Central Huijin makes another move, how far is the bottom of the market? Focus on these two core elements

The "national team" shot again! Yesterday (October 23) Central Huijin announced that it bought a transactional open-ended index fund (ETF) on the same day and will continue to increase its holdings in the future.

Image source: Central Huijin official website, as of October 24, 2023

The last time Huijin made a move, on October 11, it collectively increased its holdings in the four major banks of Industrial and Commercial Bank, Agricultural Bank of China, Bank of China and Construction Bank, and said it would continue to increase its holdings in the next six months.

The two increases in half a month convey a clear positive signal that ETFs represent the market as a whole, which is an important measure to activate the capital market and help boost market confidence.

Historically, the previous two announcements by Huijin to buy ETFs and continue to increase holdings were on July 5 and July 8, 2015, respectively, and then the Shanghai Composite Index rose by 2.36% and 5.45% on July 6 and July 9 of that year, respectively, which has a significant short-term boost effect.

Recently, the market broke down, the CSI 300 index hit a new low in 55 months yesterday, as a market vane, the brokerage sector has also adjusted to the mid-year sector before the start of the "724" policy bottom, the market bottom appeared?

Image source: Wind, as of October 24, 2023

Looking back at history, the confirmation from "policy bottom" to "valuation bottom" to "profit bottom" to the final "market bottom" often corresponds to two core elements: first, "wide currency" to "wide credit" must be smoothly transmitted, which will be conducive to releasing incremental liquidity and supporting the "valuation recovery"; Second, the domestic economy has rebounded, often accompanied by a significant recovery in real estate investment.

Analysts pointed out that although the "market bottom" of A-shares in this round has appeared, there has been no significant rebound. Looking ahead, the improvement of medium- and long-term credit to residents in September will help curb the aggravation of real estate risks, ease investors' concerns about potential risks to the domestic economy, and strengthen the sustainability logic of fundamental recovery. However, the M1 growth rate - short-term financing growth rate (representing the liquidity surplus in the market) has not seen a significant improvement, which means that the momentum for valuation expansion is still insufficient.

The key to market stability or still incremental funds, many institutions have previously called for the establishment of "equalization funds", Central Huijin is equivalent to half of the "equalization fund", "equalization funds" can inject long-term incremental liquidity into the market, prompting market performance to return to more rational fundamental logic.

Looking forward, positive factors are accumulating, with the policy level to actively resolve the current main contradictions, the bottom of corporate earnings gradually emerged, valuation, sentiment and investor behavior further show the characteristics of the bottom, there is no need to be pessimistic about the subsequent market performance, the current position of market opportunities is greater than the risk, the fourth quarter is still an important window period for policy efforts.

The brokerage sector directly benefits from the stabilization and recovery of the capital market, the relevant policies of "active capital market" are still continuing, the certainty of economic recovery is enhanced, securities companies have the dual logical support of economic recovery β and favorable fundamental policies α, the current valuation has fallen back to a historical low, the bottom signal is gradually clear, and institutional tips may be available for bargain hunting.

It is worth noting that there are funds lurking in advance through ETFs, Shanghai Stock Exchange data shows that brokerage ETFs (512000) received a net inflow of 127 million yuan yesterday, and funds have increased their positions by 309 million yuan in the past 4 days; in the long run, brokerage ETFs (512000) have accumulated 653 million yuan in the past 20 days.

Image source: Wind, as of October 24, 2023

According to public information, the brokerage ETF (512000) tracks the CSI All Index Securities Company Index, including 50 listed brokerage stocks with one click, of which nearly 60% of the positions are concentrated in the top ten leading brokerages, and the leaders of "big asset management" + "big investment banks" gather; In addition, 40% of the positions take into account the high flexibility of the performance of small and medium-sized brokerages, absorb the characteristics of small and medium-sized securities firms with high outbreak in stages, and are efficient investment tools for concentrated layout of top securities firms and small and medium-sized securities firms.

Source: Shanghai and Shenzhen Stock Exchange. Risk warning: Brokerage ETF passively tracks the CSI All Index Securities Company Index, which was released on 2013.7.15 on the basis date of 2007.6.29. The composition of the constituent stocks of the index is adjusted in due course in accordance with the rules for compiling the index. The constituent stocks of the index are for display only, and the individual stock descriptions are not intended as any form of investment advice, nor do they represent the position information and trading trends of any funds under the Manager. The risk rating of the Fund assessed by the Fund Manager is R3-medium risk, which is suitable for investors with an appropriateness rating of C3 or above. Any information appearing in this article (including but not limited to individual stocks, reviews, forecasts, charts, indicators, theories, any form of expressions, etc.) is for reference only, and investors are responsible for any investment behavior that they decide independently. In addition, any opinions, analyses and forecasts in this article do not constitute any form of investment advice to the reader, nor are we responsible for any direct or indirect losses arising from the use of the content of this article. Fund investment is risky, the past performance of the fund does not represent its future performance, the performance of other funds managed by the fund manager does not constitute a guarantee of the performance of the fund, and fund investment needs to be cautious.