Four new policy tools have been implemented

In recent days, the performance of the A-share market has been quite good. Although there are occasional spikes followed by pullbacks, the overall market has been closely tracking the 5-day and 10-day moving averages, advancing slowly and steadily without haste. This trend is essentially in line with Jingyang's previous forecast. It can be said that this steady upward pattern gives a very solid feeling; you won't worry that the entire market has accumulated high risks due to consecutive sharp rises, which could lead to a sudden and significant drop at any time!

Looking at the neighboring US stock market, which has been in a bull market for years, hasn't it always been characterized by a pattern of not hitting the upper limit but continuously rising? This is also the slow bull market that our leaders have been longing for, which indeed brings peace of mind and comfort. It's just uncertain how many more days this peaceful period can continue.

According to Jingyang's previous analysis, the market performance in the fourth quarter of this year should not be bad. Maintaining this incremental upward movement, followed by a period of horizontal consolidation, and then a rise in the market is quite likely. The trend is roughly similar to the three months from the end of February to the end of May this year. The current market trend in the past few days is replicating the incremental upward movement from the end of February to early March. The market has been strengthening slowly, closely tracking the 5-day moving average, with the highs not deviating too much from it, and the lows stabilizing above the 10-day moving average. The various moving averages below are beginning to show a bullish arrangement, which is a typical characteristic of the market being in an upward channel in the short to medium term!

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Why did Jingyang make such a judgment at the time? When analyzing the short-term trend of the entire market, it is necessary to focus on the impact of news and capital flows, but when analyzing the medium-term trend, the macroeconomic fundamentals cannot be ignored!

Jingyang provided the above conclusion in his article at the end of September because the leaders, in order to achieve the economic growth target set at the beginning of the year, have been continuously increasing stimulus policies in the third and fourth quarters. Now that the third quarter has passed, but the macroeconomic adjustment results are not ideal, with the GDP growth rate in the third quarter only at 4.6%, and the economic data for September have not yet shown a significant improvement.

To achieve the annual target set at the beginning of the year, the GDP growth rate in the fourth quarter needs to rise from 4.6% in the third quarter to around 5.6%, which is a significant marginal increase!

Jingyang believes that many of the institutional loopholes that have troubled the A-share market in the past have been basically filled by the China Securities Regulatory Commission over the past year, including indiscriminate IPO issuance, illegal share reduction, quantitative trading, and short selling through securities lending, etc. Therefore, the macroeconomic fundamentals are now the biggest unfavorable factor constraining the strength of the A-share market. When the expectation of a tail-up in the fourth quarter GDP strengthens, it is equivalent to lifting the seal on the A-share market, and the entire market can naturally rise steadily!

From this perspective, whether the A-share market can achieve a slow bull market in the fourth quarter depends on whether the monthly economic data can support the GDP to rise as expected in the fourth quarter?

Since the first set of economic data for October, the manufacturing PMI, will only be released in the middle of next week, Jingyang is still unable to confirm the specific operation of the macroeconomy in October at present. However, considering that there have been dense economic stability benefits in recent months, and the monetary and fiscal policies are now in a state of dual expansion, coupled with the People's Daily and other official media repeatedly mentioning the need to complete the economic growth tasks set at the beginning of the year. When these elements come together, Jingyang is more willing to believe that the domestic macroeconomy will successfully tail up in the fourth quarter and drive the A-share market to strengthen steadily!

As for whether this slow bull market can continue into next year? It depends on how the future management team uses the policy tools at hand!Since September 24th, the A-share market has surged from the bottom, largely due to several new policy tools, such as the swap convenience and increased repurchase loans that were highlighted in previous days. If we also include the State-owned Assets Supervision and Administration Commission's (SASAC) policy at the beginning of this year, which links the market value management of central state-owned enterprises with the performance assessment of enterprise leaders, these new policy tools have significantly changed the landscape of the A-share market.

Yesterday, the Institute of Finance at the Chinese Academy of Social Sciences released the macro-financial analysis report for the third quarter of 2024, titled "Emphasis on Both Stock and Flow: Innovation in Macroeconomic Governance Thinking." The report mentioned three important suggestions regarding the reform of the capital market. Jingyang believes that these three suggestions will accelerate the transformation of the A-share market structure and lay a solid foundation for a future slow bull market!

The core idea of the report on the capital market is to enhance the inherent stability of the capital market. The three suggestions are:

1. Accelerate the entry of medium and long-term funds into the market, for example, moderately increase the proportion of insurance company funds invested in the stock market, and increase the proportion of local social security funds indirectly entering the market through the National Social Security Fund Council.

2. Strengthen the coordination between swap convenience of securities, funds, and insurance companies and the central bank's buying and selling of government bonds, achieving effective linkage between the money market and the capital market, and the central bank can provide low-cost liquidity support to the stock market when necessary.

3. Issue 2 trillion yuan of special government bonds to support the establishment of a stock market stabilization fund, and promote market stability through low-buying and high-selling of blue-chip leading stocks and ETFs.

Jingyang mentioned this news in this morning's "A-share Explosive Material," focusing on the analysis of the 2 trillion yuan stabilization fund. According to the suggestions of the Chinese Academy of Social Sciences, after the establishment of the 2 trillion yuan stabilization fund, it will promote market stability through low-buying and high-selling of blue-chip leading stocks or broad-based ETFs! From the wording of the Chinese Academy of Social Sciences, it is more concerned with the inherent stability of the market! What is stability?

Is continuous sharp rises and falls stability? Obviously not! Is it stability to be in a long-term horizontal position, or to continue to shrink in volume and fall to the point of being ignored? Obviously not!

What is stability? In the eyes of the higher-ups, only a slow bull market like the U.S. stock market can be called stability!

For a long time, the higher-ups have hoped that the A-share market will gradually move towards a mature capital market through its inherent growth. But looking back now, the past ideas are still too naive. So now they simply take the field themselves, designing a series of new policy tools to artificially correct the entire A-share market.These new tools, as previously praised in the text, include the swap convenience, the increase and repurchase loan, the market value management plan, and the 2 trillion stabilization fund!

So how will these policy tools change the pattern of the A-share market and gradually lead the A-share market out of a slow bull market? The key point is: blue-chip leading stocks!

Attentive investors should be able to see that the above four new policy tools are all aimed at blue-chip leading stocks. Swap convenience is financial institutions using high-quality listed companies as collateral to borrow money from the central bank to continue investing in A-shares; the increase and repurchase loan and market value management plan are also mostly implemented by central enterprises; the upcoming 2 trillion stabilization fund, at the beginning of its design, also requires the purchase and sale of blue-chip leading stocks or ETFs.

Therefore, the biggest change these four policy tools bring to the market is that a large amount of state-owned assets directly enter the market and buy blue-chip leading stocks, indicating that in the future, the higher-ups will directly use money to regulate the medium and long-term trend of the market, which is completely different from just talking before.

In addition, some central enterprises have recently started to cancel repurchase, in this way, the high-quality white horse stocks that have been marginalized by the market in the past 4 or 5 years will receive more and more market attention in the future. Some large-cap companies will no longer lie at the bottom for a long time just because of poor growth. State-owned capital can drive the market to strengthen in the long term by continuously buying large-cap companies; it can also cool down the short-term overheated market by selling, thereby achieving the purpose of stabilizing the market!

Finally, let's talk about the short-term market. In the past few days, the overall market performance has been stable, but the speed of hot spot rotation is very fast. Yesterday, the AI application theme surged, with culture and media, film and television, and games leading the rise, and today it immediately appeared to make up for the decline; today, new energy wind power and photovoltaics led the rise, which was also a direction that performed poorly before, and the single-day movement was driven by the need for a catch-up increase, but in the absence of large funds to grab, the continuity is also a problem. That is to say, in the past few days, the market hot spots have rotated quickly, but the continuity is not very good, which is a typical fan pattern.

The reason for the fan pattern may be that the main hot spots need to be repaired after a continuous surge! Especially for technology stocks, the rise last week and this Monday was not small, and after the technical repair is completed in the next two days, it will become the focus of the entire market again in a few days!