English

By Qian Shuo

Last week, the A-share market continued to build its bottom through a series of volatility. The Shanghai Composite index at one point fell below 2800 points, the lowest level of the past 2 years. However, at the end of the week, and also as the last trading day of the month, the market closed higher in general and left a more optimistic environment for the next half of the year.

All the main benchmarks ended lower, except the gain of the Growth Enterprise Index.

The Shanghai Composite Index was down 42.34 points, or 1.47%, to end at 2847.42. The Shenzhen Composite Index fell 30.48 points, or 0.32%, to close at 9379.47. The Growth Enterprise Index gained 57.05 points to 1606.71, leaving it with a 3.68% weekly gain. The Small and Medium-Sized Index dropped 21.21 points, or 0.33%, to finish at 6477.76.

On the first day of last week, the market started high and then moved downward. The great consumption sector had the best performance in general, but some heavily-weighted sectors, such as real estate, have been weak and thus contributed to the falling trend.

Moreover, encouraged by the favorable policy of targeted cuts to required reserve ratios, debt-to-equity swap had become the hottest spot among all the concepts, with its index closed 2.81% higher.

During the week, the Shanghai 50 index experienced a three-day deep retracement, affected by the poor performance of those heavily-weighted sectors. The index fell as low as 2438.04 points and then continued the weak volatility in the next few days.

Among all the heavily-weighted sectors, food and beverage, real estate, banking, household appliances, and non-banking financial sectors showed the greatest retracement.

Looking at the specific indexes, Shanghai Composite index and Shanghai 50 index both had significant drop after the low opening, falling below the lowest point in the past two years and one year, respectively.

Shortly after the lowest point, other heavily-weighted sectors, like petroleum, petrochemical, and finance, drove the indexes up. But later the two indexes closed in green as the finance sector fell down greatly.

In the contrast, the Growth Enterprise board was relatively strong, as the index fluctuated back and forth around the 5-day moving average after the lowest point on the 25th.  The great innovation sector had the best performance overall, with computer, national defense, electronic components, and communication sectors led the upward trend. The Growth Enterprise index was once above the 10-day moving average, but then fell back and closed with green.

Friday was the last trading day in June, with all the indexes picked up.  The Shanghai Composite index recovered its 2800-point mark, and the Growth Enterprise index was up more than 4%, as both the trading volume and the stock prices showed increasing trend.

The market started warming up, and more expectations are coming up for the performance of the market in next half of the year.

The A-share market is still at a bottom-building stage. Under the weak operation of the market, the recovery needs the cooperation of multiple favorable factors, including capitals and profit accumulation.

The fundamental aspects of China's economy is fairly good, with its increasingly resilient growth and a balanced supply-and-demand relationship.

In addition, the market liquidity and capital supply are relatively stable, so there are more to expect in the future.

The consumption and innovative technology industry are still the most favored concepts. On the basis of risk evaluation, investors can look for opportunities of food and beverage, computer, and pharmaceutical stocks.