Despite the fact that the Shanghai Composite Index broke through a new high for the year last week, the market reaction has been unusually calm, a phenomenon that may be due to a combination of complex factors, and I am not able to provide more opinions due to the limited information that prevents me from exhausting the specific reasons behind it. Over the weekend, the market ushered in three pieces of news that were seen as bearish, which undoubtedly added uncertainty to the market movement ahead. On the other hand, the resilience of the market and its ability to respond to negative information are the touchstones to test its true health. If A-shares can effectively absorb these negative effects in the coming week, maintain stability or even swim against the current, this not only indicates that the internal forces of the market are strong, but also indicates the stability of market confidence, which may be the starting point of a new round of bull market. Because history shows that a true bull market is often born when the market is able to defy short-term challenges and continue to show upward momentum.
The data for January and April came out, and the growth of social finance was negative!
Financial data for April showed that the scale of social financing decreased by 198.7 billion yuan, while the broad money supply (M2) exceeded the 300 trillion yuan mark and reached 301.19 trillion yuan, a year-on-year increase of 7.2%, slightly lower than the market expectation of 8.3%. The narrow money supply (M1) fell by 1.4% year-on-year, which not only meant that the total amount of "live money" circulating in the market decreased, but also the gap between M2 and M1 (M2-M1 scissors difference) widened to 8.6%, a new high in recent years. This may reflect a shift from highly liquid areas to fixed income products, such as bonds and wealth management products, in search of safer havens.
From January to April this year, the cumulative increase in the scale of social financing was 12.73 trillion yuan, a decrease of 3.04 trillion yuan compared with the same period last year, showing the weakening of financing demand. In addition, RMB deposits increased significantly, with a total increase of 7.32 trillion yuan, of which the increase in residents' deposits reached 6.71 trillion yuan, indicating that the willingness to save has increased, the demand for loans has weakened, and the financial market has shown a pattern of "more deposits and less loans". Financial markets reacted swiftly, with 10-year Treasury yields falling in response, especially in the short-term bond market, continuing its slow upward trend, reflecting strong risk aversion. Recently, the bond market and the stock market have shown an obvious negative correlation, that is, the strength of the bond market is often accompanied by the increase in the pressure of the stock market, and the two show a "warped" effect.
2. The IPO is open again
On the evening of May 10, the Shanghai Stock Exchange and the Shenzhen Stock Exchange announced simultaneously that they planned to resume the review of corporate listing applications on May 16, which means that the IPO review process, which had been interrupted for nearly three months, is about to restart. The news came as a surprise to many markets, who had expected an update on the restructuring of the securities industry over the weekend, but unexpectedly ushered in the return of IPOs. There are widespread concerns that the resumption of new listings could put short-term pressure on the current market. There was a change in the real estate sector at the end of Friday, and the market once speculated that it was related to the comprehensive relaxation of the purchase restriction policy. However, with the resumption of the IPO and the confirmation of Marco Polo's status as the first company, the market's previous conjectures have been solved one by one: the IPO restart is theoretically a direct positive for the securities industry, while Marco Polo's listing is seen as an indirect boost to the real estate industry chain, a series of dynamics that are very different from the market's previous expectations.
Although some of the existing funds have been deployed in advance before the weekend based on different expectations, the deviation between the actual major news and market expectations, coupled with the IPO restart itself is regarded as negative for the market, makes the market face greater uncertainty on Monday. In this context, if the A-share market can remain strong under such multiple complex factors, or even rise against the market, this will strongly indicate the inherent resilience of the market, which means that the current market has increased its ability to digest negative news, and there are almost no other potential negative factors that can hinder its long-term positive trend. On the other hand, if the market is directly weak, it will be difficult to start a discussion.
3. The U.S. Biosecurity Act will be voted on May 15.
Once the Biosafety Law is implemented, it may indeed have a significant impact on the cooperation of foreign pharmaceutical companies, including WuXi companies, and raise concerns about the breakdown of cooperative relationships. However, the proposed provision provides a transition period for existing contracts and products, extending the waiver until January 1, 2032, essentially providing a buffer period of about eight years for U.S. and other international pharmaceutical companies to gradually adjust their supply chains and find or nurture new partners. For WuXi companies, this means that they have more time to respond to potential business changes and mitigate immediate market shocks, which is undoubtedly more friendly than the immediate disruption of cooperation that the market originally expected, and alleviates market pessimism.
Therefore, this should not be seen as simply negative news, but rather as a relatively positive development, as it provides a window of time for companies to transform and adapt, as well as the possibility of a turnaround for the CXO sector. The market's immediate reaction to the situation in 8 years may indeed be over-predicted, after all, there are many variables in the period, including policy adjustments, the effectiveness of corporate strategic transformation, etc. Therefore, this news can be interpreted as a positive for the pharmaceutical sector to a certain extent, because it provides an orderly transition plan for the industry, which helps stabilize market sentiment and promote the recovery and long-term healthy development of the pharmaceutical sector. In short, the proposal of this clause has brought a ray of light to the market, indicating that in the face of regulatory changes, enterprises and the market have more preparation time and room to adjust their strategies, which may open up a new period of development opportunities for the pharmaceutical industry.
To sum up, the negative news in the market over the weekend actually provided an opportunity to test the true bull market success of A-shares. If the market can maintain an upward trend despite headwinds, this is undoubtedly a strong proof of the intrinsic strength of the market, and we can take advantage of the trend and adopt an aggressive long strategy. But in this process, there is a key point worth paying special attention to: not all sectors can perform strongly when the market as a whole rises, just as the editor-in-chief Hu bought the bottom at 3144 points before, even if the index rises to 3150 points, if the investment direction is not right, it will still face losses. Therefore, to be effective bullish, it is necessary to follow precisely those leading sectors that can lead the index to the upside. On the other hand, if the market does not show resilience as expected and chooses to go down, then there is only one option: take profit immediately!
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