HTSC A-share strategy: Positive factors are emerging, post-holiday allocation can be appropriately steady and progressive.

Zhitong App learned that HTSC has released a research report stating that history shows that the market often has three major catalysts when moving out of the bottom range: ① Reversal of economic expectations → Although current macro data is mixed, high-frequency consumption data during the Spring Festival continues to recover. The focus will be on the policy direction of the Two Sessions. ② Micro incremental funds → Since December last year, funds have continued to flow into broad-based ETFs. The current funding pressure on small and micro-cap stocks may have cleared to the bottom range. ③ Shift in overseas flows → In January, U.S. inflation data rebounded, but retail data cooled significantly, and the uncertainty of the Fed's interest rate cut timing remains strong. The first two of the above three points have reached a critical turning point, and the calendar effect shows that the A-share win rate is higher from after the Spring Festival to before the Two Sessions. With the current data signal leaning towards the positive side, it is appropriate to seek progress steadily, moderately tilting towards cyclical performance stocks, and continue to recommend a combination of Shanghai and Shenzhen 300.

▍HTSC's main points are as follows:

Under the restart of domestic mobility, Spring Festival consumption has continued to recover for 24 years, with low-tier cities as the main incremental force

According to the Ministry of Transport's forecast, the passenger traffic volume during the 2024 Spring Festival may increase by 13% year-on-year, which is still about 40% lower than in 2019. However, the national inter-regional personnel flow may reach 9 billion trips, reaching a historical high. From the 16th day of the twelfth lunar month to the fifth day of the first lunar month, the number of passengers sent by road/rail/air compared to the same period last year was -9%/+61%/+71%.

Correspondingly, under the background of returning home for reunions and traveling during the Spring Festival, the heat of local travel in low-tier cities has increased compared to previous years. Beijing and Shanghai's congestion index during the festival period remained basically the same year-on-year. Under changes in population structure, Meituan's 2024 Spring Festival consumption insight shows that consumption growth is fastest in fourth-tier and below areas, with the highest box office share. The lower-tier market is experiencing a strong rebound. On the other hand, returning home and traveling during the Spring Festival have also brought about a retransformation of consumption patterns, such as exploring the New Year atmosphere in small towns and night tours with decorative lanterns, bringing about personalized consumption scenes that are "unlocked" this year.

January social financing data also reveals some positive signals

The January social financing data reveals some positive signals, but weak inflation data reflects that the overall economy is still showing a slow and wave-like pace of recovery: 1) In January, the year-on-year growth rates of domestic CPI and PPI showed differentiation. The year-on-year growth rate of CPI was affected by the Spring Festival misalignment and base effect, leading to a widening decline to 0.8%, while the year-on-year growth rate of PPI shrank to 2.5% under the rebound of national oil prices. 2) The total amount of new social financing in January (6.5 trillion) achieved a good start, exceeding Wind's consensus expectation (5.8 trillion). The Spring Festival misalignment, strong financial support at the beginning of the year, financial fund conversion, etc., may be the main reasons. The year-on-year difference between M1 and M2 has rebounded, but the degree of fund activation still needs to be observed, and the remaining liquidity continues to decline. 3) Real estate returning home for property purchases did not heat up. From New Year's Eve to the seventh day of the first lunar month (2.9-2.16), the cumulative sales of commercial housing in 30 large and medium-sized cities decreased by about 60% compared to the same period last year during the Spring Festival.

Overseas assets exhibit certain "re-inflation" trading characteristics

During the holiday, overseas major asset trading exhibited certain "re-inflation" trading characteristics. In terms of equities, markets with strong cyclical attributes, such as Japanese stocks, Hong Kong stocks, and European stocks, led the gains, with the Nikkei 225 leading the way. The U.S. stocks with weak cyclical attributes showed weaker upward momentum, with the Nasdaq slightly declining. Global long-term government bond yields are generally rising, with U.S. long-term bond yields returning to 4.2% amid inflation expectations disturbance. The commodity-driven prices of crude oil, industrial metals, and others continue to rise, with Bitcoin leading the gains.

Expectations for interest rate cuts are adjusting, and gold prices may experience short-term volatility amidst geopolitical complexities. Additionally, during the Spring Festival, the Nasdaq China Golden Dragon Index and FTSE A50 futures rose by 5.7% and 1.8% respectively, reflecting the rise of Chinese assets or the continuation of pre-holiday momentum. Japan's Q4 23 GDP YoY fell to -0.4%, marking two consecutive quarters of contraction and entering a technical recession.

Recommendation: Steady progress, continue to recommend a portfolio similar to the CSI 300

While high-frequency consumer data during the Spring Festival shows signs of recovery, macroeconomic data remains mixed. The domestic fundamentals are still undergoing a wave-like recovery process. The funding pressure on small-cap stocks may have reached the bottom range, but further observation is needed. On the last trading day before the holiday, the CSI 2000 and Wind Micro Cap Index stopped falling and rose, indicating that small-cap stocks may have progressed to the middle stage: liquidity and chip pressure release → stabilization and bottoming out → steady rebound.

In terms of allocation, with marginal changes in the macro environment, more consideration should be given to trading behavior and chip structure. Maintaining a strategy to reduce volatility, it may be appropriate to reduce dividend positions and shift towards assets with smooth fund, valuation, and chip logic similar to the CSI 300/Shanghai 50. Furthermore, positive economic data and declining remaining liquidity reflect enhanced marginal prosperity, allowing for a moderate shift from dividend value to pro-cyclical performance stocks.

Risk Warning:

Domestic economic and policy outcomes fall short of expectations; Overseas liquidity tightens beyond expectations.