truly experience a reversal under the influence of previous low sentiment? Undoubtedly, it is a topic of widespread concern for investors. Interviewees generally believe that positive policies are expected to boost market trading activity and participant confidence, but there is often a certain time lag. In the long run, A-shares are expected to remain stable, improve, and climb up, which may be more promising.
A-shares rise and fall
Boosted by multiple positive factors such as the halving of stamp duty last Sunday, the A-share market opened high on August 28th, with the three major indexes rising more than 5% at the beginning of trading. At one point, more than 100 stocks rose by the limit or even more than 10%. Subsequently, the Shanghai Composite Index surged 3200 points, approaching the May line, but quickly fell afterwards. The 3100 point gained and lost again, closing at 3098.64 points, with the increase narrowing to 1.13%; The Shenzhen Component Index rose 1.01% to 10233.15 points; The ChiNext Index rose 0.96% to 2060.04 points.
In terms of sectors, among the 31 Shenwan level industries, except for food and beverage, which fell slightly by 0.33%, all other sectors have shown signs of prosperity, with real estate, coal, and non bank financial sectors leading the way, rising by 4.38%, 3.07%, and 2.35% respectively. The securities sector, known as the "flag bearer of a bull market," opened 10.85% higher at the opening, with over 40 securities firms opening at the limit up price.
However, as the gains of the three major stock indices narrowed, the securities sector also continued to decline. As of the close, most individual stocks in the securities sector have shown an upward trend, with an average increase of 2.77%; Among them, Jinlong Group and Huaxin Group rose to the limit, while Tianfeng Securities, Pacific Securities, Harbin Investment Group, and Xiangcai Group all saw closing gains of over 4%.
From a funding perspective, the securities sector is active in daily trading and the transaction volume is rapidly increasing. The data shows that on August 28th, the total transaction volume of the securities sector was 125.7 billion yuan; On July 24th, the daily transaction volume of the securities sector was less than 9 billion yuan, expanding more than tenfold.
Overall, individual stocks in both markets showed more gains than losses. The data shows that a total of 3627 stocks in the market rose, 1509 stocks fell, and 129 stocks remained flat. Among them, 37 companies have hit the limit up. At the same time, the market transaction volume has significantly increased, with a total transaction volume of 1126.6 billion yuan between the two markets.
At the same time, northbound funds continued their previous trend of fleeing and accelerated their exit in the afternoon, selling a net of 8.247 billion yuan throughout the day; Among them, Shanghai Stock Connect sold a net of 4.283 billion yuan, and Shenzhen Stock Connect sold a net of 3.965 billion yuan. So far, the total net sales of northbound funds since August have exceeded 80 billion yuan.
Similar scenarios also occur in ETFs related to securities firms. The securities firm's ETF opened with a rise of over 10%, and the transaction volume has exceeded 1.6 billion yuan in just half an hour, making trading very active. According to statistics from First Financial, there are a total of 18 ETF products with "securities" in their tracking index names, all of which achieved an increase on August 28th, with an average increase of over 2.6%,
Among them, Huafu CSI Securities Pioneer Strategy ETF saw the highest increase, with a daily increase of 4.08%; The daily growth rate of products such as Guolian An CSI All Index Securities Company ETF, E Fund Da CSI All Index Securities Company ETF, Jianxin CSI All Index Securities Company ETF, and Huian SSE Securities ETF all exceeded 3%.
From on-site feedback, it can be seen that securities related theme ETFs continue to receive funding attention. For example, the single day transaction volume of Cathay Pacific CSI All Index Securities ETF, Huabao CSI All Index Securities ETF, and E Fund China Securities Hong Kong Securities Investment Theme ETF ranked first, with RMB 4.564 billion, RMB 3.171 billion, and RMB 2.82 billion, respectively. The turnover rate of ETFs of Yinhua CSI All Index Securities Company is the highest, exceeding 38%.
Confirmation of Policy Bottom
Since July 24th, various departments have successively introduced a package of policies aimed at revitalizing the capital market and boosting investor confidence. The continuous call for a reduction in stamp duty also came to fruition on August 28th. At the same time, the China Securities Regulatory Commission has also issued multiple new regulatory regulations, including further regulating the reduction of shares, gradually tightening the pace of IPOs, and reducing the minimum margin ratio for investors to purchase securities from 100% to 80%.
"This series of policies has improved market trading activity on the margins. At the same time, regulatory authorities are also widely soliciting opinions from active capital markets, and the sustainability of the policies may gradually be confirmed," said a fund industry insider in East China in an interview with First Financial.
"Lowering the stamp duty rate will have an extremely significant effect on revitalizing the capital market in the short term." Li Zhan, Chief Economist of China Merchants Fund Research Department, told First Financial that the stamp duty rate reduction directly responds to the enthusiastic calls and major concerns of investors. The recent weak trend adjustment of the stock market, sluggish transactions, and sluggish market trading sentiment are the direct reasons for the introduction of the stamp duty rate reduction policy.
From historical experience, since the introduction of stamp duty in July 1990, China's securities trading stamp duty rate has undergone more than 10 adjustments, including 7 reductions in the comprehensive tax rate. It can be seen that the four reductions in stamp duty rates since 2000 have all boosted short-term market activity.
According to data from China Galaxy Securities Research Institute, these four adjustments were a reduction in tax rates of 4 ‰ to 2 ‰ on November 6, 2001, 2 ‰ to 1 ‰ on January 23, 2005, 3 ‰ to 1 ‰ on April 24, 2008, and a change in stamp duty from bilateral collection to unilateral collection in September of the same year. From the perspective of the market at that time, each adjustment to the stamp duty could drive up short-term trading sentiment, with the Shanghai Composite Index's trading volume rising by 71%, 98%, 114%, and 139% respectively during the week.
"A series of policies such as halving the stamp duty rate will effectively boost investors' risk appetite and help the market stabilize and rebound. The boosting effect of reducing the stamp duty rate on A-shares is worth looking forward to." Li Zhan's analysis pointed out that this is no exception, especially in the recent market downturn and the lower edge of the undervalued fluctuation range, reducing the stamp duty rate is expected to become an important and direct catalyst for market rebound.
"In addition to the expected stamp duty reduction in the market, the policies regarding reducing holdings and financing in this combination of funds have exceeded market expectations." Chen Xianshun, Chief Equity Strategy Analyst at Boshi Fund, told First Financial that this policy change directly points to the objective problems in the current market and will have a significant effect on improving the market investment environment and boosting investor risk preferences.
In the view of Huaxia Fund, the launch of this policy portfolio essentially confirms the policy bottom and sends a clear signal to boost market confidence in the bottom area of the market. In the short term, securities firms and financial IT will directly benefit from this round of policy catalysis.
"The official reduction of stamp duty, which the market is most concerned about, not only benefits investors, but also demonstrates the policy determination of subsequent capital market reforms." Feng Chencheng, a fund manager of ETF at a securities firm, told First Financial that the securities sector is a clear thematic investment opportunity this year. With the expected continuous implementation of practical policies, the securities sector is expected to continue to serve as a pioneer and platform building function.
How long will it take for the policy bottom to reach the market bottom?
On August 28th, "A-shares" once again made it onto the hot search list. What investors are generally concerned about is how far is the market bottom after the policy bottom is confirmed? Can we truly experience a reversal? Interviewees generally believe that positive policies are expected to boost market trading activity and participant confidence, but there is a certain time lag between the policy bottom and the market bottom.
"The intensive introduction of policies has led to a significant rebound in market sentiment, which is the main reason for the sharp opening of the market today." Morgan Stanley Fund related personnel told First Financial that the current policy is still the core variable affecting the market. The policy foundation is solid, and investor confidence is gradually recovering, which is expected to attract incremental funds and drive the market to stabilize and recover.
When it comes to stock market fluctuations, insiders from Yongying Fund stated in an interview that they are mainly due to various reasons. "The recovery of market confidence is difficult to achieve overnight, and some investors have a strong interest in profit taking. Incremental funds are still in a wait-and-see state. In his view, although there is a positive stimulus to reduce stamp duty, it has been nearly 15 years since the last stamp duty reduction. Currently, the expansion of A-shares is obvious, and the overall market rebound still requires more incremental funds to intervene.".
On the other hand, he also believes that the continued outflow of foreign investment, coupled with the weakening of the RMB exchange rate, has to some extent suppressed the rebound of A-shares. Overall, with the current market policy bottom basically established and a high probability of profit bottom forming, coupled with the possibility of slowing down foreign investment outflows, the future performance of A/H shares may be worth looking forward to.
"The market is showing a high opening and falling trend today, and in the short term, the reduction of stamp duty is expected to create a certain emotional boost for the capital market." In the view of a public fund investment researcher in East China, the sustainability of this boosting effect may be relatively limited in the medium to long term, and the market's medium to long term trend will still be highly related to the pace of fundamental recovery and the sustained recovery of sentiment.
The research report of Huaxi Securities also pointed out that the market often rebounds after the confirmation of the "policy bottom", but the construction of the market bottom is often not achieved overnight. The improvement of market expectations for economic fundamentals and the recovery of investor confidence in the capital market are the main driving forces for the market to break out of the bottom.
"Positive policies may not immediately lead to an improvement in economic growth, and there is often a certain time lag, which we must patiently wait for." Sun Zhiyuan, General Manager of Asset Allocation Department of Huashang Fund, told First Financial that the overly pessimistic sentiment may be able to be repaired in the short term, but the central point of the upward path still needs to be gradually effective with various policies.
