On June 23, when the yield of Chinas 10-year Treasury bond rebounded to 2.977%, the market just laughed and buried in buying medicine, technology and liquor; on June 24, according to the latest forecast of the International Monetary Fund, when China became the only major economy to maintain growth in 2020, the market just laughed and continued to work on medicine, technology and liquor. As if, these three plates have no ceiling.
However, when the fund finished half a year of net worth, all this changed. There are three driving forces leading to this change, namely, the reduction of rediscount rate and refinancing interest rate, the addition of local government special bonds to supplement the capital of small and medium-sized banks, the PMI data and the issuance of special treasury bonds. These three promoters directly promoted a wave of unexpected blue chip market. At the same time, foreign investment is rare. So, does this mean a premium for China, and is the style sustainable?
The three major promoters or promote the 7.1 market
These three things are:
The first is that the central bank has decided to reduce the refinancing and rediscount rates from July 1, 2020. Among them, the interest rates of agricultural loans and small loans were reduced by 0.25 percentage points. The rediscount rate was cut by 0.25 percentage point to 2%. In addition, the central bank also lowered the interest rate of financial stability refinancing by 0.5 percentage points. After adjustment, the interest rate of financial stability refinancing was 1.75%, and the interest rate of financial stability refinancing (extension period) was 3.77%. The central banks reduction of rediscount rate is the first adjustment of rediscount interest rate in recent 10 years. The last adjustment dates back to December 2010, when the central bank adjusted the rediscount rate from 1.8% to 2.25%, and there has been no change in the next decade. The refinancing rate was lowered for the second time in this year, and it has been reduced by 50bp.
Second, on July 1, the executive meeting of the State Council decided to arrange a certain amount in the new special debt limit of local governments this year, and allow local governments to explore new ways to reasonably supplement the capital of small and medium-sized banks by means of subscribing convertible bonds in accordance with laws and regulations, mainly giving priority to supporting small and medium-sized banks with sustainable market-oriented operation ability to supplement capital, and serving small and medium-sized enterprises Enterprises, employment protection and improving corporate governance of small and medium-sized banks should be combined. Before that, local special bonds were not allowed to supplement bank capital. This is a very big policy breakthrough.
The third is the June China Purchasing Managers Index (PMI) released on June 30. The PMI of the manufacturing industry was 50.9%, 0.3 percentage points higher than that in May, and the non manufacturing business activity index was 54.4%, 0.8 percentage points higher than that in May, rising for four consecutive months. At the same time, the issuance of 1 trillion special treasury bonds began in mid June and will be completed by the end of July.
Why do these three things promote the big blue chip market?
Before that, the market had always expected that the currency would gradually tighten after the epidemic subsided. And the capital interest rate does have a rising process, which can be seen in the interest rate of 10-year Treasury bonds and Shibor. Normally, in such a monetary environment, the opportunities for growth stocks should be gradually weakened. However, due to the demand for half a years net worth, growth stocks also ushered in a bright moment until June 30. It was not until July 1 that the policy released the signal of expanding credit that the market structure changed.
These signals include the use of local special bonds to supplement the capital of small and medium-sized banks, and the reduction of refinancing interest rates and discount rates. At the same time, Chinas purchasing manager index (PMI) was released on June 30. The manufacturing PMI was 50.9%, 0.3 percentage points higher than that in May, and the non manufacturing business activity index was 54.4%, 0.8 percentage points higher than that in May, rising for four consecutive months. The issuance of special treasury bonds strengthened the expectation of sustained economic growth.
The downward rediscount rate directly pushed up property stocks. In this process, the logic of securities companies has also been promoted, because the stock market of securities companies in 2014 was launched in the process of interest rate reduction, but the scale and method of interest rate reduction are not the same. The strengthening of the expectation of a better economy, as well as the capital supplement of small and medium-sized banks, is a relief for the small and medium-sized financial institutions with greater risk pressure. Coupled with the low level of financial real estate valuation, to some extent, this is a big blue chip market with perfect combination of policy promotion and valuation repair under the background of wide credit and economic recovery.
Foreign investment is rare. Is Chinas premium coming?
It is worth noting that foreign investment has played an important role in the three-day boom. When we study the net purchase amount of Beishang capital, we can find that on July 1, Beishang channel was closed and a shares began to rise, which was basically dominated by domestic capital; on July 2, the channel opened, foreign investors began to buy, and began to lead the blue chip market.
According to statistics, in the past two trading days, foreign investors net purchase of a shares exceeded 30 billion yuan, which has exceeded the net purchase amount in May this year. Moreover, even in the bull market from 2014 to 2015 and the explosive rise in early 2019, it is rarely seen that the phenomenon of buying more than 10 billion for two consecutive days. In the past, the super buying of northbound capital will only appear when a shares are included in the international index. So why is foreign investment suddenly so fierce?
First of all, it may be related to the interest rate gap between China and the United States. According to the British financial data, the yield of Chinas 10-year Treasury bonds is 2.929%, although there is a certain degree of decline compared with the level of nearly 3.3% in November last year, the decline of 10-year Treasury bond yield of the United States is far more than that of Chinas treasury bonds in the same period. According to the latest data, the yield level of treasury bonds is only 0.669%, and the interest rate gap between China and the United States has widened to 2260. At the beginning of November last year, the minimum interest rate difference between the two countries was only about 1350 points.
The third is the epidemic. In the process of fighting the new crown epidemic, China and the United States have shown completely different styles. Even though there are still some small disturbances in some places, the epidemic situation in China has been basically controlled. However, the epidemic is still spreading in the United States, and there are more than 50000 cases diagnosed in a single day for three consecutive days. White House health adviser Dr Anthony Fauci recently warned that new cases could exceed 100000 a day.
In order to fight against the new crown epidemic, the global currency issuance has been rampant in the past six months, but the epidemic situation in most countries has not been completely controlled, especially in the United States. Money flows from countries with excessive issuance to countries with stable economy and relatively bright prospects, which is also in line with the nature of capital pursuing profits.
Can style last?
With the current capital structure, it is basically in the direction of development in favor of big blue chips. The interest rate of funds went up, but the credit structure was not tense, the economic expectation continued to improve, and foreign investors also preferred blue chips. So, can style last? Analysts believe that if the mood comes up, it will not end so soon.
First of all, from the perspective of policy structure, the market trend after the first two issuance of special treasury bonds was favorable to blue chip stocks. On August 18, 1998, the Ministry of Finance issued 270 billion yuan long-term special treasury bonds to four state-owned commercial banks, all the funds raised were used to supplement the capital of state-owned commercial banks. In the secondary market, just on the day of the issuance of the special treasury bonds, the Shanghai Composite Index ended a 54 day slump with a range of 26.70%. On that day, it saw a long-term bottom of 1043.02 points, and rebounded to 1300.15 points in the following three months, up 24.65%. When the special treasury bonds were issued in 2007, the market was hit at first, but then the big blue chips broke out, and the Shanghai Composite Index soared 71.85% to 6124.04 points in 68 trading days.
This year, the issuance of 1 trillion special treasury bonds started in mid June and will be completed by the end of July. All the issuing methods are market-oriented, which means that the capital of the market will be disturbed to a certain extent. But from the perspective of its use, in addition to 300 billion yuan for anti epidemic spending, the other 700 billion yuan can be used for infrastructure projects. This is undoubtedly a major positive for stable growth. This tight currency and stable economic pattern is also conducive to the continued development of blue chips.
Secondly, compared with the market in 2003, five golden flowers 17 years ago are still worth mentioning. During the SARS period in 2003, a shares also experienced a rise, fall, and then burst market within a year. After the Shanghai Stock Index saw the bottom of 1307, on November 19, 20, 24, and December 1, 22, the index successively appeared a large volume of the positive line, and its momentum of closing short was somewhat similar to the current situation. At that time, it also suddenly rose to a level that some investors could not understand. From the perspective of the rising structure, the five golden flowers market of steel, automobile, petrochemical, energy and power, and finance is still fresh in the memory of some old shareholders. Behind that wave of market was also driven by policy reform, which lasted for five months.
Third, from the perspective of structure, in the last three trading days, the stock price of Everbright Securities has nearly doubled since June 19. CITIC Securities and CITIC construction investment rumors of merger, also become a catalyst for the rise of securities companies. After Fridays trading, the good news came out of the securities companies, and the follow-up securities companies may have the process of Chong Gao. Compared with securities companies, the valuation advantages and industry trends of the insurance sector have been too much, insurance stocks in the 7 warm-up 3 days have been signs of strength, China Life late strong trading limit. The growth of premium income, the rise of treasury bond yields and the recovery of blue chip stocks are significant positive for insurance companies. If the securities market continues to deduce, the follow-up pan financial sector will also be concerned by funds. Analysts believe that as long as the trading volume level does not show signs of shrinking, the blue chip rate will probably rise. In the future, if the capital turns around in the north and the policy appears to be adjusted, it is necessary to be alert to the change. Extended reading midday review: Shanghai index rose 4.24% close to 3300, two cities turnover nearly trillion yuan, market fire to trading software downtime! The familiar bull market is about to repeat itself? Is the bull market really coming? Bank stocks soared across the board: more than 5% up_ NF4368
Third, from the perspective of structure, in the last three trading days, the stock price of Everbright Securities has nearly doubled since June 19. CITIC Securities and CITIC construction investment rumors of merger, also become a catalyst for the rise of securities companies. After Fridays trading, the good news came out of the securities companies, and the follow-up securities companies may have the process of Chong Gao. Compared with securities companies, the valuation advantages and industry trends of the insurance sector have been too much, insurance stocks in the 7 warm-up 3 days have been signs of strength, China Life late strong trading limit. The growth of premium income, the rise of treasury bond yields and the recovery of blue chip stocks are significant positive for insurance companies. If the securities market continues to deduce, the follow-up pan financial sector will also be concerned by funds. Analysts believe that as long as the trading volume level does not show signs of shrinking, the blue chip rate will probably rise. In the future, if the capital turns around in the north and the policy appears to be adjusted, it is necessary to be alert to the change.