A press conference was held by the State Council Information Office this morning. Important information was released during this press conference, including plans to research, formulate, and implement a strategy to expand domestic demand for the 2026-2030 period, study the establishment of a national-level mergers and acquisitions fund, regulate low-price and disorderly competition among enterprises according to law, plan and advance a batch of iconic and leading high-tech industrial mega-projects for the "16th Five-Year Plan" period, research and formulate an action plan for stabilizing and expanding employment and a plan to increase urban and rural residents' incomes, and effectively implement several measures to further promote the development of private investment. Wang Changlin, Deputy Director of the National Development and Reform Commission, stated that with CPI and PPI both showing a recovery, the next steps on the aggregate front involve implementing more proactive fiscal policy and moderately loose monetary policy, making promoting price recovery a key consideration for monetary policy, leveraging the integrated efficiency of existing and incremental policies, and fostering a positive interaction between economic growth and price recovery. The concept of "promoting price recovery" is not unfamiliar. It has been mentioned in the Central Economic Work Conference and statements from the central bank over the past year. Why is it necessary to promote price recovery? Let me briefly explain. If overall social prices are slowly declining, and one's wage income is not growing or is even decreasing, then the willingness to spend diminishes, and one becomes hesitant to spend. Consumption, such as buying home appliances or replacing a car, would likely turn into "waiting a bit longer" or "managing without buying or replacing seems fine." For businesses, a decline in consumers' willingness to spend means it becomes increasingly difficult to sell their products. Through this simple explanation, the importance of promoting a reasonable recovery in prices should be clear. Many investors have held expectations for the consumer sector in recent years, but the sector has consistently failed to gain momentum or produce a major rally; consumer willingness is one factor. To promote stable economic growth and a reasonable recovery in prices, the state has introduced a series of policies. Just today, the Ministry of Finance's official website released five documents in succession, including jointly implementing a loan discount policy for small, medium, and micro enterprises, optimizing the implementation of a loan discount policy for business entities in the service industry, jointly implementing a special guarantee plan for private investment, optimizing the implementation of a fiscal discount policy for equipment renewal loans, and optimizing the implementation of a fiscal discount policy for personal consumption loans. Returning to the market. Today, the three major A-share indices declined, with the Shanghai Composite Index edging down 0.01%, while the Shenzhen Component Index and the ChiNext Index fell 0.97% and 1.79%, respectively. The combined turnover for the Shanghai, Shenzhen, and Beijing markets reached 2,804.4 billion yuan, an increase of 72 billion yuan from the previous day. The median change for individual stocks was a decline of 0.39%. The Shanghai Composite Index fell by as much as 0.82% during the session but was remarkably pulled back near yesterday's closing level, showcasing the "precise control" of major players. Regarding the broader market, my view remains unchanged: the Shanghai Composite Index has triple support below (the 20-day moving average, the high from November last year, and the uptrend line from September-October last year), which should provide some support. In terms of other indices, an unusual phenomenon appeared today: broad-based indices representing the small and mid-cap segment weakened significantly. The CSI 1000 Index and the NZ 2000 Index both saw intraday maximum declines exceeding 1.9%, and closed down over 1%, significantly underperforming the Shanghai Composite Index, the SSE 50 Index, and the CSI 300 Index. The broad-based ETFs for the SSE 50 and CSI 300 have been the "main force" used by major players recently to control the market's pace and sentiment. The fact that the CSI 1000 and NZ 2000 indices fell more than the SSE 50 and CSI 300 is an anomaly. Furthermore, the STAR 50 Index fell 1.58% today, despite being the strongest performer recently amid cooling sentiment. The ChiNext Index fell 1.79%. It's important to remember that the STAR 50 and ChiNext indices were the leading broad-based gainers in last year's market. What does their weakness today imply? I currently don't have the answer; we must wait for the market to provide it. Several phenomena indicate a clear cooling of sentiment recently, such as a sharp drop in the success rate for stocks that were limit-up the previous day, a significant reduction in speculative "monster stocks," and the absence of sustained sharp rallies in strong sectors. Additionally, the margin balance in the A-share market recorded its first decline this year yesterday. Wind data shows that the margin balance on January 19 decreased by 8.501 billion yuan compared to the previous trading day. Sector-wise, against the backdrop of cooling sentiment, funds are shifting from high to low. Sectors like real estate, water utilities, home furnishings, and construction were among the top gainers, reflecting a defensive posture by capital. In my view, until clear signals emerge for the start of a sustained sector-wide rally, the gains in these sectors represent a choice of necessity for funds. The truly significant opportunities still lie in sectors exhibiting such sustained rallies. If such sectors do not appear, it might be best to wait patiently. The chemical sector continued its strength today. Yesterday, I mentioned that China Galaxy Securities stated that the transition between old and new growth drivers in China will continue, and coupled with the start of the US interest rate cut cycle, demand growth for chemical products is anticipated. From a market perspective, I believe the current rally in the chemical sector can be seen as a catch-up play following significant gains in the non-ferrous metals sector. The commercial aerospace sector adjusted today, with its sector index hitting a new low for this corrective wave, though there was a slight inflow of funds at the close. Among core and leading stocks, Aerospace Hi-Tech Holding Group, AECC Aero Science and Technology Co., Tongyu Communication Inc., and China Spacesat Co. fell sharply. The limit-up leader, *ST Chengchang, experienced an intraday reversal from limit-up to limit-down, and the strongly trending stock Super Jolt also declined significantly. In the AI application space, sectors including online gaming, media, software services, and the internet continued to adjust. Recently oversold leading and core stocks showed mixed performances; the large-cap stock BlueFocus Interactive rebounded for a second day, while newly resumed trading Yidian Zixun plunged by the 20% daily limit. Commercial aerospace and AI applications are the main sectors where sentiment has cooled recently. Unless a new major sector emerges with a strong rally, a stabilization and recovery in these two sectors might be necessary for overall market sentiment to improve. In AI hardware, core stocks such as Zhongji Innolight, Suzhou TFC Optical Communication, Sunway Communication, Shengyi Technology, and Cambricon Technologies fell sharply, dragging down the AI hardware segment. Some investors quipped, "The market had seventeen consecutive positive days, and I was losing money; now sentiment is cooling, and I'm still losing money." For AI hardware, it might require better-than-expected Q4 2023 earnings or Q1 2024 guidance from core companies to provide a catalyst. Finally, to summarize: Major players continue to control the pace and sentiment. Against the backdrop of slightly larger declines in the CSI 1000 and NZ 2000 indices, weakness in the recently strongest STAR 50 Index, and a rotation of funds into lower-positioned sectors, if market sentiment fails to improve, adopting a more defensive posture might be appropriate. Sector-wise, amid cooling sentiment, rotations are mostly occurring among sectors like humanoid robots, power grid equipment, non-ferrous metals, and chemicals, with expectations for a sustained primary uptrend in any single sector being reduced. According to the latest regulations from relevant state departments, this market commentary does not constitute any operational advice. Investors bear their own risks upon entering the market.
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