Don't panic! There are also big opportunities under 3000 points

Editorial Department of this journal丨Wang Fei

3000 points, and finally fell below the ...... 

Since breaking through 3,000 points in early 2007, A-shares have fallen below this integer threshold dozens of times, and now, as they have done in the past ten years, they are once again standing below this integer threshold. So, is there a chance next? 

The disc guard failed

As the time comes to the end of March, it means that the spring restless market is coming to an end, but most people are not used to the sudden brakes of A-shares that are galloping in the first quarter. For example, on March 27, the Shanghai Composite Index closed slightly down 0.52% at noon. Judging from the decline, the decline of the Shanghai Index can only be regarded as average, but even so, A-shares were once on the hot search on Weibo. 

But judging from the index point, it seems that it is not difficult to understand why A-shares are like this. The Shanghai Composite Index closed at 3,015.74 points at noon, just one step away from the 3,000-point integer mark. 3,000 points was once recognized by the market as a watershed in the trend of A-shares, going up, 3,000 points is the springboard, and going down, is the ceiling. 

After going around for more than ten years, turning back at 3,000 points, investors are not only feeling a lot of emotion, but also panicking. "Big A shares are on the hot search again, and every time they are on the hot search, shareholders have to sweat in shock. "As soon as I saw that A-shares were on the hot search again, I knew that it was cold again today. The sound is also endless. 

However, the disk protection funds are indeed working hard to hold 3,000 points. 

As of the close, only two industries of banking and household appliances in Shenwan 31 industries closed in the red, and coal closed slightly down, and it is a large market capitalization sector in the A-share market, of which banks and coal are not only the industries where state-owned enterprises are piled up, but also the first choice of previous disk protection funds. In terms of individual stocks, the main net inflows of many related stocks such as Agricultural Bank of China were among the top (see Table 1). 

On March 26, the Shanghai Composite Index also fell for a time, hitting an intraday low of 3,006 points, but finally closed at 3,031.48 points, recording a long lower shadow white line. Generally speaking, a long lower shadow bearish candlestick indicates a strong buying force in the market, which can support a rally and close near the day's high when the stock price falls. 

But the ideal is very plump, the reality is very skinny, as of the close, the Shanghai Composite Index finally closed below 3,000 points. 

There is also a chance to break down

In fact, even if it falls below 3000 points, there is no need to panic, because according to past data, there will be a greater opportunity under this. 

As the statistics of the past four years show that the Shanghai Index has also fallen below 3,000 points many times, including March 27, 2020 to July 1, 2020 and other five times for a long time, and in these five bottom ranges, the performance of various industries in the A-share market is also uneven, but the two industries of Shenwan chemical and pharmaceutical and construction machinery have always performed well, and have recorded gains in the five bottom ranges (see Table 2). 

The reason why the two industries of chemical pharmaceuticals and construction machinery make sense from the perspective of valuation, for example, at the beginning of the five bottom ranges, their dynamic P/E ratios are at a relatively low level (see Figures 1 and 2). 

As of March 26, the latest valuations of chemical pharmaceuticals and construction machinery were 30.98 times and 22.66 times, respectively, below and slightly above the valuation center in recent years. From this point of view, if the current market goes below 3000 points again, these two industries still have the possibility of outperforming the market. 

In these two industries, there are also a number of stocks in these five bottom ranges are performing well, such as chemical pharmaceutical companies Hisco, Jiudian Pharmaceutical and China Resources Shuanghe have recorded gains in the five bottom ranges, and the construction machinery industry has recorded gains in Hangcha Group, Shantui shares, Liugong, Wantong Hydraulics, XCMG Machinery, Sany Heavy Industry and Hengli Hydraulics. These stocks are also generally in line with the commonality of their respective industries, with relatively low valuations at the beginning of the 5 bottom ranges, and now they are generally in the area of the valuation center in recent years. 

In addition, from the perspective of the subdivision track, these companies also have consistency, such as chemical pharmaceutical companies are mostly chemical agents, and construction machinery is mostly construction machinery enterprises. 

(The individual stocks mentioned in the article are for example analysis only, and do not make trading recommendations.) ）