Hello friends, as we step into the weekend, we reflect on a week in which the A-share market displayed a notable upward trend, suggesting a warming of the profit-earning sentiment among investorsHere’s to hoping that the upcoming week brings fruitful returns and a bullish performance across all held positions!
Last week marked a historic occasion for the A-share market: the six major state-owned banks outshined the entirety of the ChiNext (the growth enterprise market in China) in market capitalization.
On August 27, the collective market capitalization of these six major banks soared to 8.79 trillion yuan, with five of them (excluding Postal Savings Bank) hitting historic highs in share priceIn stark contrast, the total market capitalization of the 1,349 stocks within the ChiNext amounted to only 8.68 trillion yuan that day.
Moreover, heavyweight stocks like the ‘three barrels of oil’—PetroChina, Sinopec, and CNOOC—as well as China Life Insurance and China Mobile all experienced substantial gainsThe only notable decline among the top ten market capitalizations was from Kweichow Moutai.
Since the start of August, these major banks have consistently achieved record highs in their stock pricesAnalysts suggest that the high dividend yields and stability of these banks are principal factors supporting this upward momentum.
Lin Yingqi, a banking industry analyst with CICC, pointed out that banks exhibit lower profitability volatility than non-financial sectors more reliant on cash flowWith a return on equity (ROE) hovering around 10%, these banks maintain a strong dividend yield of about 5%. This yield stands about 300 basis points above risk-free returns and is higher than traditional sectors known for robust dividends like power and transportation, while offering greater stability than industries such as coal.
However, beginning Wednesday, after reaching historic highs, the share prices of these six major banks started to retreat, marking two consecutive days of significant trading declines
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Following this adjustment in banking stocks, the three major indexes saw a rebound, with the last trading day of August (August 30) even trending on social media as noteworthyOn that day, the trading volume on the Shanghai and Shenzhen markets surged to 876.6 billion yuan, an increase of 269.4 billion yuan from the previous trading day.
When reviewing the overall market performance for the week, the three major indexes largely trended upwards, with only the Shanghai Composite Index dipping slightly by 0.43%. Sector-wise, motorcycles, power generation equipment, daily chemicals, and leisure goods recorded the most significant gains, each surpassing a 10% increaseIn contrast, sectors such as water utility, banking, and land transportation experienced sizable declinesThese movements suggest the iota of a market bottoming out.
Observing market styles, small-cap stocks outperformed large-cap counterparts, a contrast reflecting a trend where "the larger it is, the more it falls." The Shanghai 50 index and the CSI 300 witnessed declines of 0.86% and 0.17% respectively, while the CSI 2000 surged by 3.26%, and the CSI 500 closely followed in performanceGrowth sectors clearly outshone value sectors, with the ChiNext and Sci-Tech 50 rising by 2.17% and 1.22%, significantly outperforming the value-oriented Shanghai 50 and CSI 300.
From the perspective of primary industry segments, within the week, 25 of the first-tier sectors demonstrated increases, showcasing a remarkable money-making effectIn terms of capital inflows, 26 sectors recorded net inflows of 65.275 billion yuan over the week, demonstrating that as the stock market shows signs of stabilization, funds are eagerly entering the marketNotably, electronics saw net inflows of 19.091 billion yuan, while power equipment attracted 10.779 billion yuan; conversely, the banking sector recorded a net outflow of 7.203 billion yuan.
In the fund market, indices from various major funds showed positive performance, largely influenced by the rebound in the capital market
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While overseas markets gained overall, QDII funds suffered due to the rapid appreciation of the yuanCurrency-based funds saw growth, while bond funds experienced a decline, particularly long-term bonds due to increased volatility, whereas short-term bonds performed betterSince deep market indices outperformed their upper market counterparts, indices such as the Shenzhen Composite and the CSI index also finished strong.
Looking ahead, the initially strong segments of the A-share market underwent corrections, revealing potential signs of a market bottomSectors associated with dividends—including banking, precious metals, and transportation—saw declines, though trading volumes in both markets showed considerable increase, indicating that a growing number of stocks witnessed more rises than fallsThese signs reflect a renewed risk appetite among investors, especially as the key funds previously concentrated in heavyweight stocks begin to disperse.
According to Wind data, as of August 31, the half-year report disclosure for listed companies in the A-share market has been virtually completedThis year's mid-year reports saw over 670 companies unveiling mid-term cash dividend plans or proposals, summing to nearly 530 billion yuan in total dividendsThis year marks a pivotal increase, surpassing the sums from the previous three years.
In a recent meeting held in Beijing, Wu Qing interacted with representatives from ten leading institutional investors, including those from the National Social Security Fund and private equityDiscussions emphasized the importance of guiding listed companies to enhance their dividend and buyback initiatives, and encouraged the integration of mergers and acquisitions and equity incentives to bolster investment value.
Xingye Securities forecasts that with the backing of policy adjustments, dividend-bearing stocks may witness a long-term reshaping of their valuations, heralding a potential dividend era in both the A-share and Hong Kong markets.
According to Changcheng Securities' research, the rise in dividend stability, yields, and payout ratios across the A-shares will gradually enhance their appeal among long-term capital
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Future dividend plans are likely to support the stability and ratios of dividends, which may serve to bolster the valuation levels of A-shares as more companies announce shareholder return plans over the next three years.
Xingtu Financial Institute anticipates that with the conclusion of the mid-report season in China and the Fed's expected interest rate cuts, the oncoming uptick in the yuan, which recently crossed the 7.1 threshold, may lead to an influx of overseas capital.
They also believe that the bullishness of A-shares is on the rise, showing initial bottoming signs that can inspire some moderate optimismAdjusting investment portfolios to favor small-cap and growth styles appears to be appropriateHowever, given the current sensitivity of market sentiment, the possibility of one final downturn remains, hence careful position management is advisedPrioritize stability over risk, gradually entering the market when a consistent upward trend is observed.
According to Guotai Junan Securities, the downward potential for A-shares seems limited, with an upward progression from the bottom anticipatedDespite a prevailing weak operational trend and valuations at relatively low historical levels, suggesting a decent cost-performance ratio, concerns about extreme risk factors typically accompany weak market phasesAt present, the risk factors appear comparatively subdued, indicating limited future downside potentialA boost from proactive policies and marginal improvements in the fundamentals may stabilize and invigorate the marketInvestors should focus on high dividend stocks.
In market news, data from the China Passenger Car Association indicates that the narrow passenger vehicle retail market saw approximately 1.84 million units sold in August, reflecting a year-on-year decline of 4.4% but a month-on-month increase of 7.0%. The retail sales of new energy vehicles are on track to reach about 980,000, indicating a year-on-year growth of 36.6% and a month-on-month increase of 11.6%, with an anticipated penetration rate of 53.2%.
Further, the Ministry of Industry and Information Technology reported on August 30 that from January to July, the output value of the electronic information manufacturing industry grew by 13.4% year-on-year, outpacing overall industrial and high-tech manufacturing growth rates
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