The market does not end abruptly at the shining highs, nor does it suddenly erupt in the troughs of silence, in fact, most reversals have accumulated a large number of signals before they occur.
What excites us in investing is that we have captured important signals. We have condensed the signal sensitivity cultivated through long-term research and investment in the market into our new column, "Trendy Weekly Signal". Once a week, we capture market signals with a keen sense of smell, let market trends surface, and help more investors penetrate the fog of information and grasp the moment of decision-making.
This is an excerpt from the report, and if you would like the full report, please contact your dedicated investment advisor at Sirui Group. Author: Zhang Jing, Research Department of Sirui Group
Li Jianpei, Hong Hao, Research Department of Sirui Group, Partner, Chief Economist, and Director of the China Chief Economist Forum Macro Focus In April, the scale of social financing increased by -198.7 billion yuan, a year-on-year decrease of 1,423.6 billion yuan. This was mainly due to the slow financing of government bonds (-98.4 billion additions), the contraction of undiscounted bills of exchange (-448.6 billion additions) and the decline in corporate bonds (49.3 billion additions). The last time was in October 2005, when the Shanghai Composite Index was at 1,000 points. The new RMB loans were 730 billion yuan, an increase of 11.2 billion yuan year-on-year, mainly supported by a significant increase of 838.1 billion yuan in bill financing. The year-on-year growth rate of broad money (M2) continued to slow to 7.2% in April from 8.3%, mainly dragged down by deposits in the corporate sector (-1,872.5 billion new). The year-on-year growth rate of narrow money (M1) turned negative from positive to -1.4%. In April, the national consumer price index (CPI) rose 0.3% year-on-year (previous value 0.1%, 0.2% expected) and 0.1% month-on-month, and the core CPI, which excludes food and energy, rose 0.7% year-on-year. Although the CPI has maintained positive growth for three consecutive months, it is still close to zero, and insufficient demand is still the root cause of the low price level. In April, China's industrial producer price index (PPI) fell 2.5% year-on-year (previous value -2.8%, expected -2.3%), falling for the 19th consecutive month; Month-on-month, it decreased by 0.2%. Although the international crude oil and non-ferrous metal prices have risen, the prices of steel, cement, and coal priced in China have fallen. Under the clamping effect of the real estate downturn, the momentum for the sharp rise in domestic industrial product prices is insufficient. In US dollar terms, China's total export value in April was US$292.45 billion, with a year-on-year increase of 1.5% (previous value -7.5%), exceeding market consensus expectations by 1.3%; The total value of imports was 220.1 billion US dollars, a year-on-year increase of 8.4% (the previous value was -1.9%, the expected 4.7%), and the import performance was stronger with the support of bulk commodities and high-tech products; the total value of imports and exports was 512.56 billion US dollars, a year-on-year increase of 4.4%; The trade surplus was 72.35 billion US dollars. Exports rose 1.5 percent year-on-year in the first four months of this year, significantly better than the 0.4 percent growth rate in the same period last year. From the perspective of export commodities, integrated circuits, ships, and automobiles contributed the most to the growth rate. In terms of trading partners, ASEAN continues to be the mainland's largest trading partner. Chart 1: New social finance turned negative, the last time was in October 2005
Source: Bloomberg, Sirui Research On May 9, the Bank of England kept its benchmark interest rate unchanged at 5.25% for the sixth consecutive time, in line with market expectations. Seven voted to keep interest rates unchanged and two voted for a rate cut, and the "dovish" character has become more apparent. Bank of England Governor Bailey said that the shock of global inflation is receding, the possibility of a rate cut in June has not been ruled out and is not planned, and the rate decline may be greater than the market expects. Subsequently, the pound fell more than 35 points against the dollar in the short term, while the UK's FTSE 100 index jumped about 0.4% in the short term. In May, the preliminary Michigan consumer confidence index unexpectedly fell to 67.4 from 77.2 in the previous month, far less than the expected 76.2 and the largest decline since August 2021. At the same time, consumers' inflation expectations for the next 1 year rose to 3.5%, and their inflation expectations for the next 5-10 years were 3.1%. The sharp drop in consumer confidence should have been accompanied by a rise in expectations of interest rate cuts, but in fact it was accompanied by a rise in inflation expectations, i.e., a decline in interest rate cut expectations. Two factors weighed on U.S. stocks, and the Nasdaq returned to decline. Initial jobless claims in the United States surged to 231,000 in the week ended May 4 (209,000 previously), higher than expectations of 212,000. In the week ended April 27, the number of continuing jobless claims increased to 1.785 million (previous value was 1.768 million), higher than the forecast of 1.782 million. The U.S. labor market is cooling at an accelerated pace. The UK's gross domestic product (GDP) grew by 0.6% quarter-on-quarter in the first quarter (-0.3% previously, 0.4% expected), the best performance since the easing of pandemic restrictions in late 2021; YoY 0.2% (previous -0.2%, 0% expected). In March, UK industrial production rose by 0.2% month-on-month (previous value 1.1%, forecast -0.5%); Manufacturing output rose 0.3% m/m (1.2% previously, -0.5% expected). The UK economy has emerged from the recession and is on track to recover. The pound expanded slightly after the release of the data, but then retreated. In April, the Caixin China Services Purchasing Managers' Index (PMI) edged down 0.2 percentage points month-on-month to 52.5, remaining in the expansion range for 16 consecutive months, while the composite PMI edged up 0.1 percentage points to 52.8, the highest since June 2023, indicating that the pace of expansion of Chinese enterprises' production and business activities has accelerated. In the week ended May 3, the US MBA mortgage application index rose 2.6% (previous value -2.3%), buoyed by lower borrowing costs. The 30-year fixed mortgage contract rate fell to 7.18% from 7.29%, falling for the first time after five consecutive weeks of gains. As of the end of April this year, the size of the mainland's foreign exchange reserves fell by 1.4% from the previous month to US$3,200.8 billion, mainly due to changes in asset valuations. Gold reserves were reported at 72.8 million ounces, an increase of 60,000 ounces from the previous month, increasing their holdings of gold reserves for the 18th consecutive month, with a cumulative increase of 10.16 million ounces. In March, German factory orders fell by 0.4% month-on-month (previous value 0.2% vs. 0.4% expected), mainly dragged down by other vehicles (planes, ships, trains) and the manufacture of metal products. The weaker-than-expected weakness suggests that Germany's economic growth may be weak in the second quarter. The next day's industrial output fell 0.4% month-on-month, better than expectations of -0.7%, but a significant decline from the positive growth of 2.1% in the previous month. As the main force of the French economy, the final value of the services PMI in April was revised upward to 51.3 from 50.5. The final value of the composite PMI was revised upward from 49.9 to 50.5, and the economy gradually resumed growth. From May 5 to 10, the President of the People's Republic of China was invited to pay a state visit to France, Serbia and Hungary. For France, the two sides will promote the upward balance of bilateral trade, expand cooperation in agriculture, food, finance and other fields, promote joint R&D and innovation in aerospace and civil nuclear energy, strengthen the synergy of development strategies, and expand cooperation in emerging fields such as green energy, intelligent manufacturing, biomedicine, artificial intelligence, and third-party markets. During the visit, the two sides signed 18 inter-departmental cooperation agreements, covering aviation, agriculture, people-to-people, green development, and cooperation with small and medium-sized enterprises. China has decided to extend the short-term visa-free policy for citizens of 12 countries, including France, to come to China until the end of 2025. On the Serbian side, the two heads of state announced that they will deepen and enhance the China-Serbia comprehensive strategic partnership and build a China-Serbia community with a shared future in the new era. Serbia has become the first European country to work with China to build a community with a shared future. On the Hungarian side, the President stressed that China is willing to strengthen the synergy between the development strategies of the two countries with Hungary, give full play to the role of the China-Hungary Intergovernmental Belt and Road Cooperation Committee and other mechanisms, promote cooperation in infrastructure and green energy in an orderly manner, and complete the construction of the Hungarian-Serbian railway on schedule. Actively expand cooperation in emerging fields such as clean energy and artificial intelligence. This week, the property market in many places in the mainland has been "relaxed". Hangzhou has completely lifted the housing purchase restriction measures, and non-Hangzhou household registration personnel who have obtained legal property rights in Hangzhou can apply for settlement. Xi'an has completely canceled the housing purchase restriction measures, and residents will no longer review the qualifications for purchasing new commercial housing and second-hand housing in the city. At present, in addition to the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen, only Hainan Province and Tianjin are still in a state of partial relaxation of purchase restrictions. It is learnt that the domestic regulator is considering reducing the 20% income tax that mainland individual investors are required to pay when they receive dividends when investing in Hong Kong-listed companies through the Hong Kong Stock Connect, so as to avoid double taxation in the two places. During the two sessions this year, the chairman of the Hong Kong Securities and Futures Commission, Lui Tim Leung, also proposed to reduce the tax level of dividends and dividends for individual investors in the Hong Kong Stock Connect and lower the access standards for mainland investors in the Hong Kong Stock Connect. At this time, the Hong Kong Stock Exchange has no comment. On May 10, a number of Hong Kong stock dividend-related ETFs rose more than 5% amid rumors. Domestic investors rushed to raise high-dividend assets, and the most bought stocks were Bank of China, China Mobile, and Agricultural Bank of China. On May 9, the U.S. Department of Commerce blacklisted 37 Chinese entities, citing so-called "national security," following last month's call for higher tariffs on Chinese steel and aluminum and an investigation into China's shipbuilding industry. It is reported that next week the United States may announce new tariffs on China, mainly targeting key strategic industries such as electric vehicles and solar energy equipment.
During the five-day May Day holiday in 2024, a total of 295 million domestic tourists traveled across the country, a year-on-year increase of 7.6%; The total travel expenditure of domestic tourists was 166.89 billion yuan, a year-on-year increase of 12.7%; The daily per capita consumption was only 113 yuan, lower than 151 yuan in the same period in 2019, and the unit price of tourists was low.
During the week, a number of Federal Reserve officials expressed their positions one after another. On Monday, Richmond Fed President Barkin (who has the right to vote) said that the current level of interest rates is helping to bring inflation down to 2%. On Tuesday, New York Fed President Williams (perpetual voting) argued that the current monetary policy is in an "excellent state", although interest rates may eventually be cut; Minneapolis Fed President Kashkari (non-voting) said that the most likely scenario would be to keep interest rates unchanged for an "extended period of time" and not rule out the possibility of raising interest rates if necessary. On Wednesday, Boston Federal Reserve Bank President Collins (non-voting) said inflation could return to 2% in a reasonable time and that the labor market remained healthy. On Friday, Atlanta Fed President Bostic (with the right to vote) said that he expects to cut rates only once this year, but now is more focused on the right timing of the "first rate cut"; Dallas Fed President Logan (non-voting) said it was too early to consider a rate cut given the disappointing inflation data so far; Fed Governor Bowman (with voting rights) is the most hawkish and does not expect a rate cut this year.
The Bank of Japan released the minutes of its monetary policy meeting on April 25-26. The minutes showed that if the outlook for economic activity and prices materializes and underlying inflation rises, the Bank of Japan will adjust the level of monetary easing, while expecting accommodative financial conditions to remain in place for the time being.
On 7 May, Israeli forces took control of the Palestinian side of the Rafah crossing, the only crossing point linking the Gaza Strip to Egypt. Ceasefire talks between the two sides continued to drag on, with Hamas saying it had accepted the proposals of the facilitators, Egypt and Qatar, but Israel rejected them. China and France issued a joint statement on the situation in the Middle East on the 7th. The two Heads of State oppose the Israeli attack on Rafah, which will lead to a humanitarian catastrophe on a larger scale, as well as the forcible relocation of Palestinian civilians.
The Riksbank announced an interest rate cut on Wednesday, cutting its benchmark interest rate to 3.75% from 4.0%, becoming the second developed central bank to adopt an accommodative policy after the SNB.
On May 7, local time, TikTok and ByteDance filed a lawsuit in the U.S. federal court, asking the court to rule that the "Protecting Americans from Foreign Adversaries Control of Apps Act" aimed at banning TikTok violates the U.S. Constitution and blocks the implementation of the law.
The Ministry of Industry and Information Technology solicited opinions on the "Lithium Battery Industry Standard Conditions and Announcement Management Measures (Draft for Comments)". The "Draft Opinions" make it clear that lithium battery enterprises should be guided to reduce manufacturing projects that simply expand production capacity, strengthen technological innovation, improve product quality, and reduce production costs. The annual expenses of lithium battery enterprises for R&D and process improvement shall not be less than 3% of the main business income. On May 9, the lithium battery sector led the rise, and many stocks rose to the limit.
On May 9, Country Garden announced that it was unable to pay the interest on the two phases of guaranteed bonds on time, totaling 65.95 million yuan, due to the unsatisfactory recovery of sales and difficulties in fund allocation. We will endeavour to pay in full within the grace period of 3 working days. On the afternoon of the 11th, Country Garden completed the interest repayment within the grace period.
On Friday, real estate stocks in the A-share and Hong Kong stock markets collectively moved. Shimao Group, a Hong Kong domestic real estate stock, once rose by more than 90%, and South China City rose by more than 70%. The A-share real estate sector rose nearly 4%, and many stocks such as China Merchants Shekou and Binjiang Group rose to the limit. The analysis points out that the stock price of real estate stocks usually reacts faster than the recovery of fundamentals, so the bottom of real estate stocks has been basically clear.
The first quarter report on China's monetary policy implementation released by the central bank clearly stated that "we will continue to deepen the market-oriented reform of interest rates, give full play to the role of the reform of the loan market prime interest rate and the market-oriented adjustment mechanism of deposit interest rates, and promote the steady decline of corporate financing and household credit costs." Subsequently, a number of banks successively lowered the interest rate on deposits. At present, the five-year deposit interest rate of the six major state-owned banks is 2%, the five-year deposit interest rate of most of the national joint-stock banks is 2-2.05%, and a few are reported at 2.3%.
On 9 May, HKEX's new chief executive, Tim Chan, predicted a comeback of major initial public offerings (IPOs), with 100 applicants currently waiting to list in Hong Kong. Hong Kong's Deputy Financial Secretary Michael Wong said Hong Kong authorities are working with their Saudi counterparts to launch an exchange-listed fund (ETF) in Riyadh that tracks Hong Kong's stock index.
On May 9, the main contract of the container transportation index (European line) soared sharply, and once rose by more than 12% in the intraday, setting a new record in history. Since March 15 this year, the cumulative increase has been as high as 206%. As the geopolitical situation heats up, most of the Red Sea routes have been diverted to African routes, resulting in capacity constraints.
Vaccine maker Novavax closed up nearly 99% on Friday, its biggest one-day gain since the company's U.S. IPO. Novavax Therapeutics announced that it has entered into a multibillion-dollar exclusive license agreement with French pharmaceutical giant Sanofi Aventis to jointly commercialize Novavax COVID-19 vaccine and jointly develop a combination vaccine against coronavirus and influenza.
On May 10, local time, ZEEKR became the fourth Chinese new energy vehicle company to be successfully listed on the U.S. stock market, and its share price rose 34.6% on the first day, and the intraday increase once exceeded 40%. Since its inception in 2021, the company has gone public in just three years. It is also the largest IPO by a Chinese company in the U.S. market since 2021.
Amazon plans to spend $9 billion to expand its cloud computing infrastructure in Singapore, becoming the latest global technology company to increase its investment in the Southeast Asian market. Amazon said the investment will be completed over the next four years, doubling the investment in Amazon Web Services in Singapore and helping to meet the growing customer demand for cloud services, as well as accelerate the adoption of artificial intelligence. Including investments in Singapore, AWS has announced plans to invest about $35 billion outside the U.S. so far this year.
Sources: Wind, Bloomberg, National Bureau of Statistics, Ministry of Finance, Ministry of Commerce, Ministry of Culture and Tourism. A review of the performance of major assets
The brightest performance this week is undoubtedly the upward movement of A-shares and Hong Kong stocks. The Hang Seng Index continued to rise 2.6%, led by funds in high-dividend assets, led by utilities and financials. Following the trend of Hong Kong stocks, A-shares climbed steadily this week, with the Shanghai Composite Index rising 1.6% and the Shenzhen Component Index rising 1.5%. Following the start of a technical bull market in Hong Kong stocks, the Shanghai Composite Index once stood above 3,163 points this week, rebounding more than 20% from the intraday low on February 5. Chart 2: Hong Kong stocks join hands with A-shares to rise
Source: Bloomberg, Sirui Research: Most of the world's major stock indexes rose. Benefiting from the continued recovery of the European economy, the strong performance of corporate earnings and the rising bets on interest rate cuts, the German DAX, the French CAC 40 and the British FTSE 100 were among the top gainers, rising 4.3%, 3.3% and 2.7% respectively. The significant gains in both European and Hong Kong equities benefited from their relatively low valuations. The three major U.S. stock indexes collectively closed higher, with the S&P 500 up 1.9% and the Nasdaq up 1.1%, while most of the large technology stocks and popular Chinese concept stocks closed slightly lower. The price-weighted Dow achieved "eight consecutive gains", with a cumulative increase of 2.2%.
The Bank of Japan is suspected of intervening in the foreign exchange market twice last week, but the yen is still weak and there is no obvious sign of stabilization. USD/JPY rose 1.8% for the week and 10.5% for the year. On Wednesday, Bank of Japan Governor Kazuo Ueda said the central bank could take monetary policy action if the yen's move has a significant impact on inflation. Despite its hawkish rhetoric, the market seems to have fallen on deaf ears. Under continued selling pressure, USD/JPY approached the 156 mark.
After a brief pullback, gold and silver resumed their rally. During the week, COMEX silver rose 6%, outpacing COMEX gold by 2.5%, with a year-to-date increase of 18.2% and 14.2% respectively. The main logic behind the trend of gold prices is the intensification of geopolitical risks and the weakening of the US dollar credit system. If the Fed starts cutting interest rates in the second half of the year, gold's attractiveness could rise further.
Chart 3: Silver outperformed gold
Fact —————
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