Battle for 2700 Points Begins?

During the first two trading days of this week, the A-share market experienced a thrilling ride.

After a break-down on Monday, the market continued to test the bottom on Tuesday, but managed to turn red in the afternoon.

Amidst the voices suggesting that "the big A has started a defense battle at 2700 points," a glimmer of hope emerged, and perhaps the "golden autumn market" is not far off.

Industry insiders also believe that although there are still many suppressive factors internally and externally in the near term, the market itself is already in a value range and has some bottom characteristics.

Once the market stabilizes, high-quality stocks with stable long-term growth may take the lead in rebounding.

At the start of 2024, the A-share market has been full of twists and turns.

On February 5th, during the trading day, the Shanghai Composite Index fell to 2635 points, hitting a new low in nearly five years, but the bottoming out phase was completed, and it subsequently experienced a rebound of over 17%.

On February 6th, Central Huijin announced an expansion of ETF holdings, and the A-share market began to rebound.

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Subsequently, OpenAI's release of Sora and the State Council's promotion of equipment updates and other symbolic events injected momentum into economic growth and propelled the A-shares upward.

Starting from April, IPO continuous supervision regulations, the new "Nine National Policies," and other policies were successively implemented, and with a series of real estate policies further stabilizing expectations, the A-shares gradually stabilized.

Despite disturbances from external factors such as geopolitical tensions and the repeated expectations of US interest rate cuts, the overall trend remains a fluctuating upward trend, and on May 20th, it reached the highest point of the year so far at 3174 points.

On May 21st, A-shares entered an adjustment channel again, and so far, it has almost consumed all the previous gains.

On September 10th, during the trading day, the Shanghai Composite Index touched the lowest point of 2718 points, and popular stocks such as Shenzhen Huaqiang, Laobaixing, and KeSen Technology collectively collapsed, and A-shares once again topped the hot search.

However, in the afternoon, the major indices turned red one after another, staging a wonderful counter-attack drama.

CICC believes that strong stocks catching up with the fall is also a common phenomenon at the historical bottom of the stage.

Although there are still many suppressive factors internally and externally in the near term, the market itself is already in a value range, and during the index adjustment, it is possible to pay attention to the marginal changes of positive factors.

The market has recently had some bottom characteristics, such as the turnover rate of A-shares calculated based on free-floating market value falling to a historical bottom level of 1.5%.

In terms of valuation, the dividend yield of the CSI 300 is 1.1 percentage points higher than the interest rate of 10-year government bonds, and the forward valuation of the CSI 300 index is near the historical bottom one standard deviation, and the market has a good valuation attraction.

In the capital market, performance has always been the cornerstone of stock prices.

If A-shares enter a rebound in the future, high-quality stocks with long-term performance may be the first to start the upward trend.

According to Wind data statistics, since 2019, there have been 373 companies in the entire A market that have been continuously profitable and have continued to grow in net profit attributable to the parent company for five full years.

If combined with the performance in the first half of this year, there are 228 companies that have continued to grow in net profit attributable to the parent company this year, against the background of continuous growth in the previous five years.

Further observation of the company's growth rate shows that 64 companies have long maintained a double-digit profit growth rate.

Companies such as Tebao Bio, Hui Tai Medical, Southern Grid Technology, Autowei, and Northern Hua Chuang have always maintained a profit growth rate of more than 30% during the statistical period.

For example, Tebao Bio, an anti-cancer drug and hepatitis treatment concept stock, has an average annual net profit growth rate of 301.76%, 81.31%, 55.44%, 58.4%, and 93.52% from 2019 to 2023.

In the first half of this year, the company's net profit of 304 million yuan also achieved a year-on-year increase of 50.53%.

In recent years, Tebao Bio has focused on unmet clinical needs, achieved continuous and steady growth in business performance through continuous innovation and active market development.

New energy, semiconductor company Autowei, the company's net profit attributable to the parent company from 2019 to 2023 increased by 45.36%, 111.57%, 138.63%, 92.25%, and 76.1% respectively, and in the first half of this year, the company continued to complete a profit of 769 million yuan, achieving a year-on-year increase of 47.19%.

In the cold winter of photovoltaics, Autowei handed in a counter-trend growth semi-annual report.

It was observed that since 2019, companies that have always maintained a growth rate of more than 30% are mostly from the pharmaceutical, technology, automotive, power equipment, and other sectors.

In July, the important meeting set the tone that "macro policies should continue to exert force and exert more force," and it is expected that policy intensification will support the marginal improvement of corporate profits.

Ping An Securities believes that the market can focus on two main lines in the future.

One is the continuity of the performance realization of the automotive, home appliance export industry chain, and the logic of enterprises going abroad to seek new growth is still continuing; the other is the continuity of the recovery of the technology sector represented by electronics, and the policy support for new quality production capacity and the capital market is still intensifying.

In the pharmaceutical sector, under the influence of multiple factors such as the high base of the industry during the epidemic, the expansion of centralized procurement, and industry rectification, the overall revenue growth of the sector has been under pressure, including the tightening of the new internal and external environment in the past year, which also had a new impact on the first half of this year.

Among them, the commercialization of innovative drugs continued to maintain a high growth in the second quarter, and the demand for drugs such as narcotic drugs and some brand-name Chinese patent medicine OTC also maintained a stable growth rate.

Guotai Junan believes that in the second half of the year, it is expected that the in-hospital market will recover moderately as the pressure eases or slows down, and more categories of drugs and equipment are expected to recover.

Combining the performance of the secondary market, the aforementioned companies with long-term stable growth in performance have also shown a trend of mud and sand flowing down this year, but there are also 19 companies that have risen against the trend, with Wolnuclear Materials rising by more than 50%, and Lingrui Pharmaceutical, Chunfeng Power, Hui Tai Medical, and other 7 companies have also achieved an increase of more than 20%.

However, if the cycle is extended, with the stable growth of performance, the long-term performance of such companies is also more dazzling, such as Chunfeng Power, which has risen by more than 8 times since 2019, Northern Hua Chuang has risen by nearly 7 times, Shanxi Fenjiu has risen by nearly 6 times, and a total of 29 stocks have doubled in price.

This may also be inseparable from the support of institutions.

Many of these value growth stocks are highly held by institutions.

According to the institutional holding situation at the end of the second quarter of this year, there are 50 companies with more than 100 institutional holdings, and 26 companies with more than 300 institutional holdings.

Companies such as CATL, Kweichow Moutai, Northern Hua Chuang, Wuliangye, Mindray Medical, and Luzhou Laojiao have successively exceeded 1,000 institutional holdings.