First, there has been a major turning point for Britain to leave Europe; secondly, the Federal Reserve announced expansion and blood transfusion until 2020; and thirdly, substantial progress has been made in Sino-US trade.
The global stock market was jubilant, with the three major indexes of US stocks closing higher overnight, all up more than 1%. In the last three trading days, the value of the U.S. stock market increased by about $1.3 trillion, or more than 9 trillion yuan. Apples market capitalization has returned to the top of the world by a small margin. The European market, Hong Kong market and A50 period are all rising, and the RMB is soaring by nearly 800 points.
Happy Time in Global Markets
In the past week, although the peripheral market has been volatile and volatile, the market in the past three trading days has gained a lot. Lets take stock of the results of this week.
In the last three trading days, the value of the U.S. stock market increased by about $1.3 trillion, or more than 9 trillion yuan. Apples market capitalization has returned to the top of the world by a small margin.
The A50 index closed Liulianyang, up nearly 5% since October.
The Renminbi surged nearly 800 basis points in three trading days, from 7.168 to 7.088.
Three Major Advancing Risk Preferences
In recent trading days, gold has been the worlds worst performing asset, and COMEX gold prices have fallen to around $1493. This means that risk aversion has eased and risk appetite has risen recently. From the current event-driven point of view, the power to promote risk preference mainly comes from three aspects:
First, there has been significant progress in Britains disengagement from Europe. This week, it was reported that the European Union was ready to make a major compromise to allow the Northern Ireland Parliament to withdraw from the Irish Guarantee Scheme after many years with a double majority. Irelands foreign minister, Kovni, said the talks were mainly aimed at maintaining the status quo and Ireland was not stubborn on the issue. It is important not to be overwhelmed by the progress. Much remains to be done. It is possible to reach a de-EU agreement by the end of this month.
British Prime Minister Johnson and Irish Prime Minister Valladka met for three hours and said they hoped to find a way to reach an agreement. Officials from both sides would continue to communicate constructively, British media reported Wednesday. Ireland also has media reports that talks between British Prime Minister Johnson and Irish Prime Minister Valladka have made great progress on customs issues.
Irish Prime Minister Valladka recently said that a de-EU agreement could be reached by the end of October, enabling Britain to leave the EU in an orderly manner. Earlier, he had what he called very positive talks with British Prime Minister Johnson. It is only three weeks before Britain withdraws from the EU. It is still unclear what conditions Britain will withdraw from the EU, or even whether it will withdraw from the EU.
Earlier, Federal Reserve Chairman Powell said the Fed would resume purchasing Treasury bonds to avoid a repeat of recent turmoil in the money market, while remaining open to interest rate policy several weeks before the next policy meeting.
Third, according to Xinhua News Agency, Washington, October 11, from October 10 to 11, Liu He, a member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council and Chinese leader of the China-US Comprehensive Economic Dialogue, held a new round of high-level economic and trade consultations between China and the United States in Washington with U.S. Trade Representative Lethizer and Finance Minister Mnuchin. Under the guidance of the important consensus of the two heads of state, the two sides held frank, efficient and constructive discussions on economic and trade issues of common concern. The two sides have made substantial progress in agriculture, intellectual property protection, exchange rate, financial services, expanding trade cooperation, technology transfer and dispute settlement. The two sides discussed arrangements for follow-up consultations and agreed to work together towards a final agreement.
Four major variables or dominant periphery
The optimism of global investors may continue in the face of significant gains, but it is not monolithic, especially in the last few minutes of overnight market closing. Last night, S & Ps last few minutes were like this:
So what are the variables in the market?
Firstly, the market risk at this stage depends on location and price. However, judging from the position and price of U.S. stocks, it may not be very cheap now. Research data from Guojin Securities show that the current P/E ratio of S&P 500 is still above the historical average.
Compared with the global market, the valuation level of U.S. stocks is relatively high in the major global markets.
Second, despite signs of easing trade disputes, markets remain concerned about the global economic outlook. Analysts from UBS say the optimism may not last until Christmas. In 2020, the low growth of the global economy will not change as trade eases. Meanwhile, George Brown, an economist at Investec UKs Tianda Group, said that Britain would avoid recession, but at the same time, growth was clearly fragile in the context of uncertainty surrounding Britains withdrawal from Europe and the global economy. In the three months to August, the annualized growth rate of GDP fell from 1.3% to 1.1%, which was equal to the seven-year low set in June. Nor will this vulnerability be reversed quickly with Britains orderly exit from Europe.
Thirdly, it was reported that 17% of Americans began hoarding cash at home because of concerns about a potential recession, according to a new MetLife survey conducted on November 11, Beijing time. Metropolitan Life surveyed more than 8,000 American adults, and 21% of respondents said they were more conservative in spending money.
Even those who do not go to extremes will be affected by concerns about the recession. According to the Metropolitan Life Survey, about 41% of Americans say they are checking their investments more frequently because people are talking about the possibility of a market downturn.
The Allianz Quarterly Market Perceptions Study, released a day earlier, showed that more Americans were worried about a recession this year because of slowing economic growth, Global trade conflicts and geopolitical concerns. Fifty percent of respondents expected a major recession to be imminent, up four percentage points from 46 percent earlier this year.
Fourthly, from the perspective of market structure, the US stock market is also facing the impact of big and small similar to A shares in the future. The lock-in period of Uber, Pinterest, Zoom and other unicorns for this years IPO will expire between mid-October and the end of the year. This may put new pressure on their share prices.
Founders, employees and some early private investors who buy stocks before a company goes public are usually limited to selling stocks within 90 to 180 days. Analysts said that after the expiration of the ban period, a lot of selling could put pressure on already struggling IPOs and prevent other start-ups from entering the public market this year.
How will A share be deduced?
In the first week after the National Day, A shares swept away the haze before the Festival, and the market value of the four trading days increased by nearly 2 trillion RMB, which was a proper opening bonus. So, how will A share be deduced in the future?
First of all, from the perspective of the trend of large funds, although the market has been volatile in recent months, but still run out of many bull stocks. For example, Jiudings investment has soared 251% since July 1; Baodings technology has risen 250% in the same period, and the stock has been rising and stopping continuously in recent years; China Submarines shares have risen 242% and Zhuoshengweis shares have risen 235%.
According to what Chinese journalists from securities firms have learned from the market, the main force that managed the market value several years ago and did not die out in recent years may gradually return, which is called Hu Hanshan is back again. Their return has the realistic needs of listed companies, such as convertible bond to equity swap, resolving the equity pledge crisis, and obtaining secondary market returns in equity transfer. With the return of these players, there may be more structural opportunities in the future market.
Secondly, the market here launched a wave of big market clues are not yet seen. Similar to the level in the first quarter of this year, the first clue to emerge is replenishment. In September, the turnover of the two cities exceeded 700 billion yuan at most, and the market adjusted along the way. The recent minimum volume of the two cities was only about 350 billion yuan, which returned to about 450 billion on Friday. If the market wants to continue to rebound in the future, the transaction amount needs to be restored to the level of more than 600 billion, otherwise it will be difficult to sustain.
Third, in terms of valuation and graphics, the rebound will not end soon. In terms of absolute valuation, the overall valuation level of A-share market is not very high, but in terms of capital prices, under the background of the net return in October, the overall price of various types of funds has declined, indicating that the situation of tight money at the end of the third quarter has improved.
Technically, the 30-minute level bottom deviation has been in the rebound market since it was formed, and has not yet formed a complete central form, which means that there is still a distance from the top deviation. On the event-driven side, sentiment tends to be optimistic, which may also contribute to the A-share market rebound. However, it is worth noting that the central form of GEM index may be formed quickly, and then we need to observe whether it will form a top deviation trend. From the current trend of treasury bond yields, the 10-year Treasury bond yields in China have rebounded more in recent days, up to 3.199%. The higher the data go, the greater the resistance to valuation, especially growth stocks.
Source: responsible editor of securities companies in China: Yang bin_nf4368