Jufeng Micro Strategy: Open lower and rise higher, A-shares officially enter the negotiation zone. Don't miss these opportunities!

Ask AI · How do Q1 earnings support the current rebound market?

Author | Guo Yiming, Editor | Liang Puxi

Source: Jufeng Investment Consulting, Good Stock app

The overnight decline in US stocks and the collective pressure on Asia-Pacific markets have not been able to stop the A-share market from making a comeback on the day. On Thursday, after the three major A-share indices opened lower in the morning, they quickly received buy-side support, delivering a “straight-line rally.” Not only did they turn positive, but in the afternoon, led by multiple sectors, they continued to trade higher in a choppy pattern. The Shanghai Composite Index successfully reclaimed the 3,900-point integer level. This “against the global trend” independent performance not only continues the repair rebound since 3,794 points, but also sends an upbeat signal to the market: the marginal impact of overseas market volatility on A-shares is weakening significantly. After the concentrated release of short-term panic sentiment, the market’s own repair momentum has started to take the lead. Meanwhile, during the day, the brokerage sector—benefiting from standout Q1 reports—was the first to gain momentum, which also confirms that fundamental support for stock prices is returning.

Looking at the day’s rebound overall, it mainly stems from the tail end of the market’s short-term oversold panic sentiment after a selloff. Reviewing this round of correction, its essence is not a deterioration in macro fundamentals; more than anything, it reflects profit-taking pressure after a sustained rise since the beginning of the year. The Middle East geopolitical conflict has served only as a “catalyst.” When the Shanghai Composite Index briefly broke below the 3,800-point integer level, the confluence of technical oversold signals and short-term bargain-hunting capital provided natural soil for the rebound. However, even though index-level performance has been impressive, investors still need to stay clear-headed. During the current rebound, trading volumes across both markets have not shown a significant expansion. This indicates that more capital is still on the sidelines and the market has not formed a consensus long-side force. Therefore, the current rise is more accurately defined as structural repair rather than a trend reversal. The probability is high that the market will keep grinding its base, using time to create space. The risks of chasing gains blindly and betting with heavy positions still remain.

From historical experience, the “dumping” caused by external factors such as geopolitical conflicts often, after sentiment has been purged, provides a better layout window for rational capital, and the subsequent rebound also shows a certain degree of regularity. First, the high-quality sectors that were wrongly hit are the top choice in the initial stage of the rebound. In the process when the market is washed with sand and grit, some stocks with solid fundamentals and improving business conditions but whose performance has been dragged down by liquidity shocks often repair valuations earlier. For example, certain tech leaders with strong earnings certainty that had been passively pulled back along with the sector, as well as cyclical sectors that benefit from economic recovery but were suppressed by pessimistic sentiment earlier, all have strong repair elasticity. Second, high-growth directions with elevated business momentum remain the core main line of the rebound. From historical data, after each deep dip, growth stocks with an industrial trend logic (such as artificial intelligence, semiconductors, high-end equipment, etc.) are never absent, and they often become the main battlefield for rapid capital replenishment due to their high elasticity.

Besides the two main lines of “wrongly sold” and “growth” based on the historical patterns and logic discussed above, the certainty of the Q1 earnings track looks especially important at the current stage. The rebound structure in the recent market has already clearly shown that earnings are the hardest support for stock prices. Take the brokerage sector as an example: benefiting from a recovery in proprietary trading business and an increase in trading activity, multiple brokerages have turned in results that exceeded expectations. Their intraday straight-line surge is a direct vote from capital for earnings certainty. Therefore, in terms of future positioning, investors should focus on those “double-insurance” candidates that were not only wrongly sold but also have Q1 earnings performance that can validate their growth logic. Especially in the context where macro data is in a verification period and external uncertainty still exists, companies with earnings support can better withstand market volatility and capture excess returns during the rebound.

Finally, while seizing structural opportunities, it is also necessary to face the potential challenges currently facing the market. A rebound without volume is the biggest concern. This suggests that incremental capital is not showing strong willingness to enter; the market is mainly a game between existing (stock) capital and portfolio reshuffling. If, going forward, trading volume cannot be sustained in effectively expanding, then both the rebound’s height and its durability will be constrained, and the market is likely to enter a process of repeated choppy trading and bottom-building. In addition, although uncertainty in overseas markets has weakened at the margin, it has not disappeared. The direction of the Federal Reserve’s monetary policy and the evolution of geopolitical situations may still create disturbances to global risk appetite. Therefore, for investors, the strategy at this time should adhere to the principle of “optimistic expectations with cautious execution.” Under the premise of controlling total position sizes, use market volatility to build positions on pullbacks around the main lines mentioned above, and avoid emotionally chasing gains after a single-day surge, so as to respond to a possible scenario of continued base-grinding and reversals.

Author: Guo Yiming | Professional license: A0680612120002

Disclaimer: The above content is for reference only and does not constitute specific investment operation advice. Profit or loss from any action taken is your responsibility, and risks are your own.

Author statement: Personal views, for reference only