As A shares rebound, analysts see market flying on measures

Monday's share price rebound shows A-share market sentiment will continue to pick up as supportive policies introduced earlier this year will further stabilize economic growth and inject impetus into the stock market, experts said.

On Monday, the Shanghai Composite Index gained 1.28 percent to close at 3236.37 points while the Shenzhen Component Index closed 2.66 percent higher at 11938.12 points. The Nasdaq-style ChiNext in Shenzhen jumped nearly 4 percent.

The total trading value at the Shanghai and Shenzhen exchanges topped 1.11 trillion yuan ($167 billion) on Monday. The northbound capital－it is overseas investors' spend on A-share companies' shares via the stock connect mechanisms between Shanghai, Shenzhen and Hong Kong－reported a net inflow of about 11.3 billion yuan.

Metal companies with businesses related to the new energy industry reported the strongest average daily surge of 6.75 percent on Monday, followed by the 4.97 percent average price increase of A-share photovoltaic equipment providers. Washington's Monday announcement to pause new tariffs on solar imports for two years may have lifted the prices of these A shares, said industry experts.

According to Qin Peijing, chief strategist of Citic Securities, the strong rebound on Monday appears to be the beginning of a possible slow bull run that will likely extend to the mid to long run.

For one, the various economic stimulus policies announced at the beginning of the latest COVID-19 resurgence will take effect collectively this month, facilitating economic recovery at a faster pace.

For another, foreign investors' risk appetite for A shares has recovered and the trend will last over the following months. Foreign investors have been adjusting their positions over the past few months, and agree that the A-share market is set for a recovery as market fundamentals will continue to improve and external disruptions will be less. Therefore, more foreign capital inflows into the A-share market can be foreseen, Qin said.

Under such circumstances, investors should look for opportunities in modern infrastructure, property and consumption sectors, or companies with businesses related to production resumption, Qin said.

Xun Yugen, chief economist of Haitong Securities, said the A-share market may have bottomed out in late April. At that time, most investor exposure to A shares was at a historic low, a possible sign of the market bottoming out.

Xun explained that market recovery can be confirmed if any three of the five major indicators－aggregate financing to the real economy, infrastructure investment, purchasing managers' index, property sales and auto sales－start to stabilize. The five indicators have either stabilized or shown an uptrend as production resumption steadily advanced in areas affected by the recent COVID-19 resurgence. Under such circumstances, the A-share market is sure to see forward momentum, he said.

According to Shanghai-based market tracker Wind Info, 146 companies have made IPOs in the A-share market so far this year, with 38, or 26 percent of the total, seeing their stocks fall below the offer price on debut.

The trend has somehow decelerated in May, as only two of the 18 newly listed shares, or 11 percent of the total, slid below the IPO price on debut.

Yang Delong, chief economist of Shenzhen-based First Seafront Fund, said he considered that to be a signal of a market turnaround, for "newly issued shares usually perform strongly when the market recovers".