Last Friday's State Council meeting emphasized the need to "more forcefully expand domestic demand" and to "unswervingly complete the annual economic and social development goals and tasks," setting a rather positive tone. It is inevitable that domestic demand policies will be intensified in the remaining months. In fact, many stimulus policies have already been introduced recently. The Hong Kong stock market has seen two consecutive days of significant gains, with the Hang Seng Tech Index rising by over 2% last Friday and nearly 2% today. In contrast, the A-shares have dived for two consecutive days, with the ChiNext Index turning green.
Both Hong Kong and A-shares are RMB-denominated assets. Although their rhythms are not entirely the same, their directions are basically similar, and it is unlikely for one to strengthen while the other remains weak. It can only be said that there is a serious issue with the micro-liquidity in A-shares. The trends over the past two trading days have been quite similar: the national team starts buying at the opening, the index surges, then the national team stops, and funds sell off continuously, causing the index to plunge. At the end of the day, the national team buys again to stabilize the situation.
Advertisement
The current A-share market is extremely fragmented. Due to the national team's purchases and institutional herding, the five major banks (ICBC, ABC, BOC, CCB, and BOCOM) have been hitting new highs continuously. In stark contrast, most stocks are extremely weak, with many having broken below their levels at the beginning of the year.
Many are aware that the continuous strength of the banking sector is due to the market's defensive and high-dividend styles. However, this is only part of the story. In fact, the main reason for the banking sector's strength is the return on investment in government bonds. As of today's close, the 30-year government bond futures have risen by over 10% year-to-date. Government bonds are leveraged, and the bull market in government bonds in the first half of the year has brought substantial profits to the banking sector.
For instance, Ping An Bank's interim report shows that in the first half of the year, it achieved a total operating income of 77.132 billion yuan, a year-on-year decrease of 13.0%. The net interest income was 49.086 billion yuan, down 21.6% year-on-year. However, the non-interest net income from bond investments and other businesses grew, driving the bank's other non-interest net income to increase by 56.7% year-on-year, reaching 15.049 billion yuan. It can be said that this bond bull market has made banks extremely profitable, with some rural commercial banks even investing in bonds against regulatory restrictions.
However, it is well known that investment income is one-time, and now the bond market is under the scrutiny of the central bank and other departments. The 10-year government bond yield has already fallen below 2.16%. Unless the government bond yield continues to weaken, this investment income is basically unsustainable, so the interim report may be the point of realization.
After several moves by the central bank and other departments, the 30-year government bond futures fell for three days and then started to rise again, with a significant increase of 0.52% today. This is not dancing on the central bank's head, let's see how the central bank will respond.
Let's look at some other significant news:Last Friday, gold prices surged to new highs, and today the A-share gold sector saw a significant strengthening, with Yulong Shares temporarily hitting the upper limit, and Chifeng Gold, China Gold, and others experiencing substantial increases.
Due to a wave of speculation in the stock market last week regarding 910c, but today it was mentioned that 910c has been postponed, leading to a sharp decline in related concept stocks. Kaiwang Technology's stock was suspended, and Huafeng Technology plummeted nearly 9%.
The Ministry of Finance issued a notice stating that in order to support the market-making of government bonds, enhance the liquidity of the secondary market for government bonds, and improve the yield curve of government bonds that reflects the market supply and demand relationship, the Ministry has decided to carry out market-making support operations for government bonds. The operation direction is "follow-sell," and the bond types are the 2024 book-entry interest-bearing (eighth issue) government bonds and the 2024 book-entry interest-bearing (tenth issue) government bonds, with an operation amount of 3.1 billion yuan for each, with terms of 5 years and 3 years, respectively. The competitive bidding time is August 20th, and starting from August 23rd, they will be merged and listed for trading with the corresponding government bonds.
The National Immigration Administration reported that from January to July this year, a total of 17.254 million foreign nationals entered through various ports in the country, a year-on-year increase of 129.9%. A total of 846,000 port visas were issued, a year-on-year increase of 182.9%.
During today's trading, the US dollar index weakened, approaching the 102 level at one point, and the yen strengthened significantly, which reminded the market of the fear dominated by "Black Monday." The Japanese stock market and US stock futures plummeted, causing a global stock market plunge.
Finally, a brief look at the market shows that as of the close, the Shanghai Composite Index rose by 0.49%, the ChiNext Index fell by 0.14%, the Hang Seng Index in Hong Kong rose by 0.80%, and the Hang Seng Technology Index rose by 1.68%. The turnover in the two markets slightly shrank to 0.57 trillion, with more than 3,100 stocks falling. In terms of industries, banking, non-ferrous metals, commercial retail, social services, and media industries led the gains, while beauty care, pharmaceuticals and biotechnology, agriculture, forestry, animal husbandry, and electronics, and power equipment industries led the declines.
The biggest problem in the A-share market now is the deterioration of micro-liquidity, reflected in the continuous reduction of volume, with foreign capital and financing basically falling back to the level at the beginning of the year, and continuous selling pressure can be felt during the trading day. As of today's close, the daily post-market disclosure of foreign capital has also been terminated, and it may only be known through monthly or quarterly disclosure in the future.
Risk warning:
The stock market is risky, and investment should be cautious. This article does not constitute investment advice, and readers need to think independently.
Leave a Reply