Day 148 Mid-week stock market observation and analysis

Mid-week stock market observation and analysis

During the last two trading days, both Chinese SSE index and SZSE component index has experienced an immense increase. Where the SSE had reached 4500 points earlier today and SZSE was sitting on 15400 levels. So I would like to provide a brief resonation of this bull pattern incurred right after the drastic down turn last week.

To be consistent with my previous analysis, we would still look at two major factors: flow of funds and market confidence. Since I believe these are the strongest force in the market and perhaps most obvious figures for inexperienced investors to read. In order to interpret the market movement caused by these elements, we should start with the most significant information that had influenced the weighted stock in the market. On Tuesday, the Ministry of Industry and Information Technology (MIIT) announced the ‘Made in China 2025’ strategic report, which claimed the Chinese manufacturing industry has become the world largest and will definitely bring the economy into a different level. In my opinion, this report is not same as the previous mid/long term plan, but as the strategy of development for the following ten years. It explained the relative policy support towards the green manufacturing, product innovation, and quality measurement. On the same day, the announcement stimulated the performance on concept stock of intelligence machinery, including Siasun Robot & Automation Co.,Ltd.(sz.300024) and HuBei SanFeng Intelligent Conveying Equipment Co.,Ltd.(sz.300276). As an investor, we should be aware of the profound effect in the future in the industrial relevant stocks. Therefore, we must monitor the ten major industries that can be expected to receive policy support in the next ten years, which were mentioned in the report. To illustrate, these areas are: new generation of telecommunication; aerospace equipment; computer-controlled robot and laths; ocean engineering equipment; new energy vehicle; transit equipment; electrical power unit; biological and medical equipment; new material; agricultural machinery. Hence the market tends to have more confidence in these stocks, and potential capital gain opportunities are generated. On the other hand, there will be 20 IPO on the market this week, which creates enormous pressure on flow of funds. Thus we must acknowledge the possible downward pattern in the following trading days as well.