Analysis of the A-share market trends after a big pump

Recently, the Chinese stock market has experienced a strong rebound, triggering widespread discussion about future trends in the market. This article will analyze the future of A-shares from three aspects: economic fundamentals, policy direction, and stock market valuation.

I. Economic Fundamentals

Currently, the overall domestic economic fundamentals remain weak, but there are some positive signals. Consumer data improved during the National Day holiday, but this has not yet been reflected in the main economic indicators. It is expected that in the coming quarters, China's economy may show a mild recovery trend with policy support.

The manufacturing PMI for September is 49.8%, an increase of 0.7 percentage points from last month, indicating a recovery in manufacturing sentiment. The non-manufacturing business activity index is 50.0%, a slight decrease from last month.

In August, the profits of industrial enterprises above designated size fell by 17.8% year-on-year, mainly affected by the high base from the same period last year.

In August, the national consumer price index for residents rose by 0.6% year-on-year, with an average rise of 0.2% from January to August.

In August, the total retail sales of consumer goods increased by 2.1% year-on-year.

From the perspective of financial leading indicators, the overall financing demand in society is insufficient, the year-on-year growth rates of M1 and M2 are slowing down, and the scissors difference between the two has risen to a historical high, reflecting insufficient demand and a certain degree of idle operation within the financial system.

2. Policy Trends

Recent policy measures have exceeded market expectations, providing support for the stabilization and rebound of A-shares.

On September 24, the central bank announced the establishment of new monetary policy tools to support the stable development of the stock market, including convenience swaps for securities, funds, and insurance companies, as well as special relending for stock buybacks.

On September 26, the Central Financial Office and the Securities Regulatory Commission jointly issued "Guiding Opinions on Promoting Long-term Funds to Enter the Market," which involves multiple measures such as cultivating a long-term investment ecosystem and developing equity public funds.

The current policies mainly focus on two paths: reducing financing costs and boosting investment return expectations, but a sustained market recovery requires subsequent structural fiscal stimulus and the implementation of policies.

The press conference held by the National Development and Reform Commission on October 8 failed to meet market expectations for large-scale fiscal policies, becoming one of the main reasons for the market adjustment after the National Day.

3. Market Valuation

From the perspective of the duration, extent, and valuation level of the decline, this round of market movement has shown characteristics of a market bottom.

As of October 9, the valuation level of A-shares has been restored to near the median. The rebound at the end of September was significant, with the PE ratio reaching the level expected at the beginning of the year for economic recovery.

In a horizontal comparison, the relative valuation of the Chinese market is still at a relatively low level compared to the Asia-Pacific region, close to that of South Korea.

Conclusion

Overall, the bottom of the A-shares may have formed, but the main upward wave has not yet arrived. In the short term, market volatility may be large, mainly influenced by technical factors and sentiment. Whether subsequent fiscal policies can follow up will become a key factor affecting the pace and space of the stock market's upward movement. From a long-term perspective, the recent pullback seems more like an adjustment rather than a trend ending, and the market still has upward space. Investors should maintain rationality and pay attention to the implementation of policies and the substantial improvement of the economic fundamentals.