Guotai Junan Securities: Market funds are flowing back, and the short-term style may continue

According to the Zhitong Finance APP, Guojin Securities released a research report stating that the market fluctuated and fell in the past week, with market funds flowing back to sectors with performance expectations and low valuations, resulting in good performance of the consensus expectation factor and value factor. Additionally, due to the market's decline, the risk appetite of funds has decreased, and volume-price factors, including technical and low volatility factors, have rebounded as expected. In the coming week, as there are not many potential event catalysts, it is expected that the market style will continue. Investors are advised to pay attention to consensus expectations, value, and volume-price factors.

The main points of Guojin Securities are as follows:

In the past week, among the major domestic market indices, the Shanghai 50, CSI 300 Index, CSI 500 Index, and CSI 1000 Index had respective fluctuations of -3.4%, -3.29%, -4.79%, and -4.63%.

In the past week, China released the financial credit data for October, with M2 year-on-year continuing to rebound, reported at 7.5%, up 0.7% from last month; while the M1 year-on-year data also showed an upward turn, reported at -6.1%, up 1.3% from last month. The data indicates that after the implementation of various incremental policies, the market confidence of residents and enterprises has improved, and the liquidity of deposits has increased. Such signs can also be seen from the year-on-year data of social retail sales in domestic consumption.

With the support of various consumption-promoting policies, the year-on-year value of total social retail sales in October was reported at 4.8%, up 1.6% from last month. Overall, the economic recovery momentum remains strong. However, after major domestic and international events have settled, due to a short-term policy vacuum period domestically, the market's bullish sentiment has slightly cooled, and the market has generally shifted towards the earlier expected direction of the bank. Funds have shifted from the previous thematic investment style back to sectors supported by low valuations and fundamental expectations.

In addition, overseas, due to the year-on-year rise in the U.S. CPI in October, reaching a three-month high.

Partly due to the rise in this data, Federal Reserve Chairman Jerome Powell stated in a speech that "the economy has not sent any signals that the bank needs to rush to lower interest rates." Following his remarks, the current pricing of the Fed futures market for a rate cut in December has dropped to 58.2%. The yield on the 10-year U.S. Treasury bond has also risen from 4.3% on November 8 to 4.43% on November 15, an increase of 13 basis points. The rise in U.S. Treasury yields has caused some of the previously increased risk appetite funds flowing to non-U.S. regions to flow back, tightening overall liquidity in non-U.S. regions, and the high-elasticity growth sectors have been somewhat pressured.

Driven by domestic and international factors, the bank has observed the result of funds migrating from growth to value in the past week. In the coming week, as there are not many economic data releases, the bank expects this style to continue, so it recommends switching tactical positions to dividend sectors and growth sectors with performance expectations.

Considering the economic situation and liquidity, for the coming week, the bank recommends maintaining a core position in large-cap growth, while tactical positions should switch to dividend sectors and growth sectors with performance expectations.

In terms of liquidity, this week the central bank injected 180.14 billion yuan through a 7-day reverse repurchase, with 84.3 billion yuan maturing, resulting in a net injection of 171.71 billion yuan through open market operations. The short-term 1-week SHIBOR and DR007 were reported at 1.674% and 1.8589%, respectively, up 2.9 basis points and 5.53 basis points from last week The 1-month SHIBOR and 3-month SHIBOR are reported at 1.796% and 1.858%, respectively, down 0.3 basis points and 0.6 basis points from last week. Additionally, the bank's short-term price-volume industry allocation model provides industry allocation recommendations for the upcoming week: construction, national defense and military industry, automotive, retail, non-bank financials, and comprehensive. Reviewing last week's performance, the average return of the six industries recommended last time was 6.04%, slightly lower than the average return of 6.42% for the other 29 industries excluding comprehensive finance, with an excess return of -0.37%.

From a medium-term perspective, based on the signals given by the macro timing strategy constructed by the bank, the recommended equity allocation ratio for November is 30%, maintaining the same allocation ratio as in October. Breaking it down, the model maintains a conservative view on economic growth for October, with a signal strength of 0%; the signal strength for monetary liquidity is 60%. The timing strategy has yielded a return of 2.76% from the beginning of 2024 to date, while the Wind All A index has a return of 10.71% during the same period.

Micro Stock Index Timing and Rotation Indicator Monitoring:

1. In terms of the rotation signal for the Micro Stock Mao Index, the relative net value of the Micro Stock Mao Index triggered a signal crossing above the annual line on October 14. Additionally, the 20-day closing price slopes for both the Micro Stock and Mao Index are positive, indicating that the rotation strategy currently favors the relative performance of the Micro Stock Index;

2. In the Micro Timing Model, on October 15, the volatility crowding indicator, which reflects market trading sentiment, has fallen below the threshold, and the volatility crowding risk warning signal has been lifted; while the year-on-year indicator for interest rates based on fundamentals is -20.45%, which has not triggered the interest rate risk control threshold of 0.3. Therefore, the current Micro Timing Model has not triggered risk control, so for investors wishing to hold a long-term Micro Stock style, it is recommended to continue holding.

Risk Warning: The above results are based on historical data statistics, modeling, and calculations. There is a risk of model failure when policies or market conditions change. The content output by large models carries a certain degree of randomness and accuracy risk