April 12, 2024 Morning Trading Strategy: Continue to Focus on the Main Theme

Yesterday, the A-share market showed resilience, with the Shanghai Composite Index closing higher. Affected by the possible delay of the US interest rate cut, global markets were in an adjustment phase.

The US CPI exceeded expectations, making inflation difficult to control, and the expectation of a rate cut was dashed again, causing a global market shock. US stocks plummeted, the US dollar index rose, and the RMB depreciated. The A-share market's resilience yesterday benefited from an earlier adjustment, which was like 'the shoe finally dropping,' allowing investors to move forward with less burden.

China's economic data released this morning was generally within expectations. As the saying goes, 'Strike while the iron is hot,' which supports the positive logic of the market rebound. Although China's recovery is weak, it is still a recovery. As long as the direction is right, speed is secondary.

For the stock market, a weak recovery may not be a bad thing. The transition from weak to strong will inevitably involve a large number of economic stimulus policies, which will positively impact the policy-driven A-share market. I believe the first half of the year will indeed be a weak recovery, but the second half could mark a turning point from weak to strong, with significant potential.

The ChiNext underperformed, mainly dragged down by tech stocks during the earnings falsification period. Rumors circulated in the late morning that major brokerages had halted margin trading for tech growth stocks. During this earnings falsification period, tech growth stocks are in a dark phase, and many are short-selling to profit.

Market rumors suggested that mid-to-large brokerages had suspended margin lending, blocking one of the key channels for short-selling. The STAR Market rebounded in response. However, in the afternoon, interviews with leading brokerages revealed that the suspension lasted only one day and had already been lifted, causing tech stocks to fall again.

As the market approaches the critical 3,000-point level, many positive rumors have emerged, indicating strong support for the index.

However, trading volume of over 800 billion ensures market rotation, which may leave you dizzy.

A popular joke sums it up: 'Chase low-altitude stocks, and metals rise; chase metals, and solid-state batteries rise; chase solid-state, and coal surges; chase coal, and machinery rallies; chase machinery, and gold climbs; chase gold, and tourism booms. What do you want from me? If you're not making money in the A-share market, you're not rotating fast enough. Even a dog would shake its head at this market!'

Of course, the sectors I’ve repeatedly highlighted—consumer staples and nuclear pollution control—have all delivered gains. Stay focused on the main trends.

Now, let’s look at themes and individual stocks:

1. Consumer Staples
In a rotating market, focus on sectors with clear expectation gaps at each stage.

I maintain my previous view: consumer-related sectors will rotate repeatedly before Labor Day, with tourism and hotels showing stronger logic and elasticity than other sub-sectors.

2. Power
Like consumer staples, many core power stocks have hit new highs, indicating significant expectation gaps.

Key reasons:
① Power is a high-dividend sector with substantial annual payouts.
② Thermal power accounts for 70%-75% of China's power generation. Surprised? Despite China's advanced solar and wind power, thermal power remains dominant.
③ The upcoming flood season and summer will significantly boost the performance of hydro and solar power companies.

Thermal coal prices are expected to stabilize and decline in 2024-2025, with the 2024 average price dropping by 100-200 yuan/ton to 800-900 yuan/ton. Current prices are already below 900 yuan/ton, greatly benefiting thermal power companies' profitability.