Market vane|A-shares stabilized at 3,000 points again, can they continue to break through in April?

Interface News Reporter | Mao Dun

Interface News Editor | Cui Yu

The A-share market was solid in March. The Shanghai Composite Index rose 0.86% in March, the Shenzhen Component Index rose 0.75%, and the ChiNext Index rose 0.62%.

In terms of industry, 23 of the 31 Shenwan first-class industries rose in March, 8 industries fell, and the industry rotation rate accelerated, rising and falling. Among them, non-ferrous metals, petroleum and petrochemicals and comprehensive gains were the top three, up 12.50%, 6.01% and 5.50% respectively. Non-bank financials, real estate and coal fell the most, falling by 6.16%, 3.78% and 3.72% respectively during the month.

So in the context of the trend of economic recovery and the intensification of plate differentiation, how will the A-share market perform in the first half of April? Can the market form a breakthrough?

Related reading: Market vane|Stable operation above 3000 points, how will A-shares go in the second half of March?

Since July 2021, Interface Business School, a subsidiary of Jiemian Think Tank, has established a liquidity index model to predict the trend of the A-share core index in the next half month, mainly measuring the liquidity of individual stocks, sectors and indices through the combination of price and volume, and continuously optimizing the model in terms of weighting and sample pool. In 2022, Interface Business School will also integrate the two types of weighting models of the liquidity index to form a comprehensive liquidity index of each major sector under the complementary advantages, and optimize and adjust various parameters on a rolling basis based on the data of the previous year.

In the last forecast article for the second half of March (March 20 to March 29), we predict that both the Shanghai Composite Index and the ChiNext Index will be volatile, and there are investment opportunities. The actual trend reflects that the Shanghai Composite Index fell by 0.70% and the ChiNext Index fell by 4.65%, and the actual results did not match the forecast.

Based on the backtesting of historical forecasts and actual values, we find that when the forecast value based on the liquidity index diverges from the actual value, there is often a "super event" such as exceeding expectations, exceeding strength and ultra-volatility, which often has a short-term impact on the market or strengthens or reverses, but will "return" to the trend shown by the forecast value after the impact of the event gradually subsides.

During the range, the breakthrough decline of the RMB exchange rate caused panic in the market. At the same time, the market disseminated the news that the public fund received the regulatory requirement not to participate in the speculation of the capital target, and the impact of the delivery date of the options market in the interval was superimposed, resulting in pressure on the market index.

For the trend in the first half of April (April 1 to April 15), we take the 15 trading days of the reset-based market-wide liquidity index as the basis for the change forecast of the Shanghai Composite Index, and we can see that the backward liquidity index is in relatively high agreement with the Shanghai Composite Index.

In the chart above, the dark blue solid line is the actual value of each trading day of the Shanghai Composite Index, and the red dotted line is the forecast value of the Shanghai Composite Index. The calculation results show that in the first half of April (April 1 to April 15), the investment opportunities of the Shanghai Composite Index outweigh the risks, there is room for growth, and it is possible to remain optimistic, and priority needs to be paid to structural opportunities.

At the same time, through calculation, we will move the reset ChiNext Index liquidity index back for 15 trading days as the basis for the change forecast of the ChiNext Index.

In the chart above, the dark blue solid line is the actual value of each trading day on the GEM, and the red dotted line is the forecast value of the GEM. The results show that in the first half of April (April 1 to April 15), the ChiNext index is expected to rebound within the forecast range, and investment opportunities can be actively monitored.

Due to the recent sharp market volatility and frequent "super events", we make the following tips:

1) On March 27, it was reported that negotiations between Israel and the Palestinian Islamic Resistance Movement (Hamas) on a ceasefire and the release of detainees in the Gaza Strip have reached an impasse again. The conflict sparked concerns about oil supply, sending commodity prices soaring, while gold prices rose again on the back of safe-haven demand. Investors' risk appetite has decreased, and the equity market will continue to be negatively affected by the escalation of the war.

2) The March dot plot revealed that the Fed still has the possibility of three rate cuts this year, but the recent U.S. inflation path has risen slightly, and Goldman Sachs has lowered its Fed rate cut expectations. A slowdown in the Fed's rate cut campaign will put pressure on equity market valuations.

(The content of this article is for reference only and does not constitute any investment advice)