Core conclusions: ① After the central bank raised open market interest rates, the market did not fall but rose, indicating that the previous decline had digested the related negative effects. This rise in interest rates is structural rather than systemic, and there is no need to

core conclusion: ① After the central bank raised open market interest rates, the market did not fall but rose, indicating that the previous decline had digested the related negative effects. This rise in interest rates is structural rather than systemic, and there is no need to worry. ② Looking back on the past ten years, the market mostly rose from early February to the end of the two sessions, and then differentiated obviously. We are currently in a period of political upheaval. Recently, the capital inflow from the mainland to the north has increased significantly, and market sentiment is gradually improving. ③In early December 2016, we turned cautious. In early January, we suggested that we still need to wait. In early February, we were optimistic. The spring market was already on the way, focusing on the main policy lines, such as the reform of state-owned enterprises and the Belt and Road Initiative.

htmlOn February 3, the central bank comprehensively raised the reverse repurchase interest rate and SLF interest rate of all maturities. The market generally interpreted it cautiously; however, the Shanghai Composite Index only saw a significant decrease on that day, rising by 1.8% last week. We believe that "not every rise in interest rates is called a bear market" when negative factors appear but not fall. The market is already price in on the negative factors such as stricter supervision of insurance capital, rising interest rates and accelerated IPOs before the Spring Festival. Maintaining the view of the February monthly report "Rolling Up the Sleeves in Spring - 20170202", the short-term spring market is already on the way.

1. Whether the market is very good or not

After the central bank raised SLF, the market did not fall but rose, indicating that the market is undergoing subtle changes after the bad news. On February 3, the central bank comprehensively raised the reverse repurchase rate of each term by 10 basis points, and also raised the SLF interest rate. The interpretation of the market conference call last weekend was generally cautious; we pointed out that "not every rise in interest rates is called a bear market." Last week, the Shanghai Stock Exchange The KLCI closed up 1.8%, its highest weekly gain since December 2016. In the face of the negative market, the market did not fall but rose, which shows that after two months of adjustment, the market's negative factors for rising interest rates have been eliminated. The three major short-term negative factors are stricter supervision of insurance capital, acceleration of IPOs and rising interest rates. The insurance regulatory policy was implemented on January 24. Historical patterns show that there are significantly fewer IPOs in February than in other months, and the first two factors have been gradually digested. In addition, judging from the sentiment indicators of turnover rate and reaction, the negative factors have also been gradually digested. We have repeatedly compared this round of decline to January-March 2015 and April-June 2016, which lasted about two months, and the maximum retracement of the Shanghai Composite Index was about 10% in terms of space. It has been nearly 2 months since the adjustment in December, with the Shanghai Composite Index having a maximum retracement of 7.8%. Referring to sentiment indicators such as trading volume (weekly smoothing) and turnover rate (weekly smoothing), when the lows were adjusted from January to March 2015, they shrank to 36% and 35% of the previous highs respectively. From April to June 2016, they were 46%, 45%. On February 3, the trading volume and turnover rate were 19 billion shares and 116%, respectively, shrinking to 36% and 42% of the previous high of 53.2 billion shares and 330% respectively. The negative factors are gradually being digested. Trading volume began to increase last week, with trading volume and turnover rate rising to 32.2 billion and 196% respectively. The balance of long and short power has changed dynamically, and the market can be more optimistic in the short term.

This time interest rates are structurally rising, and the market shock pattern has not changed. "Is the rise in interest rates systemic or structural, and the performance of major asset classes is very different - 20170209" detailed analysis, using the 1-year time deposit interest rate to represent the policy interest rate, and the 10-year treasury bond yield to represent the market interest rate, which can be clearly seen since 2005 There were three periods of rising interest rates, namely from March 2007 to August 2008, from October 2010 to July 2011, and from March to December 2013. However, the macro background and nature of these three interest rate rises are different. The first two were systematic rises. All interest rates entered an upward cycle. Tightening policies affected fundamentals, eventually forming a Davis double kill in the stock market. The latter time was a structural upward trend, with market interest rates rising while the benchmark interest rates for deposits and loans remained stable. This interest rate rise belongs to the second type, with the purpose of risk prevention and deleveraging. The central bank raised the MLF interest rate two years ago, and then raised the reverse repurchase rate and SLF interest rate on the first trading day after the year, sending a strong signal to the market that monetary policy has shifted from "loose" to neutral. The central bank's main intention is financial deleveraging, especially financial deleveraging. It is to remove the off-balance sheet assets of banks and the high leverage among small and medium-sized financial institutions. In the future, it is not ruled out that the central bank will continue to increase policy interest rates such as reverse repurchase, MLF, and SLF. However, the GDP growth rate in 2016 has basically stabilized at 6.7%, and the industrial added value has also stabilized at around 6%. The CPI has increased slightly but is still at a reasonable level. There are still downside risks to the economy in 2017, and macro fundamentals do not support sustained interest rate increases.At 2638 points at the end of January 2016, "Has A-share bottomed out?" we proposed that the bear market of unilaterally falling and has ended, and the market has entered a volatile pattern, similar to that of 2013. Due to the real estate purchase and loan restriction policy, allocating funds have nowhere to go. Stock market funds can still maintain a balance between supply and demand, and the volatile pattern will continue.

2. The policy warm-up period has boosted the market.

The market as a whole rose in the past ten years before the two sessions. Based on statistics of market performance before and after the Two Sessions since 2007, the market performance is divided into two stages: before the Two Sessions (from early February to the end of the Two Sessions each year) and after the Two Sessions (from the end of the Two Sessions to the end of April). The market reflects the "general rise before the two sessions and differentiation after the two sessions". "Characteristics: First, the market rose as a whole before the two sessions. In the past 10 years before the two sessions, the index has risen in seven years. Excluding the bear market in 2008, only in 13 years has there been a significant decline due to the large early increase in the market (from December 2012 to early February 2013, the Shanghai Composite Index rose by 24% cumulatively). In the first quarter, due to the lack of economic and performance data, the main line of the market is unclear; policies often become the main driving force of the market. During the policy warm-up period, market hot spots frequently appear, and the market is shown in turns by themes. Since 2012, the hot topics that have performed well before and after the two sessions have been There are large differences, indicating that the persistence of the theme needs to be verified. Secondly, the market diverged after the two sessions. In the three rounds of bull markets in 2007, 2009, and 2015, the market trend became clearer after the Two Sessions, and the market growth after the Two Sessions was much greater than before the Two Sessions; and if the Two Sessions released clearer policy signals, the market would turn after the sessions, such as Premier Wen Jiabao’s announcement in March 2012 In response to a reporter's question on the 14th, he emphasized that "house prices are far from returning to reasonable prices." The Shanghai Composite Index fell 2.63% that day, with a maximum amplitude of 3.8%. From March 14 to the end of March, the Shanghai Composite Index fell nearly 8%. At present, economic inflation is still within a reasonable range. There is no performance pressure in the market before the disclosure of the first quarter report. The policy continues to drive the two sessions and the market is slowly unfolding. The Shenzhen Reorganization Meeting on February 6 emphasized that reform should be given a more prominent position. Combined with the density and advancement of central-level local policy disclosures, the end of the two sessions will still be a policy-intensive period. It is expected that national reform, "One Belt and One Road", medical reform, fiscal and tax reform, etc. are expected to become policy highlights.

From the perspective of capital inflows, foreign investment sentiment towards A-shares has improved. The Southern A50 ETF fund, which has been in a state of net redemptions in the past seven months, received continuous subscription applications from foreign investors last week. Its share has increased from 1.61 billion shares in January to 1.67 billion shares on February 9, with a premium of 0.77%. . We noticed that the Hang Seng Index has risen by 7.2% cumulatively over the past 17 years, outperforming A-shares. From November 2016 to January 2017, the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect had a cumulative net inflow of 60.9 billion yuan in southbound funds and a net inflow of 26.6 billion yuan in northbound funds. . However, in the six trading days since February, the net inflow of northbound funds from Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect has reached 11.2 billion yuan, which is close to the net inflow of 11.4 billion yuan in January, and exceeded the net inflow of southbound funds (10.695 billion yuan) in the same period. These changes indicate that overseas funds’ interest in A-share investment seems to be gradually recovering. Comparing the global capital market horizontally, A-share valuations are not expensive. Looking at the absolute valuation PE (TTM, holistic method), the main board is 18 times, the small and medium-sized board is 50 times, and the GEM is 57 times. The main board is not high, and the small and medium-sized enterprises are not low. Comparing the current PE percentile levels of various markets since 2005, the A-share main board is 18%, the small and medium-sized board is 44%, and the GEM is 23%, while the S&P 500 is 64%, and the Nasdaq is 33%. The UK FTSE 100 is 46%, the German DAX is 18%, the Nikkei 225 is 43%, and the National Stock Exchange of India Index is 76%. The historical valuation of A-shares is not high. For overseas funds, A shares are still attractive.

3. Coping strategy: Actively grasp the spring market

The spring market is already on the way, actively grasp it. We turned cautious in early December last year and suggested that we still need to wait in early January. We were optimistic in early February. Last week, the Shanghai Composite Index rose by 1.8%, which was in line with our judgment. At present, the February monthly report "Rolling Up Sleeves in Spring" maintains the optimistic view, and the spring market is on the way. The three negative factors that have triggered the market decline since December 2016 are stricter supervision of insurance funds entering the market, rising interest rates, and IPOs. Judging from sentiment indicators, the market has been adjusting for nearly two months, with trading volume and turnover rate shrinking to 40% of the previous high. On February 3, the central bank raised the reverse repurchase rate for each term, but this week the market rose in the face of negative factors, indicating that the market has priced in negative factors, similar to the market situation in May 2016.At present, positive factors at home and abroad are gradually accumulating, such as the domestic two sessions from local to national two sessions, which will usher in a policy-intensive period in the future, the reform of state-owned enterprises and the continued advancement of the Belt and Road Initiative, etc. The rebound in the share of ETFs represented by Southern A50 and the increase in net inflows from Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect indicate that overseas funds are regaining interest in A-shares. At 2638 points at the end of January 2016, we stated in "Have A-shares bottomed out?" that the unilateral bear market was over and the market had entered a volatile pattern, similar to that of 2013. Due to the real estate purchase and loan restriction policy, there is nowhere to allocate funds. The stock market funds can still maintain a balance between supply and demand. In the medium term, the volatile market will continue. We will follow up on the interim results and the implementation of the reform process.

focuses on policy highlights, such as state-owned enterprise reform and the “One Belt, One Road” initiative. We believe that there are structural opportunities in the volatile market of stock games. Similar to 2013, the main line of the market focuses on "performance determination" and "policy highlights." The current main line of “policy highlights” is relatively obvious, with recommendations on state-owned enterprise reform and the “One Belt, One Road” initiative. In the past three months, we have been recommending the main line of state-owned enterprise reform. On February 3, Shandong State-owned Assets Supervision and Administration Commission issued the "Opinions on Mixed-ownership Reform to Play the Role of Small and Medium-sized Shareholders" to effectively protect the legitimate rights and interests of all shareholders; this month, a conference on the reform of state-owned assets and state-owned enterprises will also be held in Shanghai. It is expected to make new arrangements in aspects such as mixed-ownership reform and state-owned assets flow platform. Related companies include Tunnel Co., Ltd., Highly Co., Shenda Co., , Shanghai Lingang, Bailian Co., , Tsingtao Beer, Ginza Co., Tongling Nonferrous Metals, Anhui Heli , Guanghong Holdings , etc. One Belt and One Road is the focus of China's opening-up strategy in 2017. On January 17, President Xi mentioned "One Belt and One Road" again and pointed out that the International Cooperation Summit Forum will be held in Beijing in May, reaffirming that "One Belt and One Road" has entered the 2.0 stage. The recent government work reports of many local governments during the Two Sessions have made work arrangements for the "One Belt and One Road" this year, including Shaanxi, Zhejiang and other places, which have proposed to deeply integrate into the "Belt and Road" overall pattern and promote a higher level of "going global". . Overseas orders from -related companies have continued to grow at a high rate for 14 years. Policies and fundamentals have boosted this theme, such as Sinosteel International, China Construction, Intercontinental Oil and Gas, Tongyuan Petroleum, Kaishan Co., Ltd., CRRC, Fiberhome Communications, and ZTE. , China Mining Resources, etc.