A-Shares Welcome Rebound and Recovery! CITIC Securities: Deep Correction Has Created Mid-Term Layout Opportunity

Overnight global market news was volatile, affecting asset pricing, including a rapid decline in oil prices, narrowing gold declines, and a rebound in U.S. stocks. Short-term developments led to a rebound and recovery in the A-shares market, with the Shanghai Composite Index opening nearly 1% higher. Investors are now concerned whether to buy (bottom-fish) or sell (hedge).

In response, China International Capital Corporation (CICC) stated: We still need to monitor subsequent developments and recent liquidity conditions in the A-shares market, such as institutional redemption pressures. From a market stability perspective, it is currently necessary to guard against negative feedback from liquidity on the index.

The firm further indicated: The current level may represent a mid-term low for A-shares, and the deep correction has created a good opportunity for deployment. On a medium-term basis, the macro environment has not fundamentally changed, and the logic supporting a stable and advancing A-shares market remains valid. The release of risks and downward adjustments are expected to offer good allocation opportunities. China’s manufacturing advantage is evident. Currently, artificial intelligence is in a stage of new technological iteration and application deployment. The demand for energy and costs in training new models is growing exponentially, supporting upstream demand and driving up product prices and profit margins of related listed companies.

Although short-term trends still carry some uncertainty, after the adjustment, risks in the A-shares market have been further released. We believe valuations are relatively reasonable. Based on risk premium measures, as of March 23, the earnings yield of the CSI 300 Index compared to the 10-year government bond yield shows an equity risk premium of 5.5%, placing it at the 42nd percentile since 2010. The CSI 300 dividend yield is 2.7%, indicating that the valuation of stocks relative to bonds remains attractive.

Among many ETFs tracking the CSI 300, the Huaxia CSI 300 ETF (510330.SH) has the lowest management fee at just 0.15% per year. Off-market fund investors can also consider dollar-cost averaging into the Huaxia CSI 300 Connect ETF (005658.OF), which has no subscription fee and no redemption fee if held for more than 7 days.

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