Highlights

The A-Share market displayed a remarkable shift as transactions surged to 1 trillion yuan within just 20 minutes today. This rapid change was marked by four major divergences: the distinction between Hong Kong and A50 stocks, dissimilarity in futures and stock trends, bond versus dividend behavior, and disparities between transaction volumes and broker stock movements. The market remains structurally heated, pointing towards potential adjustments if volumes continue to rise.

Sentiment Analysis

• Positive trends observed in transaction volume and market dynamics.
• Divergences highlight underlying volatility and potential risks.
• Historical data suggests that increased volume can predict adjustment phases.
• Overall, sentiment leans towards caution with opportunities for strategic investment amidst potential shifts.

Article Text

This morning's A-Share market opening was both remarkable and intense. In just 20 minutes, the trading value exceeded a staggering 1 trillion yuan, signaling a brisk start to the trading day. However, this surge was accompanied by significant structural changes within the market dynamics. Notably, while sectors such as commercial aerospace continued to gain strength, the lithium battery sector experienced a rapid decline, illustrating the nuanced shifts within the market landscape.

Throughout the morning, several key divergences became evident. First, a stark contrast was observed between the Hong Kong stock index, which saw an increase led by a 1% rise in the Hang Seng Tech Index, and the A50's dip of 1% during early trading. It was noteworthy that despite these opposing movements, Hong Kong stocks did not follow the decline observed in the A50, demonstrating resistance to downward pull from the mainland market trends. Furthermore, southbound funds recorded a net purchase of 6 billion HKD early in the trading session.

Additionally, the morning saw significant rises in gold, silver, copper, and lithium carbonate futures, yet the corresponding stocks did not follow suit, with examples like Zijin Mining initially surging and then dipping into the red. This divergence in stock and future price movements drew attention to the complex interplay of market factors at play.

In terms of bonds, early trading saw upward movement across major future contracts, yet this increased activity did not translate into similar trends in the dividend stocks, which remained largely unaffected. Similarly, despite expectations of record high transaction volumes, broker stocks that generally benefit from such market activity faced pressure, with ETFs tracking these brokers experiencing sharp declines.

The overarching concern amongst market analysts, as noted by CICC's Summer Fan, remains the risk of adjustments linked to continuously rising transaction volumes. Historical trends, such as those observed in the early 21st century and 2015, suggest that sustained volume increases could precede market corrections. Nevertheless, the overall market environment, with stable RMB exchange rates and moderate inflation, remains conducive for A-Share opportunities.

As the market progresses through January, a narrative has emerged likening current conditions to the favorable early 2015 scenarios. While margin lending appears stable without excessive leverage behavior, upward trends are primarily seen in artificial intelligence and commercial aerospace sectors, with brokerage and dividend indices lagging behind. Hence, the present market environment still offers potential profitability that has yet to fully broaden across all sectors. The shifting liquidity landscape, particularly with major deposits coming due and evolving bank deposit rate dynamics, may steer future market directions.

Key Insights Table