I. The market experienced a significant decline on Friday, with the ChiNext 50 hitting new lows, and the Growth Enterprise Board marking a year-long low.
In terms of index direction, we have consistently highlighted the risks:
The continuous downward trend prompts the question: where is the bottom? Historically, January has seen subdued market performance, often followed by pre-Chinese New Year declines, creating room for potential spring rallies.
On a short-term horizon, the rate of decline is accelerating, and we may witness a short-term rebound early next week. However, caution is warranted, as this rebound is not to be confused with a full-scale reversal.
Northbound capital remained net buyers with an influx of 2 billion RMB, indicating that external factors are not solely to blame for the downturn. Ultimately, it is internal institutional rebalancing causing these fluctuations.
While the index plummeted for four consecutive days, banking stocks witnessed a four-day surge. During trading hours, Rui Feng Bank even hit its daily limit-up, with the banking, real estate services, and insurance sectors leading the way.
Coal stocks, including Lu'an Environmental Energy, approached historic highs, while Shaanxi Coal Industry neared its all-time high, and China Shenhua reached a 15.5-year high, briefly surpassing Ning Wang's market capitalization.
We've been continuously analyzing high dividend-yield stocks:
Other media outlets have also started to report on them, which might not be the best time to dive in again. Once the index stabilizes and rebounds, sectors like banking and insurance may not perform as well because of their high dividend characteristics and stabilizing effect.
How should we interpret the early-morning index surge?
The overnight surge in the solid-state battery concept stock, Quantumscape, caused it to skyrocket by over 54% during the trading session. This influenced other solid-state battery concept stocks to become active in early trading. The public, unaware of the specifics, saw this rebound in battery stocks and mistakenly thought the new energy sector had hit bottom, sparking a rush to buy.
II. Short-Term Consecutive Limit-Up Sentiment
Long Bai Shan (Northeast Tourism) with 4 consecutive limit-ups, Dalian Sainty with 3 consecutive limit-ups (Northeast Tourism), Rijiu Optoelectronics with 3 consecutive limit-ups (flexible screens + Huawei + automotive electronics + PET copper foil), and Si Jin Intelligent with 3 consecutive limit-ups (cold forging + integrated die-casting).
It has become commonplace for the leading stocks to hit the trading limit, while mid and lower-tier stocks are sold off. We have been consistently warning about the risks of chasing after limit-up stocks since Wednesday. Be patient and wait for a resonance between sentiment and the index.
III. Concept Sectors
1. Real Estate Sector: As discussed earlier, this sector, despite market turbulence, showed gains today.
The likelihood of continued declines in mortgage interest rates in the future may provide support to the real estate market. We anticipate a recovery in the real estate market in 2024.
2. HarmonyOS Concept:
We previously expressed doubts about its sustainability.
Today, this sector experienced a decline, primarily due to the overall market downturn, which has, to some extent, released accumulated risks. While Huawei concept stocks saw overall gains last year, they have struggled to reflect this in their financial performance. With current valuations at elevated levels, their risk-reward ratio is not favorable, and they might underperform the broader market.
3. Snow and Ice Tourism:
Without a specific catalyst in Harbin, investors turned their attention to Changbai Mountain and Dalian Sainty. Drawing parallels to last year's fervor around Zibo BBQ, it is unlikely that these speculative concepts will have a significant impact on the financial performance of relevant listed companies.
While the mid-term outlook for the tourism sector appears promising, the short-term prospects are less favorable.
IV. Summary
Throughout this trading week, both the ChiNext and Growth Enterprise Boards experienced four consecutive days of decline, marking a challenging start to 2024. The accelerated decline on Friday suggests that we are approaching the bottom, and a rebound is likely early next week. However, investors should remain cautious, as this rebound should be viewed as a temporary bounce, not a full reversal.
In the medium to long term, the market remains in a bottoming phase. Nevertheless, making the right stock choices is crucial to avoid losses even in a bull market. The key principle is to sell high and buy low, which means shedding previously high-flying sectors and accumulating stocks that have been in a prolonged downtrend.
