As the holiday season draws to a close, the stock market braces itself for a renewed trading cycleWith the commencement of corporate earnings announcements, the market anticipates adjustments driven by performance volatility, particularly leading up to the end of March.
The fluctuations in stock prices are anticipated to occur against a backdrop of corporate guidance and potential catalytic events, resulting in a dynamic pattern of rising and falling market values.
What bold predictions and views are institutions holding regarding this year’s market trends? And what kind of mysterious forces will the stock market receive from necessary regulatory injections aimed at driving liquidity?
How much do you know about annual reports?
The annual report stands as the most important focal point right now! Particularly, observing the market's immediate reactions post-earnings report releases is critical for identifying risk release timelines.
Following the companies that have already disclosed performance forecasts, Haitong Securities has conducted relevant analyses.
From the data disclosed, it appears that the forecasted annual reports show a slight decline in profits across the board
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The main board's performance remains relatively stable, whereas the Star Market and ChiNext see more significant downturns.
Sector-wise, the communication, electronics, retail, transportation, utilities, non-ferrous metals, and non-banking sectors show higher levels of prosperity.
The spring market appears primed for gradual engagement, and with the implementation of national policies throughout the year, the market is set to enter a new phase driven by fundamentalsIn terms of structure, the technology manufacturing sector is increasingly certain, while consumer healthcare and real estate sectors may manifest substantial expectation discrepancies.
What kind of market conditions can we anticipate in 2025?
Haitong Securities suggests an even more optimistic outlook, viewing a 2024 market rebound as a transformative rather than merely reactive phenomenon
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Historical precedence indicates that major market upswings typically require either intensified or concretized policies and a pronounced directional improvement in fundamentals.
The macro policy framework has been shifting markedly since the end of September 2024, beginning to yield more noticeable outcomesFocus should be on monetary policy progress such as interest rate reductions and the gradual impact of special government bonds at various levels.
Invest in demand, not PPI, but rather focus on electricity consumption
In the face of a new economic cycle, the criteria for judgment should continuously evolveWhile history presents numerous similarities, the variables influencing change will always differ.
In past periods of undercapacity, PPI trends would dictate corporate earnings trends
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However, during phases of relative overcapacity, the relevance of PPI as an indicator diminishes significantly; instead, electricity consumption serves as the core intermediary variable:
Final demand → electricity consumption → corporate ROE becomes a more probable transmission pathway.
In the future, simultaneous declines in both quantity and price may represent latent risks; however, a return to stable pricing alongside increasing volume would herald a fresh wave of investment opportunities.
How can we infer the bottom of corporate earnings based on observations of volume recovery?
Excess capacity affects the elasticity of prices during the recovery phase of final demand, while changes in inventory cycles determine the elasticity of physical consumption
When capacity is still being cleared and inventory cycles transition from depletion to replenishment, monitoring volume takes precedence over price in evaluating corporate earnings bottoms.
Further analysis on scenarios of final demand recovery, the impact of industrial activity recovery on corporate profit distribution, and the effects of inventory cycles and capacity cycles on total asset turnover ratio remain open for study.
Spring dynamics: How to stimulate the market?
Historically, spring brings increased activity in the stock marketBut where exactly lies the point of stimulation?
According to Guotai Junan Securities, the market experienced an impressive average increase in the first quarter, although the probability of continued growth appears limited!
The Shanghai Composite Index, Shenzhen Component Index, and CSI 300 Index have a long historical context; over the first quarter spanning from 2005 to 2024, the Shanghai Composite and CSI 300 indices present a rise probability of approximately 45%, while the Shenzhen Component exhibits a 50% rise probability
Moreover, the average increase across these indices over the past two decades during the first quarter has been a positive value, with the Shenzhen Component experiencing an impressive boost of 3.5%.
Focusing on the month of February, the A-share market is expected to yield distinct outcomes.
Overall, February showcases a heightened likelihood for market growth, with small-caps performing exceptionally well.
Excluding the STAR 50 Index, major indices exhibit positive average changes in February, with the growth probabilities for the CSI 1000 and CSI 500 indices nearing 79%, and the Shanghai Composite Index reaching a commendable 65% growth probability.
To summarize, the dynamics of spring market fluctuations exhibit clear temporal characteristics.January is still in a nurturing phase, while February will welcome a better window of opportunity, and March will gradually reveal signs of fatigue.
What specifically should we pay attention to?
Two primary lines of thought emerge: a focus on profit recovery and high-risk preference varieties.
Profit recovery emphasizes opportunities in consumer-driven sectors such as pharmaceuticals and social services.
High-risk preferred sectors should seek out high-beta industries for recovery (pharmaceuticals, food and beverage, basic chemicals, non-ferrous), along with high-profit expectation sectors (e.g., technology, military) and thematic investments, including policy-supported themes like mergers and acquisitions, as well as technology-driven themes such as AI and self-sustainability.
Is the A-share market merely one final spark away from ignition for profitable sleeping?
Aside from brokerage firms, certain prominent private equity individuals express an even more optimistic outlook for the market.
In her recent live broadcasts and interviews, Lin Yuan shared her perspectives on the market.
Overall, she believes that 2025 will be a transformative year, showing an improvement over 2024.
In her asset allocation, she emphasizes two categories: growth-oriented assets primarily in the senior care sector, and high-dividend assets, as national policies shift from a focus on financing to prioritizing returns, guiding listed companies to enhance shareholder satisfaction.
Key sectors to focus on include large elder care, healthcare sectors, as well as fast-moving consumer goods and utilities stocks.
In such a competitive fast-moving consumer goods sector, why is there still a rationale to focus on this segment?
Lin Yuan pointed out that one of the biggest headaches over the past few years has been the intense competition
It begs the question of how much inventory you produce and how significant the market saturation isFast-moving consumer goods have expiration dates, allowing companies to shift excess inventory easilyInvestment implies understanding the depth of opportunitiesThe pitfalls in consumer goods are visible, as their demand remains steady.
Dividends hold paramount importance!
According to her analytical logic, if the economy stabilizes or recovers, the public mindset will shift accordinglyThere will no longer be a cold winter mentality applied when forecasting economic trends.
This reflects human nature—when the economy thrives and housing prices rise, individuals feel a sense of growth; likewise, when they see a profitable stock market, they rush in.
In asset allocation, high-dividend stocks are also a primary focus, representing the direction for the next decade.
Lin Yuan noted that her focus in dividend allocation is centered on high-quality leading stocks in the consumer and pharmaceutical sectors
She has consistently avoided high market capitalization, low growth financial assets with high dividends.
Within public utilities, her focus has been on companies with low valuations and high dividends, preferring those that offer clear timelines for return on investment, while avoiding those with high valuations.
Conclusion
The market offers varied perspectives, with investors continually focusing on opportunities in their specialized fieldsIt is believed that each investor holds their unique theoretical basis for investment.
In closing, as Lin Yuan aptly sums it up: earning money in the stock market is not about speculation but rather the value of long-term holding
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