Will A-shares Surpass 3000 Points Next Week?

In the week spanning from July 15 to July 19, the Chinese A-share market experienced a noticeable recovery, with all three major indices closing in the greenAccording to market data, the Shanghai Composite Index increased by 0.37%, the Shenzhen Component Index by 0.56%, while the ChiNext Index surged by 2.49%. This upward trend was underpinned by strong performance in sectors such as power generation equipment, computer hardware, agriculture, and land transportationConversely, industries such as household goods, daily chemical products, and motorcycles saw significant pullbacksOverall, the market sentiment was cautious; while major stocks performed better, the profit-making effect for average investors appeared limited.

The depth of the mid-year report market is gradually unfoldingAn examination of various industry sectors revealed a trend where losses outnumbered gains

Sectors leading in growth included agriculture, food and beverage, defense, non-bank financials, power equipment, new energy, pharmaceuticals, and transportationIn contrast, industries such as light manufacturing, textiles, non-ferrous metals, telecommunications, basic chemicals, automotive, home appliances, and petroleum showed declinesThe current market style suggests a continued preference for growth stocks, albeit with a slight uptick in large-cap value shares at higher valuations.

When viewed through the lens of broader indices, the overall picture showed more gains than losses across the boardIndices like the STAR Market 50, ChiNext 50, and several large-cap growth indices exhibited positive growth, while smaller indices like the CSI 2000 and mid-cap value indices faced some pullbackThis disparity highlights the ongoing investor interest within the tech- and growth-oriented segments of the market.

In terms of capital flows, data from last week showed a slight net outflow of capital from Northbound investment channels

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Notably, sectors such as power, construction materials, non-bank financials, defense, transportation, and construction attracted net inflowsOn the flip side, industries including banking, telecommunications, home appliances, food and beverage, machinery, basic chemicals, coal, real estate, automotive, and pharmaceuticals experienced substantial net capital outflows, painting a broad picture of investor sentiment toward various sectors.

The mid-year earnings report phenomenon is well underwayThe day after pre-announcements for the first half of 2024 were released, companies like Meili Technology, Huilun Crystal, and Baoshu Keen saw their stocks hit the ceiling limit, with Haidaer climbing by 30%. Other firms, like Chicheng Stock, enjoyed gains exceeding 26%. Notably, on the preceding Thursday, Shenda Co., which announced anticipated earnings growth, achieved three consecutive trading limits on the closing prices on Tuesday.

According to data compiled by Choice, a total of 1,632 listed companies in the A-share market have released their performance forecasts for the first half of 2024. Among them, significant mentions include Anli shares and others, with reported net profits expected to increase by up to 1200% compared to last year

This proliferative growth echoes the established sentiment within the market, poised for a robust second half.

Data analyst Ding Zhenyu highlighted that, as of July 15, 37 semiconductor companies have forecast their mid-year results, with over 70% anticipated to report positive growthThe standout performer appearing to be Changchuan Technology, projecting a staggering tenfold increase in net profits, labeled as the "brilliant growth king." Current market dynamics suggest that the semiconductor sector is possibly at a cyclical turning pointHowever, the sustainability of this upward trajectory will depend on global economic trends, innovations in technology and production capacity expansion, and robust policy support.

Signals of stable recovering trends are becoming evidentThere's heightened anticipation that sectors significantly benefitting from supportive policies—especially semiconductor equipment, photomasks, chips, and artificial intelligence—will outperform the indices and establish a favorable mid-term uptrend, retaining substantial market interest and activity

This anticipation reflects a broader strategy within industries to pivot towards higher-end and smart technological innovations, which is essential in propelling transport sectors.

In a related discourse on autonomous ride-hailing vehicles, industry experts suggest that they not only offer lower fare options but also promise an enhanced passenger experienceIt’s expected that with a growing deployment of such technology, there will be a marked improvement in the transportation ecosystemKey points focus on how adhering to national strategic demands and embracing advancements in technology can transform transportation to be safer, smarter, and greener.

Analyst Wu Zewei from StarMap Financial Research Institute reflected on prevailing market sentiments, noting: "Current market emotions appear to be suppressed by stable capital influx

However, it is anticipated that funds will adopt a more proactive approach in seeking directions over the upcoming weeks." With the reduction of leverage and previous rapid declines triggered by passive sell-offs, a similar sudden drop to around 2900 points or even lower is still possible but not conclusive.

Wu further highlighted three focal points for investors: First, the U.SFederal Reserve's consistent release of interest rate cut signals, with the possibility of a reduction escalating to 100% in September, indicating strong shifts in monetary policy that may benefit sectors such as gold and jewelrySecond, attention towards core technology and domestic semiconductor replacements is expected to be a pivotal area for policy focus in the near termLastly, as the sales season approaches, the performance of the film and entertainment sectors, typically experiencing upticks during peak viewership seasons, could yield positive returns for investors who are cautious about valuation ceilings.

Wu also advised investors to embrace a defensive strategy, emphasizing the observation of low-risk characteristics in selected stocks, particularly in dividend-yielding sectors