By Qian Shuo
Last week, the A-share market dropped sharply after two day’s slight gains. The main indexes all closed with great loss.
The Shanghai Composite Index fell 52 points, or 1.63%, to end at 3141.30. The Shenzhen Composite Index declined 224.30 points, or 2.10%, to close at 10448.22. The Growth Enterprise Index dropped 32.20 points to 1804.55, leaving it with a 1.75% weekly fall. The Small and Medium-Sized Index was down 147.80 points, or 2.01%, to finish at 7193.44.
The agreement reached during the trade negotiation between China and the U.S. resulted in the high openings of both Shanghai and Shenzhen markets. Afterwards, the markets showed a pattern consisted of volatility at the high prices and readiness of further consolidation.
The Great Innovation sector attracted money in the market, with indexes of computer, electronic component, and communication industries leading the highs. Among the hot-spot concepts, sub-new stocks’ index was up 4% on Tuesday, maintaining its recent active trend.
Since last year, IPO reviewing process has become more rigorous, so the quality of these new listed stocks has been improved ever since then.
Also, only a small number of companies were listed this year, which drove up the value of sub-new stock investment. The recent rise of sub-new stocks indicates the increased willingness in going long on short-term investment. Before the formation of a consensus about the main investment line, sub-new stocks are still important choices for money incubation.
However, the upward trend didn’t continue on Wednesday. Both Shanghai and Shenzhen markets had a sharp turn, and all three main indexes fell more than 1%.
Under the volatile circumstances, the great consumption sector became the first choice for capital defense. Indexes of food and beverage, medicine, automobile, retail, and other industries closed with gains. At the same time, as risk appetite in the market declined, computer, electronic components, communication, and other technology sectors fell the most.
Among all the concepts, only Hainan, domestic substitutes, bionic medicine, innovative drug, and “unicorn” related stocks didn’t follow the falling trend. Overall, hot-spot stocks are relatively scarce, and it’s not easy for the small group of active stocks to drive the entire market to recover.
At present, the overall evaluation of the A-share stocks has fallen to a relative reasonable level. Some subsequent factors affecting the upward potential include monetary policies and the degree of market’s liquidity.
Due to the growing expectations of raising interest rates of the U.S., the dollar index’s rise put non-U.S. currencies under pressure. It takes time to achieve an easy liquidity that can be accepted by the market, so a wide range of fluctuation is inevitable.
