A-shares See Decline in Both Volume and Price

On June 19, the A-share market in China exhibited signs of volatility and adjustment, with notable declines observed in both the Shenzhen Composite Index and the ChiNext Index, each plummeting by over 1%. Trading volumes further contracted, culminating in a total turnover of only 708.8 billion yuanThis turbulent day capped a continued downward trajectory that has been prominent since late May, raising questions about the market's future trajectory following a rebound that began in early February.

Industry analysts interviewed shed light on the current market dynamicsThey characterized the A-share market as being in a phase where it is attempting to stabilize but is hampered by a significant lack of incrementally new capitalThis scarcity has fostered a pervasive sense of pessimism among investors, casting a pall over any aspirations for a robust market rallyAs a strategic response, analysts recommend that investors consider balanced portfolio allocations while moderating their trading frequency and vigilantly managing their positions.

Since May 21, the stock market has experienced a near 5% decline

As of the latest trading session, the Shanghai Composite Index slightly dipped by 0.4%, settling at 3018.05 points, while the ChiNext Index saw a sharper drop of 1.26%, ending at 1788.5 pointsThe downturn is further corroborated by the fact that turnover in A-shares has once again diminished, only reaching 708.8 billion yuan.

Among the various sectors, a majority showcased downward trendsOut of the 31 primary sectors tracked by Shenwan Hongyuan, only minor gains were observed in banking, petroleum and petrochemicals, and non-ferrous metalsIn contrast, 12 sectors, including military technology, retail, and automotive, saw declines exceeding 1%. Leading these latter groups was the power equipment sector, which faced a steep drop of 2%.

The technology-focused Sci-Tech Innovation 50 Index also reflected this bearish sentiment, with most constituent stocks experiencing significant declines

Companies like Daqo New Energy and Aika Technology saw their share prices drop by more than 6%. As of June 19, the year-to-date decline for the Sci-Tech Innovation 50 Index has approached 12%.

Investment managers continue to express their insights on the prevailing situationAccording to Liu Hong from Tongwei Investment, the market is grappling with a dual challenge of illiquid conditions and a gloomy atmosphere, hindering any strong upward movementsHowever, following bouts of acute liquidity crises and the government’s supportive measures introduced during April, the likelihood of a steep decline akin to previous episodes is now diminishedPresently, both internal demand is sluggish, and external macroeconomic uncertainties loom largeIn light of this, Liu suggests a balanced approach to investing, focusing on risk management and maintaining a diversified portfolio.

In a separate interview, Xia Fengguang, a fund manager at Rongzhi Investment, echoed similar sentiments, pointing to declines in major constituents like Kweichow Moutai as symptomatic of a feeble consumer environment

After a recent correction in blue-chip stocks, the downward cycle extending over the past month may have reached its conclusionEncouragingly, after a period of shrinking volumes, there are signs that trading activity may soon pick up again, potentially indicating that the market is probing for a bottom.

Analyzing the current stage of the market, Hou Xinming from Fangxin Wealth emphasized that A-shares are presently navigating a stage of consolidationWith trading volumes nearing all-time lows, conditions may be ripe for some fluctuationsThis prolonged downturn reflects a confluence of fundamental factors and liquidity conditions, suggesting that the market will likely remain in a choppy state while it processes this information and seeks to establish a clearer trajectory.

In an advisory capacity, Zheng Yanxin, general manager of the Guangdong Provincial Guoxin Industrial Research Institute, candidly expressed the difficulty in pinning down the precise moment of reversal for A-shares

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Nonetheless, he pointed out that the negative sentiment surrounding the market appears to have largely peakedWith the rigorous support being provided at the 3000-point mark, the current valuation levels seem to offer a reasonable measure of safety for investors.

As for sector performance, there are glimmers of positivity within specific areas of the marketYear-to-date figures show that sectors such as banking and coal have posted gains exceeding 15%. Home appliances, utilities, petroleum and petrochemicals, telecommunications, and non-ferrous metals have also shown resilient performanceHowever, a transitory gap is evident in sectors like computer technology, retail trade, media, healthcare, and light manufacturing, all of which are grappling with declines exceeding 16% thus far in the yearOver the past ten days specifically, while most sectors have stumbled, electronics, telecommunications, and computer technology have notably outperformed.

For future investments, Zheng Yanxin has noted noticeable trends in policymaking as articulated by Wu Qing at the Lujiazui Forum

It appears that pursuing a singular sector is less advisable; however, cherry-picking high-performing stocks with substantive earnings potential could lead to lucrative outcomesInvestors are encouraged to search for companies with sustainable growth prospects across various industries, maintaining a long-term perspective while practicing prudent diversification and risk management strategies.

According to views articulated by Furong Fund, the technology sector remains a critical focus for medium- to long-term investmentWhile the overall risk of market decline seems contained at present, maintaining patience in strategy could yield benefits, particularly for cyclical leading companies that have bottomed out in terms of fundamental performances, as well as truly high-growth stocksLong-term outcomes for the tech sector will hinge on industrial trends, policy decisions, and liquidity factors