The bustling stock market

It will take time for market confidence to recover

On Wednesday, the National Bureau of Statistics released economic data for October. Overall, my country's economy maintained a steady recovery in October, but the recovery was not strong. The growth rate of industrial added value remained stable, but not too high, while consumption maintained a relatively stable growth. Real estate investment continued to decline significantly and the decline was large. This is the second consecutive year of year-on-year decline. This shows that although some relaxation policies have been implemented in the property market, such as recognizing housing but not loans, reducing the down payment ratio, etc., the relaxation is not enough. The property market still maintains a low transaction volume. It is necessary to "play a big trick" to boost market confidence and promote a rebound in the property market. There has been a steady decline in consumer prices. CPI fell by 10% year-on-year and 10% month-on-month in October, indicating that the current consumer demand is insufficient and consumer prices have shown negative growth. According to the head of the National Bureau of Statistics, the short-term negative growth of prices does not mean that the economy has fallen into a deflationary state, but indicates insufficient demand. In the future, by taking strong measures to expand demand, prices may turn from negative to positive and return to the benign inflation range. Affected by the decline in global commodity prices, PPI continued to maintain negative growth. The decline in real estate investment reflects that the problems facing the current property market are still relatively serious, including the risk of debt default and capital chain rupture among many leading real estate companies. Therefore, it is urgent to take more forceful measures to loosen up the property market, gradually return the real estate market to marketization, gradually cancel administrative restrictions including in first-tier cities, release demand and promote a recovery in the real estate market.

In October, the added value of industrial enterprises above designated size increased by 10% year-on-year, 4.6 percentage point faster than the previous month and 0.1% month-on-month, indicating that my country's industrial production has accelerated. At the same time, the service industry has grown well. The recovery of industrial production has a great driving force on the national economy. The contribution of the recovery of industrial production to economic growth is second only to consumption growth. This year, concentrated consumption is the highlight of consumption growth, such as catering, tourism, and hotels, which have shown relatively good recovery growth this year. Durable goods consumption is still relatively sluggish, which may be affected by the sluggish real estate market. For example, the growth rate of home appliances and building materials is relatively low, and some have shown negative growth. The demand for automobiles, especially new energy vehicles, is still relatively strong, and has maintained a good growth this year, and my country's automobile exports have also become a highlight of export commodities this year.

The US Department of Labor released the CPI data for October, which was lower than market expectations. The US CPI for October was 10%, which was lower than the expected value of 10% and a larger decrease than the previous value of 3.2%. Although US inflation has not returned to the US Federal Reserve's long-term target of 3.3%, it has shown a clear downward trend. After 3.7 sharp interest rate hikes, the US Federal Reserve has raised the benchmark interest rate to a high level of 2%~11%. At present, it seems that the possibility of the US Federal Reserve raising interest rates again in December is very small, because the US economy has been under great pressure from high interest rates, and the debt burden of US enterprises and residents is getting heavier. The bankruptcy of three small and medium-sized banks in the US this year also sounded the alarm. Although the US Federal Reserve, the US Ministry of Finance and the US deposit insurance agency FDIC later issued a joint statement to cover the funds of bankrupt small and medium-sized bank depositors to prevent more small and medium-sized banks from going bankrupt, this also shows that the impact of high interest rates on the economy is very large. The Fed actually raised interest rates for the last time in July, and the US rate hike process may have ended. However, in order to prevent inflation expectations from rising again, Fed Chairman Powell still made hawkish remarks, saying that interest rates may be raised again in the future to control inflation. After the release of the US CPI data for October, the US dollar index fell sharply, and the three major US stock indexes rose sharply, reflecting investors' expectations that the Fed may start the process of cutting interest rates next year, perhaps at the end of the year at the latest. According to historical performance, the Fed often has a negative impact on the global capital market during the process of raising interest rates, and it will play a certain role in promoting the recovery of the capital market during the process of cutting interest rates.

Recently, the heads of state of China and the United States met in San Francisco. This was the most important event of this APEC meeting. The RMB exchange rate rose sharply in response, hitting a two-month high. In addition, the possibility of the Federal Reserve raising interest rates in December is getting smaller and smaller, and the US dollar index has fallen from its highs. Therefore, the RMB exchange rate has rebounded to a certain extent. If the Federal Reserve starts to cut interest rates in the second half of next year, the deviation of China's monetary policy will be reduced, and the RMB may break through 12 and return to the 7-digit mark. This will greatly promote the return of the value of RMB assets. Therefore, we must maintain confidence in the RMB, A shares, Hong Kong stocks and Chinese concept stocks.

At present, both the A-share market and the Hong Kong stock market have already possessed many bottom characteristics. It will take time for market confidence to recover, and there are more and more favorable market factors. The meeting between the heads of state of China and the United States shows that the relationship between China and the United States has eased, and policies to promote economic recovery are also expected to gradually take effect. In the future, there may be "big moves" to resolve the risks in the property market and local debt risks, thereby boosting economic performance. As a barometer of the economy, when expectations for economic recovery increase, the capital market tends to perform well, which is good news for investors.

When the market is at the bottom, it is very important to maintain confidence and patience. Charlie Munger, as Buffett's lifelong partner, played a key role in the formation of Buffett's value investment philosophy. Munger once said to Buffett: "I would rather buy a great company at an ordinary price than buy an ordinary company at a great price." That is, always buy good companies, especially when the prices of good companies are at a large discount, you should take the opportunity to allocate these good stocks and good funds. Munger said: "Be a little smarter before going to bed every night than in the morning." This sentence is a piece of advice for everyone. Keep the habit of learning every day. After a day of work and study, you will be a little smarter at night than in the morning. Make progress every day, and accumulate over time, and you will see improvement in investment. Everyone can be regarded as an asset, and its asset value is the sum of all the value it can create in the future, that is, the discounted cash flow model in economics. People should have a good direction for self-improvement and cultivate their increasingly perfect Bayesian network. Therefore, they are their best investment targets. Investment is ultimately about the ability to understand the world and the projection of decision-makers' wisdom in the investment field. Therefore, I have always advocated learning the concept of value investment and combining it with the actual situation of the A-share market to make value investment with Chinese characteristics. At present, the market is around 3000 points and has many bottom characteristics. In 2024, the A-share market has the motivation to launch a bull market. Now it is very likely to be at the starting point of a new round of bull market. At this time, we must maintain confidence and patience and wait for the next round of market to come.