Investors need not overly focus on daily stock market fluctuations. In the current rapidly changing capital markets, diversified investment strategies remain crucial. That is to say, investors should reduce their over-reliance on a single market and engage in diversified investments, not putting all their eggs in one basket.
【Shanghai-Hong Kong Stock Connect Strategy】Diversified Investment Strategies are Essential
On the morning of October 12th, the State Council Information Office held a press conference where the Minister of Finance, Lan Fo'an, introduced that in order to stabilize growth, expand domestic demand, and mitigate risks, the Ministry of Finance will introduce a series of targeted incremental policy measures in the near future. In terms of resolving local debt risks, it is planned to increase the debt limit on a one-time basis to a larger scale, replace the existing implicit debt of local governments, and intensify support for local governments to resolve debt risks. In my opinion, this is the most important measure to support debt resolution in recent years. It is not only a "timely rain" but also fills the A-share market with imagination space.
Previously, on October 8th, the State Council Information Office had held a press conference with the theme of "Systematically Implementing a Package of Incremental Policies to Solidly Promote an Economic Structure that is Optimistic and a Development Trend that is Continuously Positive." Zheng Shanjie, the Director of the National Development and Reform Commission, stated at the meeting that in response to new situations and issues in the current economic operation, China will effectively implement existing policies while focusing on five aspects: increasing counter-cyclical macroeconomic policy adjustments, expanding domestic effective demand, increasing support for enterprises, promoting the real estate market to stop falling and stabilize, and boosting the capital market. A package of incremental policies will be vigorously introduced to promote the economy to continue to rise positively.
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In response to this, I believe that the expected effects of these policies are very positive, but their implementation requires a process. This is also the reason why many market investors believe that the recent A-share market correction is related to the "package of incremental policies" not meeting expectations.
Global stock markets can be said to be "policy markets."
It has been observed that in recent days, A-shares have indeed shown a trend of wide fluctuations, leading many investors to believe that the current market is a "policy market." So, what exactly is a "policy market"? Generally speaking, a policy market has the following three characteristics. First, the market's encounter with policy adjustments will directly affect market sentiment and trends. Second, economic policy signals released by relevant institutions will have a significant impact on the market. Third, market sentiment and confidence will be directly affected by policy adjustments. Generally, the greater the support from policies, the stronger the confidence of market investors.
Based on these three characteristics, judging from the current market situation, the A-share market to a certain extent also has the shadow of a "policy market." In fact, the global stock market, without exception, can be said to be a "policy market." That is to say, whether it is the U.S. stock market or A-shares, they are all part of the "policy market," such as the U.S. stock market's direction mainly depends on the Federal Reserve's interest rate policy and "tone."
Regarding the issue of whether the current A-share market is overheating, I believe it is an objectively existing phenomenon. First, a series of significant favorable policies have changed investors' expectations of the market, thereby greatly enhancing their confidence, making them dare to invest and have confidence to invest. This can be seen from phenomena such as the concentration of new stock market accounts and the rush to enter the market. The second manifestation is that against the backdrop of high market sentiment, the enthusiasm for trading by leveraged funds and individual investors has significantly increased. However, at the same time, this has also attracted the attention of regulatory authorities, who are concerned about the risk of bank credit funds entering the stock market and being trapped, resulting in an inability to recover.
At present, market investors have great expectations for the next step of fiscal policy in the mainland. Especially in recent days, a series of positive actions from the official side have helped to boost market confidence to a certain extent and inject strong vitality into economic development.Debt Resolution Efforts Have Yielded Results
Among the aforementioned series of official actions, I believe the focus on preventing and resolving local government debt risks is particularly noteworthy, as it is an important task for China at present, affecting China's economic and social development as well as fiscal security. Currently, China is facing the challenge of resolving local debt, such as the urgent need to restructure non-performing debts and to reduce interest rates below the inflation rate and nominal growth rate. In the future, only when local debt issues are resolved can China's economic vitality be further unleashed, and the A-share market can hope to achieve stable and long-term growth. The good news is that on October 12th, Lan Fu'an stated that the overall risk of local debt has been alleviated, and the debt resolution work has achieved phased results. Against this backdrop, the A-share market still has a considerable degree of attractiveness.
In contrast, the Hong Kong stock market also experienced a correction last week, which I believe may be mainly related to factors such as the impact of technology stocks and the real estate sector. In particular, the fluctuations in the technology and real estate sectors have had a significant impact on the overall Hong Kong stock market, especially with the larger declines in technology and real estate stocks, leading to a sharp change in market sentiment. Overall, the future trend of the Hong Kong stock market will continue to be upward, but there may be fluctuations in the short term.
Don't Put All Your Eggs in One Basket
In fact, I believe that investors do not need to overly focus on stock market fluctuations every day. In the current rapidly changing capital market, a diversified investment strategy remains crucial. That is to say, investors should reduce their over-reliance on a single market and engage in diversified investments, avoiding the mistake of putting all their eggs in one basket.