The economy stabilized marginally in March. Although there is still a divergence of macro and micro economic data, on the whole, the economy shows signs of marginal improvement, and production and demand have rebounded to varying degrees. In the future, we will continue to pay attention to the role of policy implementation and the improvement of external demand on the economy.
From a market perspective, A-shares continued to recover in March. For the whole month, the major stock indexes all rose, with the Shanghai Composite Index, the Shenzhen Composite Index, the CSI 300 Index and the ChiNext Index rising and falling by 0.9%, 2.4%, 0.6% and 0.6% respectively, and the South China Industrial Products Index falling by 2.0%.
In terms of industries, the industry rose more and fell less. In March, the top five industries (Shenwan first-class industry, the same below) were non-ferrous metals, automobiles, national defense and military industry, communications, and comprehensive, with increases and decreases of 15.8%, 9.0%, 8.9%, 8.8%, and 8.2% respectively, while the top five industries were non-bank finance, coal, real estate, medicine and biology, and banking, with increases and decreases of -4.6%, -3.5%, -1.9%, -0.1%, and 0.3%.
Table 1: Performance of major A-share indices in March
Source: Wind, 29 February 2024 to 31 March 2024. Past data is not indicative of future performance, the market is risky, and investors need to be cautious.
A brief review of the main macro data
March PMI comments: manufacturing PMI returned to above the boom and bust line
1
In March, the manufacturing PMI and non-manufacturing business activity indices were 50.8% and 53.0% respectively, up 1.7 and 1.6 percentage points respectively from the previous month;
Source: Wind, as of March 31, 2024. Past data is not indicative of future performance, the market is risky, and investors need to be cautious.
2
The manufacturing PMI returned to the expansion range in March for the first time in six months. In terms of sub-items, it was mainly supported by a sharp improvement in new export orders. From the perspective of industries, the better performance of new export orders in March was in the textile and clothing, chemical, steel, automobile and other industries, or related to the U.S. replenishment cycle;
3
In March, the willingness of enterprises to replenish inventory rebounded, the inventory of raw materials and finished products rebounded, and the production sub-item and procurement sub-item rebounded simultaneously, indicating that the willingness of enterprises to replenish inventory may have rebounded;
4
Business activity in the services sector also showed a month-on-month increase during the month, with a more significant improvement in the producer services sector in particular. In March, the index of business activity in the services sector increased from the previous month, mainly due to a shift in the focus of business activities from areas related to holiday consumption, such as accommodation and catering, to producer services, including postal services and telecommunications. This change reflects the positive role of the service industry in economic restructuring and consumption upgrading.
April stock market outlook
The market is expected to continue to recover
Since the beginning of this year, the market has fluctuated greatly due to investor sentiment and micro liquidity, and the market has been at a relatively low valuation with long-term investment value. From the perspective of policy, the current policy cycle of the capital market is on the upside, superimposed on the interest rate cut cycle and asset shortage, and the subsequent market valuation is expected to continue to repair. At the same time, the economy has entered a period of stabilization and recovery, corporate earnings have bottomed out, and profits have contributed to the market from a drag to a positive one. The market may gradually come out of the stock game pattern, and the equity assets with low valuations are expected to usher in a revaluation.
In terms of industry allocation, in the short term, the economy will stabilize and recover in 2024, inflation will rebound at a low level, liquidity will be abundant, market earnings will bottom out, and traditional pro-cyclical sectors with high elasticity for profit improvement are worth investing in. In the long run, the momentum of China's economy is being reconstructed, and the new economic growth momentum will have more room for long-term development, which is the direction worth focusing on when equity assets are low. Therefore, there are subdivided investment opportunities in both the new economic growth sector and the traditional pro-cyclical value sector, and the overall preference is to take into account the long-term development space and the elasticity of earnings improvement.
March bond market review
Bond yields fell further
In terms of funds, March was relatively loose as a whole, and the cross-quarter funds at the end of the month were also stable. The central bank's open market net withdrawal was 645 billion yuan in the whole month, and the average overnight pledged repo rate rose by 8 basis points to 1.88% in March, and the average 7-day pledged repo rate rose by 8 basis points to 2.11%.
The economic growth target and policy strength of the government work report in early March were basically in line with expectations, and the market continued its previous bullish sentiment. The import and export data and CPI data both exceeded expectations, and the central bank's continuous volume injection caused the market to worry about preventing the idling of funds, and the bond market began to adjust. In late March, it began to fluctuate in a narrow range under the disturbance of news such as "real estate information", "interest rate bond supply expectations", and "the central bank said that there is still room for RRR cuts". Yields fell across the month, with the 1-year Treasury yield falling 6 basis points to 1.72% and the 10-year Treasury yield falling 4 basis points to 2.29%, continuing to break through record lows.
Bond market outlook for April
Market volatility is likely to increase
The March PMI showed that the supply and demand of the manufacturing industry were booming, and the new export orders were significantly pulled, and the economic data in March was likely to continue to rise slowly.
The issuance of local government bonds and ultra-long-term government bonds from April will lead to an increase in supply pressure, and changes in liquidity will have a greater impact on the market, and market volatility may increase.
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