A-share market strongly rebounded last Friday, and especially, ChiNext Board index gradually caught up from the behind. However, the turnover had not expanded remarkably, making it the biggest hidden concern of the following trend in the A-share market. Meanwhile, nonferrous metal stocks, concrete stocks and other main types at earlier stage successively fell back. Therefore, market players become cautious regarding to A-share trend this week.
Infrastructure cycle likely to face variables
Indeed, recent A-share market trend is closely linked to main infrastructure sector represented by cement and nonferrous stocks. The market trend, SSE index in particular, goes up every time when main infrastructure sector strengthens, and vice versa. Hence, analysis on a short-term trend of A shares relies on estimation for main infrastructure trend.
This sector sees variables to some extent, media reported. According to media, American infrastructure planning of 500 billion US dollars may be delayed to 2018, due to approval procedure of the US Congress and other factors. International copper price drops along with this, setting a half-month low recently. It will also influence the sentiment of A-share market players, as fluctuation of nonferrous metal price represented by international copper price will directly influence the reconstitution of evaluation coordinate of A-share nonferrous metal stocks. In this case, the price of main infrastructure stocks will fluctuate, too. The decline rate of cement and nonferrous metal stocks ranked high last Friday.
Keynote to fluctuate and consolidate
Based on this, A shares may present an adjustment trend in a short run, insiders expected. Referring to the trend of recent one or two trading days, it is more likely to adjust. After all, cement and nonferrous metal stocks have formed a start for such short-term trend, so that a large number of profit gainers see the formed adjustment trend and begin to sell the stocks. Therefore, related products of main infrastructure sector still face some sell-off pressure at the beginning of this week.
However, a keynote of consolidation and rebound will not substantially change in a medium term. Firstly, local governments still have strong emotion for infrastructure now. It has been reflected in strong credit loan demand of January, but also proved by infrastructure planning of local governments. The investment and construction scale for this sector cannot be ignored, the information shows. Moreover, the north regions will enter in construction period after March, and the price of related materials, like cement, will still be strongly driven. It shows main infrastructure sector has limited space to further fall back. Additionally, this sector generally connects with “the Belt & Road” initiative, and the rising Xinjiang sector well proves this. Thus, infrastructure is still one of the main investment targets for A-share market in 2017.
Secondly, there are still many candidates for the following trend of A shares. Taking manufacturing upgrading for example, recent adjustment of automobile sector has lasted for days, but the automobile sales are still strong, and especially, SUV under the price of 200,000 yuan are basically produced by domestic brands, which have achieved strong sales trend in recent years. Therefore, automobile stocks and individual stocks in this industrial chain represented by Great Wall Motor Company Limited (601633.SH) are still likely to become one of the main investment targets in the A-share market. In terms of domesticated semiconductor and based on forecast report for wafer plants worldwide in recent two years released by SEMI, 19 new wafer plants are determined for construction from 2016 to 2017 regarding to the sizes of 8 and 12 cuns (a unit of length), and ten are located in China. Hence, China’s 12-cun wafer plants are predicted to see explosive growth to bring in investment opportunities for individual stocks of related industrial chains, according to insiders. Based on this, individual stocks of semiconductor industrial chain represented by Shanghai Sinyang Semiconductor Materials Co., Ltd. (300236.SZ) are likely to become new investment targets.
In conclusion, A-share trend indeed faces great pressure in a short run. But there will be many market hotspots in the future, and it is no necessary to be over panic on medium-term trend of this market. Investors should still keep an eye on strong stocks during operation. Based on current trend, investors could continue to buy main infrastructure stocks at low price. Meanwhile, they can also positively allocate in medical stocks, individual stocks in semiconductor industrial chain, those related to power grid reform, big airline stocks, stocks of aviation transportation highly expected to open low airspace, and etc.
Translated by Jelly
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