Adequate liquidity, a positive outlook on the performance of public companies and continued economic recovery will help the A-share market to maintain a bullish trend in the Year of the Ox, experts said.
The probability of the benchmark Shanghai Composite Index going up during the first trading week after the Spring Festival came in at 76 percent while the rate for the index to report gains during the month after the Lunar New Year began came in at 66 percent, Guosen Securities said in a report that used data over the past 21 years.
On Feb 10, the last trading day for the Year of the Rat, the benchmark Shanghai Composite Index rose by 1.43 percent to close at 3655.09 points, reporting a gain for the third consecutive day. Meanwhile, the total trading value realized on the Shanghai and Shenzhen bourses rose by 4.5 percent from a day earlier to reach 875.3 billion yuan ($135.5 billion).
Analysts from Yuekai Securities said in a note that the upward momentum is likely to be sustained in the subsequent days considering that there have been no unexpected disturbances or major incidents during the seven-day holiday.
Consumption-related companies may continue to benefit from this bullish trend, but investors are advised to keep a rational attitude when investing in such companies. On the other hand, investors can keep an eye on the undervalued companies which promise stronger performances. Industries with positive mid-to long-term prosperity such as chemicals and new energy may generate opportunities for investors, said the Yuekai analysts.
Global indexes also remained bullish when the A-share market took its Spring Festival break. The Dow Jones Industrial Average Index hit a record high of 31543.82 points on Feb 11 while the S&P 500 closed at 3937.23 points one day later, also reaching a historic high. Japan's Nikkei 225 Index stood above 30000 points on Monday, which was the highest position since August 1990.
Chen Xianshun, chief strategist at Guotai Junan Securities, said the global market rally will buoy the A-share market. The Shanghai Composite Index will oscillate between 3450 and 3700 points after the market resumes trading on Thursday. Raw material companies, which are in a rising cycle, will be good investment targets.
During a virtual World Economic Forum panel discussion on Jan 26, Yi Gang, governor of the People's Bank of China, the central bank, said that the country will not shift suddenly from its supportive monetary measures, and the monetary policy will continue to "prop up the economy".
Wang Delun, chief strategist of Industrial Securities, said that the PBOC is willing to maintain the market liquidity this year. Investors can thus look for the cyclically recovering industries in spring. Following this logic, A-share listed companies from the sectors like high-end manufacturing, chemicals, nonferrous metals, restaurants, tourism and finance have seen their prices rise noticeably over the past few trading days.
From a long-term perspective, China's capital market has already entered the equity period, as the country attaches greater importance to the professionalism of institutions, emphasizes more on global allocation and directs more household savings to the stock market, said Wang. Since 2021 marks the beginning of the 14th Five-Year Plan (2021-25) and the 31st anniversary of the A-share market, new changes can be expected regarding the mechanism, investor structure and the quality of public companies. A long bullish market can be anticipated, he said.