China Merchants Securities: The January market may show a pattern of structural incremental capital inflows, which is expected to help A-shares continue their upward trend

The Zhitong Finance App learned that China Merchants Securities released a research report saying that the RMB appreciation trend at the end of the year and the beginning of the year is a window for foreign investment to lay out the A-share market. In the short term, a phased net inflow of foreign capital is expected to contribute incremental capital, and the inflow of foreign capital is more favorable to the A-share market style. Judging from history, financing funds in January often weakened in the second half of the month, and most insurance funds had a net inflow at the beginning of the year. Overall, the January market is more likely to show a pattern of structural incremental capital inflows, which is expected to help A-shares continue their upward trend, continue to interpret the spring offensive, and recommend the general market style in terms of style.

The main views of China Merchants Securities are as follows:

Characteristics of changes in various types of capital in January over the years: Insurance and foreign capital are usually arranged at the beginning of the year, and financing funds are often weak at the end of January. The trend of RMB appreciation combined with the end of the year and the beginning of the year is a window for foreign investment to lay out the A-share New Year's Eve market. In the short term, a phased net inflow of foreign capital is expected to contribute incremental capital, and the inflow of foreign capital is more favorable to the A-share market style. Judging from history, financing funds in January tend to weaken in the second half of the month, and most insurance funds have a net inflow at the beginning of the year, which is beneficial to the A-share market style. Overall, the January market is more likely to show a pattern of structural incremental capital inflows, which is expected to help A-shares continue their upward trend, continue to interpret the spring offensive, and recommend the general market style in terms of style.

Monetary policy and interest rates: Last week (12/29-12/31), the central bank invested 709 billion yuan in the open market. In the next week, 1323.6 billion yuan of reverse repurchases and 60 billion yuan of treasury cash will expire. Interest rates in the money market have declined, yields on short- and long-term treasury bonds have risen, the scale of interbank deposit issuance has declined, and interest rates on issuance have all declined. As of December 31, R007 was down 7.4 bps, DR007 was down 9.5 bps, 1-year treasury yield was up 4.5 bps, 10-year treasury yield was up 0.5 bps, the scale of interbank deposit issuance decreased by 419.62 billion yuan, and interest rates on 1M/3M/6M interbank deposits all declined.

Capital supply and demand: The secondary market can track the increase in the scale of net capital inflows. The financing balance declined, with net sales of 2.27 billion yuan of financing capital; net outflow of ETFs of 3.35 billion yuan; and the share of newly established partial equity public funds decreased. Significant shareholders increased from a net reduction to a decrease in the scale of announced plans to reduce their holdings.

Market sentiment: Funding activity declined last week, and equity risk premiums declined. The turnover rate of various style indices and major industries generally declined last week. The VIX Index rebounded, and risk appetite in overseas markets declined.

Market preferences: In terms of industry preferences, non-ferrous metals, defense, military, and household appliances receive a high net inflow of various types of capital. Wide index ETFs are mainly net redemptions, with the Shanghai Stock Exchange 50 ETF redemptions the most; industry ETFs have mixed redemptions. Among them, there are many raw material ETF subscriptions and military ETFs redemptions. The highest net purchase was the Huaxia China Securities A500 ETF; the highest net redemption was the Huaxia SSE 50 ETF.

Overseas changes: US GDP exceeded market expectations in the third quarter, and the ISM manufacturing index fell back to 47.9 in December. The US GDP grew 4.3% year-on-year in the third quarter, exceeding market expectations. It was mainly driven by consumer consumption and investment in infrastructure related to artificial intelligence. The economy is still resilient in the short term. Foreign trade provided some support for growth, but the growth rate of corporate investment slowed significantly compared to the second quarter. Meanwhile, the ISM manufacturing index continued to fall to 47.9 in December and was in a contraction range for the 10th consecutive month, indicating weak demand in the manufacturing industry.

Risk warning: Economic data and policies fell short of expectations, and overseas policies tightened beyond expectations.