Institutional Market Watch: Under the new internal and external circumstances in April, the "changes" and "unchanged" aspects of the Chinese market

Ask AI · How to layout a rebalancing strategy when the market fundamentals are stable?

Entering April, domestic annual reports and first-quarter reports are densely disclosed, macroeconomic data for the first quarter, and the traditional month-end heavyweight meetings, combined with external conflicts leading to decisive actions, the A-share market is approaching a critical turning point.

Many institutions have released investment strategies for April, focusing on the “unchanged” and “changing” aspects of the Chinese market under external conditions.

Industrial Securities emphasizes: “The core contradiction in A-share valuation this year, shifting from valuation-driven to profit-driven, will be the biggest change compared to last year.” The systemic rise in oil prices after conflicts, and its impact on global central banks’ monetary policy paths and liquidity expectations, may make this year’s “valuation expansion” difficult to proceed as smoothly as last year, becoming one of the most important changes in the allocation environment this year.

Guotou Securities states that, two major underlying logics in the market are changing: (1) The imbalance in internal A-share positions; (2) Macroeconomic upheaval caused by oil prices. Combining historical market observations (2021 and 2022), when both major changes occur simultaneously, the position structure generally cannot remain the same, and a large-scale “rebalancing allocation” within the year is inevitable. Some stocks may never return to previous levels, which also means being prepared to bid farewell to many stocks that have benefited from the previous logic and surged significantly over the past three years, requiring mental readiness.

Shenwan Hongyuan Strategy points out that, there are two constants in the current A-share market: First, the basic foundation for healthy market development has not changed: the market stabilization mechanism is becoming more完善, and the functions of investment and financing have been significantly optimized; second, the basic foundation for market upward trend remains unchanged: the probability of cyclical improvement in A-share fundamentals by 2026 is still high.

CICC is optimistic, stating: The current may be a relatively low point for A-shares in the medium term, and the risk release and downward adjustments could bring good allocation opportunities. In the medium term, the macro environment has not undergone fundamental changes, and the logic supporting the “steady progress” of the A-share market still holds.

Regarding investment tools, in uncertain environments, focus on balanced broad-based indices concentrated in leading industries, such as the CSI 300 Index, which includes the 300 most representative securities from the Shanghai and Shenzhen markets, covering China’s advantageous industries like technology manufacturing and power equipment, with strong performance certainty, stable operations, and high dividend yields. Currently, there are 30 ETFs tracking the CSI 300 Index, among which Huaxia CSI 300 ETF (510330.SH) is large in scale, with better liquidity, and a management fee of 0.15% per year (the lowest in the market). The off-market connection fund is Huaxia CSI 300 ETF Connect C (005658.OF), which has no redemption fee for holdings over 7 days.

Daily Economic News