Sinolink: Market funds returning, short-term style may continue.

Sinolink released a research report, stating that in the past week, the market experienced a fluctuation and retreat, with funds flowing back to sectors with performance expectations and low valuations, leading to strong performance of consensus factors and value factors. Additionally, due to the market's retreat, risk appetite decreased, and quantity-price factors, including technical and low volatility factors, rebounded as expected. In the upcoming week, with not many potential catalysts, it is expected that the market style from this week will continue. Investors are advised to focus on consensus factors, value, and quantity-price factors. Sinolink's main points are as follows: In the past week, among the major domestic market indexes, the Shanghai 50, Shanghai and Shenzhen 300 index, CSI 500 index, and CSI 1000 index had price changes of -3.4%, -3.29%, -4.79%, and -4.63% respectively. Last week, China released financial credit data for October, with M2 continuing to rise year-on-year at 7.5%, an increase of 0.7% from the previous month; M1 also showed a turning point and rose to -6.1% year-on-year, an increase of 1.3% from the previous month. The data indicates that market confidence of residents and businesses has increased, with an increase in demand deposits. This can also be seen from the year-on-year data of internal consumption. Supported by various consumption-promoting policies, the year-on-year growth rate of total social retail sales in October was 4.8%, up 1.6% from the previous month. Overall, the economy is steadily warming up. However, with the settling of major events domestically and internationally, and the short-term entry into a policy lull domestically, market optimism has cooled slightly, and funds have shifted from thematic investment styles to sectors with low valuations and fundamental support. Furthermore, internationally, due to the year-on-year increase in the US CPI in October, reaching a three-month high. Perhaps partially due to this increase, Federal Reserve Chairman Powell stated in a speech that "the economy has not given any signals that the Fed needs to rush to lower interest rates." Following his remarks, the possibility of a rate cut by the Fed in December priced in the futures market has decreased to 58.2%. The ten-year US bond yield also rose from 4.3% on November 8 to 4.43% on November 15, an increase of 13 basis points. The rise in US bond yields has led to a partial flow of funds from high-risk preferences to non-US regions, tightening the overall liquidity in non-US regions, putting some pressure on highly elastic growth sectors. Driven by domestic and international factors, in the past week, funds have been seen shifting from growth to value. In the upcoming week, with not many economic data releases expected, it is anticipated that this style will continue. Therefore, it is recommended to tactically switch to dividend sectors and growth sectors with performance expectations. Considering the economic situation and liquidity, for the upcoming week, the recommendation is to maintain a core position in the broad market growth, while tactically switching to dividend sectors and growth sectors with performance expectations. Regarding liquidity, this week the central bank injected a net amount of 171.71 billion yuan through open market operations, with short-term SHIBOR and DR007 rates for 1 week at 1.674% and 1.8589%, respectively, showing a rise of 2.9 basis points and 5.53 basis points from the previous week. The 1-month and 3-month SHIBOR rates were 1.796% and 1.858%, respectively, showing a decrease of 0.3 basis points and 0.6 basis points from the previous week. Additionally, the bank's short-term price-volume industry allocation model provides industry allocation recommendations for the upcoming week as follows: construction, defense industry, automotive, commerce and retail, non-banking finance, and comprehensive. Looking back on last week's performance, the average returns of the six recommended industries were 6.04%, slightly lower than the average returns of 29 industries excluding comprehensive finance, which was 6.42%, resulting in an excess return of -0.37%. From a medium-term perspective, based on the macro timing strategy constructed by the bank, the equity allocation recommendation for November is 30%, maintaining the same allocation as in October. Specifically, the model continues to have a conservative view on economic growth for October, with a signal strength of 0%; and a signal strength of 60% for monetary liquidity. The timing strategy has yielded a return of 2.76% from the beginning of 2024 to the present, compared to a return of 10.71% for the Wind All A Index during the same period. Micro-Pan Stock Index Timing and Rotation Indicator Monitoring: 1) Regarding the rotation signal of the Micro-Pan Stock Index, the relative net value of the index triggered a signal of crossing the annual line on October 14. Additionally, the slope of the 20-day closing prices of both Micro-Pan stocks and the index are positive, suggesting a favorable outlook for the relative performance of the Micro-Pan Index. 2) In the micro-pan timing model, as of October 15, the volatility crowding indicator reflecting market trading sentiment had fallen below the threshold, and the warning signal for volatility risk had been lifted; whereas the fundamental interest rate year-on-year indicator value was -20.45%, below the interest rate risk control threshold of 0.3. Therefore, the micro-pan timing model has not triggered any risk control measures at this time, so it is recommended for investors who wish to hold micro-cap stocks for the long term to continue holding. Risk warning: The above results were calculated and modeled based on historical data and there is a risk of the model becoming ineffective when policy and market conditions change. The content output by the model has a certain degree of randomness and accuracy risk.