Funding Returning to Industrial Logic

On the 28th, the Shanghai Composite Index displayed a pattern of slight fluctuations throughout the trading day. Meanwhile, the Shenzhen Component Index and the ChiNext Index both experienced a decline. The STAR 50 Index, which represents China's tech companies, saw a drop in the morning but managed to recover somewhat before lunchtime, only to retreat again later in the afternoon. By the end of the day, over 2,386 stocks had increased, while 2,591 stocks had fallen, with 124 remaining unchanged. Notably, 110 stocks hit their daily upper limit, while 8 faced the opposite fate and hit their lower limit.

Market analysts anticipate that the short-term outlook points toward continued volatility. The fluctuations in market sentiment and variations in trading volume are expected to be crucial factors in determining the short-term trajectory of the market.

On Thursday, A-shares opened slightly lower. During the day, there were instances of intraday surges; however, a significant retreat was noted at the close of trading, causing the Shanghai Composite Index to fall below the 3,300-point mark again. The number of stocks that rose was nearly equivalent to those that fell. The total trading volume of the Shanghai and Shenzhen stock markets reached 1.49 trillion yuan, an increase of 31.8 billion yuan from the previous trading day. The Shanghai Composite Index struggled to maintain its position at the 5-day moving average, while the ChiNext Index accelerated its decline, dropping nearly 2% near the close. Several stocks that previously rallied sharply experienced a significant downtrend by the end of the day, reinforcing the notion that short-term speculative capital is retracting its positions.

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Real-time monitoring indicates that the mechanical equipment sector attracted over 5 billion yuan in net capital inflow. Other sectors like trade retail and real estate also saw inflows exceeding 2 billion yuan, while the computer, textile and apparel, and transportation sectors recorded inflows greater than 1 billion yuan. Conversely, the household appliance sector faced a net outflow of over 1.2 billion yuan, with defense, automobiles, and media also experiencing significant capital outflows.

Sector performance witnessed fluctuations, with trade and retail leading the gains across the markets for a time. Stocks such as Sichuan Communications, Cross-Border Network, Hemei Group, and Guangzhou Baiyun all reached their daily limit. On the news front, the celebration of the 70th anniversary of the All-China Federation of Supply and Marketing Cooperatives was held in Beijing on November 28.

Following the announcement of Shenzhen's "14 Articles on Mergers and Reorganizations," local stocks in Shenzhen showed considerable activity. By the close, the Jian Ke Institute saw a surge to its daily limit, while Lehman Optoelectronics spiked more than 10%. Noteworthy gains were also recorded by several other stocks, including Guang Tian Group and Hemei Group.

Afternoon trading saw significant gains for real estate stocks, with both Shen Zhen Ye A and Da Yue Cheng reaching their limits, while others like Electronic City and Nanguo Real Estate escalated more than 6%. Environmental protection stocks also raised their profiles, with Peng Yao Environmental Protection, Energy Saving Guozhen, and several others achieving either limit ups or significant gains beyond 10%.

The concept surrounding the 'millet economy' appeared to show conflicting signals, with media stocks suffering the most substantial declines. Companies such as Yi Dian Tian Xia and Sheng Guang Group saw their shares decrease by over 6%, whereas stocks like Qitian Technology and Longyun shares hit their limits or surged beyond 10%.

The household appliance sector did not perform well, with Ai Shi Da dipping more than 8% and the likes of Chen Yi Intelligent and Qin Shang shares falling over 3%. Car manufacturers similarly plummeted, exemplified by Li Lake shares declining over 6%, with further drops exceeding 2% for others like Guang Ting Information.

An unprecedented surge was observed this week in Cambricon Technology (U shares), where the stock price skyrocketed over 10%, closing at 534.55 yuan per share, marking a historical high. On Thursday morning, this stock continued its upward trajectory, peaking at 588.7 yuan per share, setting another record.

Towards the end of Thursday’s trading session, many speculative stocks associated with esoteric trading practices showed signs of weakness, resulting in a notable decline in their share prices. Some companies formed distinct bearish candlestick patterns on daily charts. Stocks like Ri Chu Dong Fang and Dong Fang Zhi Zao fell sharply as a significant volume of funds exited the market just as prices had previously experienced significant increases. Between November 4th and 27th, Ri Chu Dong Fang registered 14 consecutive limit-ups, but saw a tumultuous sell-off at the close of trading.

According to Qin Hong, an analyst from Jin Bai Lin Consulting: “In terms of medium-term trends, senseless speculation appears to be waning, allowing market funds to return to fundamental industrial logic. Attention is drawn towards Shenzhen’s increased efforts for asset restructuring among listed companies, along with encouraging policies from local governments regarding real estate support; thus, stronger improvement expectations exist across the real estate sector. Meanwhile, stocks tied to low-altitude economic sectors are displaying positive momentum, with a growing abundance of information supporting further advancements.”

Chen Yu Heng, a senior investment advisor from Ju Feng Investment Consulting, commented: “Given the ongoing decline in trading volume, this market cycle has reached a critical juncture. The rise and fall of market sentiment, along with the fluctuations in trading volume, will undeniably shape the market's immediate future. Following the record low trading volume on November 26, there was a slight uptick in trading, and sentiment followed suit. Should the trading volume persist in its recovery, this could bolster further rallies anyway leading into the next month or even the new year. Investors are urged to closely monitor fluctuations in the exchange rates between the US dollar and the renminbi, as movements in the stock market are closely correlated with the dollar index.