The bullish bullish is expected to support the stock market rally

Edited by: Zhao Yun

Last week, there were a series of positive changes in the market, the Shanghai Composite Index fluctuated and rose 0.4%, the average daily turnover of A-shares continued to rise to about 870 billion yuan compared with last week, and northbound funds turned weekly for the first time in nearly a month, with a net inflow of 560 million yuan. At the industry level, media, electronics, food and beverage led the gains; Real estate, building materials, steel, etc. did not perform well.

Overseas, the Federal Reserve's interest rate meeting in November came to an end last week, and the Fed remained unchanged and maintained the benchmark interest rate in the range of 5.25~5.5%. At the same time, non-farm payrolls increased by 150,000 in October, compared to an expected 180,000, and the number of new jobs added in October was only half of the number of jobs added in September. The U.S. unemployment rate rose to 3.9% in October, the highest level since January 2022. In addition, the ISM manufacturing PMI in the United States fell to 46.7 in October, which was significantly lower than expected.

The recent auto strikes have exacerbated the deterioration of the U.S. manufacturing boom and employment situation, and the market expects the Fed to not raise interest rates in December with a high probability of cutting interest rates for the first time or around the middle of next year.

Source: Wind

The S&P 500 and Nasdaq rose 5.9% and 6.6%, respectively, as the yield on the 10-year Treasury note fell from 4.9% to around 4.6% last week. The decline in U.S. bond yields has also had an impact on the RMB exchange rate and foreign capital flows, and the trend of continued unilateral outflows of short-term northbound funds may usher in a significant reversal.

Favorable domestic policies are also continuing to land. Last week's Central Financial Work Conference set the tone for the development of the financial sector, and combined with the current environment, it proposed to "activate the capital market", which is conducive to boosting investor confidence; The long-term assessment mechanism for insurance capital is conducive to guiding insurance capital to enter the market and give full play to the attributes of medium and long-term funds.

At the profitability level of listed companies, the quarterly report was disclosed last Wednesday, and the net profit attributable to the parent company in the third quarter increased by 0.43% year-on-year, compared with -9.28% in the second quarter. Against the backdrop of the accumulation of positive factors in all aspects, the performance of the A-share market can be optimistic.

With the decline in U.S. bond yields, investment opportunities in non-ferrous metal sectors such as gold are prominent. The U.S. job market showed signs of cooling, and liquidity expectations improved, which was positive for gold prices. In addition to weakening expectations of future interest rate hikes and strengthening expectations of interest rate cuts, tensions in the Middle East have also catalyzed risk aversion.

According to the World Gold Council, global central banks bought 337t of gold in Q3, the third highest quarterly net purchase on record. Gold purchase demand provided strong support for gold prices. On the whole, there are more positive catalysts for gold prices, and they are still expected to maintain strong operation.

In terms of industrial metals, the central government will issue an additional 1,000 billion yuan of 2023 treasury bonds in the fourth quarter of this year to be managed as special treasury bonds. The national fiscal deficit will increase from 3.88 trillion yuan to 4.88 trillion yuan, and the deficit rate is expected to increase from 3 percent to about 3.8 percent. At present, the more active fiscal policy is expected to drive a marginal improvement in the economy and boost economic confidence, thereby benefiting pro-cyclical sectors such as industrial metals.

At present, the domestic copper inventory has fallen to a historically low position, the production capacity of electrolytic aluminum in Yunnan is expected to be 1.15 million tons, the operating capacity of electrolytic aluminum is declining, the price of copper and aluminum is expected to remain strong in the short term, and the profits of copper ore and aluminum smelting are expected to follow the upward repair. The logic of low long-term copper and aluminum supply growth and consumption continuing to benefit from the high growth of new energy remains unchanged. Interested investors can pay attention to the Gold Fund ETF (518800), Nonferrous Metals 60 ETF (159881) and Mining ETF (561330).

Source: Wind, Southwest Securities

In addition, in the case of the recovery of downstream demand, the semiconductor chip industry chain ushered in a reversal of the market. On October 31, Xiaomi's official Weibo posted that Xiaomi's digital flagship has achieved historic leapfrog growth, and the first sales of the Xiaomi 14 series have soared to 6 times the total number of first sales of the previous generation in just 5 minutes. Since August, a number of explosive new products have been launched, the smartphone market has picked up, and the related industrial chain is expected to usher in a new round of market.

From the data point of view, according to TechInsights data, global smartphone shipments in Q3 2023 will be 296 million units, a year-on-year decrease of 0.3%, and the decline will slow down, with a quarter-on-quarter increase of 10%, IDC predicts that China's smartphone market shipments are expected to usher in an inflection point in the fourth quarter of 2023, achieving the first rebound in nearly 10 quarters.

According to SIA data, global semiconductor sales in September 2023 increased by 1.9% compared with August 2023, and have increased month-on-month for seven consecutive months. In terms of price, in addition to the price increase of Samsung memory chips in the fourth quarter, NAND Flash chips plan to increase by 20% quarter by quarter in the first and second quarters of next year.

In terms of domestic substitution, on October 17, BIS issued the final rules for export control of semiconductors to China, further tightening export restrictions on AI-related chips and semiconductor manufacturing equipment to China. However, the stricter sanctions will only accelerate the localization process of the mainland in related fields, and the blockage of Nvidia and AMD's high-end chip imports is also expected to bring new opportunities for domestic substitution to local AI chip/GPU chip design companies and the semiconductor equipment industry.

In the medium and long term, the sanctions imposed by the United States, the Netherlands and Japan have landed, and the domestic semiconductor chip industry chain is expected to accelerate the realization of import substitution. The short-term consumer electronics and semiconductor chip cycle is expected to gradually come out of the bottom, and long-term domestic substitution is still the main line of industrial chain development, and you can pay attention to the low-level layout opportunities of chip ETF (512760), semiconductor equipment ETF (159516), integrated circuit ETF (159546) and power consumption ETF (561310).

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National Business Daily