Last week, the A-share market vividly demonstrated the extremes of ice and fire, with the ChiNext Index closing up 17.25% on October 8th, setting a new record for single-day gains. The sudden shock and consolidation obviously allowed investors who were "on a high" to gradually calm down. Let's review the "face-changing" process of A-shares last week:
On October 8th, the entire market rose, with high emotions;
On October 9th, chips led the gains, and most sectors underwent shock consolidation;
On October 10th, dividends surged, and the market continued to consolidate and adjust;
However, it would be hasty to easily conclude that the bull market has already come to an end. According to historical experience, bull markets are often phased: after the initial bottoming out with frantic repairs, the market will enter a shock and consolidation phase. After a brief period of strength accumulation, the market will choose the main line again and start the main rising wave. After three consecutive days of consolidation and adjustment last week, on October 14th, A-shares regained their upward momentum, with the market gains continuing to expand, and the ChiNext Index closed up 2.60% after fluctuating and rising.
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Fiscal policy sets a positive tone, and the A-share market is expected to rise
On Saturday morning (October 12th), the Ministry of Finance held a press conference, where it introduced the situation related to "increasing the counter-cyclical adjustment strength of fiscal policy and promoting high-quality economic development" and answered questions from reporters.
Galaxy Securities believes that although some of the policy directions mentioned at this meeting were "expected," the specific policy content and the official positive attitude mentioned were "beyond expectations." The tools involved in the relevant policies are over 5 trillion yuan, including a new round of debt restructuring, issuing special treasury bonds to supplement bank capital, and making up for the fiscal budget revenue and expenditure gap, with a focus on the time node at the end of October or early November. In addition, the meeting mentioned that the current central leverage ratio space is sufficient, and the overall deficit ratio and the issuance scale of long-term special treasury bonds for next year are expected to increase significantly. It can be expected that a new round of large-scale incremental policies are on the way.
It can be imagined that on the basis of accelerating the implementation of policies that have been determined, the Ministry of Finance will introduce a series of targeted incremental policy measures around stable growth, expanding domestic demand, and resolving risks in the near future. At the same time, other policy tools are also under study, and the central finance still has a larger debt space and deficit increase space.
Although A-shares, H-shares, and Chinese concept stocks have adjusted after the National Day holiday week, looking at the long term, short-term adjustments during the historical bear-bull transition are conducive to this round of bull market trends being more stable and far-reaching. From the perspective of winning rate catalysis, the positive attitude of the Saturday fiscal press conference will drive the further repair of long-term policies and prosperity expectations, and the consolidation trend may bottom out. When the policy end lands at the end of the month and the certainty of recovery is further clarified, the A-share market is expected to continue to rise.Looking at the overseas market, in September, the Federal Reserve cut interest rates by 50 basis points, bringing the federal benchmark interest rate down to 4.75%-5.0%, marking the start of a new round of easing. The appreciation of the Chinese yuan is expected to stimulate foreign capital inflows into Chinese assets, providing more room for the A-share market to rebound from oversold levels, with growth-style assets and other interest rate-sensitive assets likely to have opportunities for valuation repair.
In terms of allocation, technology growth sectors that align with the development requirements of new quality productive forces, such as electronics and semiconductors with improving prospects and high probabilities of performance reversal; the communication and computing power trends of the artificial intelligence industry; and sectors like batteries, photovoltaics, and innovative drugs that have experienced significant adjustments in the past two years and benefit from policy support, are worth paying attention to. The ChiNext Index holds 33.9% in power equipment, 16.2% in pharmaceuticals and biotechnology, 9.6% in electronics, and 9.2% in communications, allowing a single ETF to cover the mainstream tracks of new quality productive forces.
New quality productive forces are expected to become the new driving force for medium and long-term economic development. At the Ministry of Finance's press conference, it was clearly proposed to reasonably support the infrastructure construction of forward-looking and strategic emerging industries to promote the development of new quality productive forces. This year, the financial department has optimized tax and fee preferential policies, implemented structural tax cuts and fee reductions, and continued to implement policies such as additional deductions for R&D expenses before tax, additional deductions for value-added tax for advanced manufacturing enterprises, and tax exemptions for the transformation of scientific and technological achievements, improving tax preferential policies for technological transformation of manufacturing enterprises.
From January to August, the main policies supporting scientific and technological innovation and the development of the manufacturing industry have resulted in tax cuts, fee reductions, and tax refunds exceeding 1.8 trillion yuan. The Ministry of Finance will vigorously implement the "two new" policies. About 300 billion yuan of ultra-long-term special national debt funds have been arranged, starting from the end of August and the beginning of September, various localities have successively introduced specific operational methods, mainly to strengthen support for equipment updates in key areas, further enhance the ability of local consumer goods to be exchanged for the old, and effectively stimulate investment growth, release consumption potential, and promote industrial development. The Ministry of Finance has clearly proposed to reasonably support the infrastructure construction of forward-looking and strategic emerging industries, promoting the development of new quality productive forces, which is an important policy support direction for the rapidly developing technology industry.
At present, China's economy is at a critical point of switching between old and new drivers of growth, and new quality productive forces, characterized by the improvement of total factor productivity, are expected to become the new driving force for medium and long-term economic development. Strategic emerging industries represented by new energy, new materials, advanced manufacturing, and new generation information technology, and future industries represented by artificial intelligence, quantum computing, and low-altitude economy are worth paying attention to. They not only reflect the country's medium and long-term economic focus but also indicate huge investment opportunities.
As a synonym for "growth" in the A-share market, the ChiNext Index has a high proportion of new economy industries such as TMT, new energy, and pharmaceuticals. As of September 30, 2024, according to the first-level industries of Shenwan, the ChiNext Index has about 60% in emerging economy industries such as power equipment, pharmaceuticals and biotechnology, and electronics; according to the top ten weighted stocks, the top ten weighted stocks of the ChiNext Index are CATL, East Money, Mindray Medical, Sunshine Power, InnoLight Technology, Inovance Technology, Wens Foodstuffs Group, New Easy Sheng, Aier Eye Hospital, and EVE Energy, with the top ten weighted stocks accounting for more than 54%. In addition, the ChiNext implements a 20% fluctuation limit, and the characteristics of high growth and high elasticity are significant.
Starting from October 9, 2024, the annual management fee rate of Huaxia Fund's product ChiNext 100 ETF Huaxia (159957) will be reduced from 0.5% to 0.15%, and the annual custody fee rate will be reduced from 0.1% to 0.05%. After this reduction, the ChiNext 100 ETF Huaxia (159957) has been reduced to the lowest fee rate level of similar products in the entire market. This move is also to reduce the investment costs of investors, enhance the sense of income gain for investors, and thus better grasp the investment opportunities of the ChiNext.
Despite the rapid rise, the latest price-to-earnings ratio (PE-TTM) of the ChiNext Index is at the 15.69% percentile level of the past 10 years, lower than 85% of the time range in the past 10 years, and the valuation cost-performance advantage is highlighted. At present, the ChiNext 100 ETF Huaxia (159957) and its connected fund (Class A: 006248; Class C: 006249) have reduced fees and benefits, and investors may wish to take this opportunity to layout and grasp the low-position configuration interval.Please provide the text you would like me to translate into English.