A Medium Term Rebound To Establish &Nbsp; Trend Reversal Also See Two Factors

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International factors have made initial success in solving the European debt crisis. Domestic factors and monetary policy have been fine-tuning.

By the negative effects of the peripheral market's low level, the Shanghai and Shenzhen two cities opened lower yesterday, but then launched a strong rebound and broke through the 30 average line at one fell swoop. At the end of the day, the stock index had dropped, and the Shanghai stock index reported 2427.48 points, up 17.81 points, or 0.74%.

The long lost money making effect has recently emerged again.

Market participants believe that the mid term rebound is established, but the weakness of the market makes it impossible for the bottom to be built overnight. This week, the market will probably shake repeatedly to confirm the bottom after a strong rebound.

In the future, resolving the European sovereign debt crisis has achieved initial success; the decline of domestic CPI has become a trend. The relaxation of monetary policy will be the two key to reverse the trend of A shares.

Good news and renewed confidence

Since Huijin's holdings, the good signal has been constantly flashing.

China's CPI rose for two consecutive months. On the 24 day, the NDRC publicly confirmed inflationary inflection points. In October, HSBC's manufacturing PMI initial value returned to the growth boom, indicating that China's manufacturing sector started well in the four quarter and reconfirmed that the economy had no "hard landing" worries.

Analysts believe that China's downward trend in prices and economic slowdown is a major factor in the recent strong rebound in the A share market.

At the same time, the Ministry of Finance and the State Administration of Taxation issued a notice recently to reduce or eliminate small and micro enterprises, and to reduce the stamp duty on loan contracts of financial institutions.

This is another positive step after the directional easing policy for small and medium-sized enterprises. It is also the embodiment of the pformation of monetary policy from tight to directional easing.

While the central bank's open market has already realized the net return of this week, the choice of abandoning the declaration of demand for the three year central bank will also help to alleviate the short-term pressure of the current capital market.

In addition, as of October 25th, from the list of the top ten tradable shareholders of the listed companies that have announced three quarterly reports, 68 stocks were added to the social security fund in the three quarter, and 123 stocks were added to the insurance fund.

The action of adding social security funds and venture capital will undoubtedly inject more "strong heart" into the market.

As a result, the positive superposition pushed up the stock index up, only three trading days, Shanghai stock index rose 110.2 points, and returned to 2400 points.

Optimists say that the easing of the "stall" worries has created a good atmosphere for the A shares to stabilize and rebound, and the emergence of favorable policies will mark the end of the current round of adjustment.

Repeated shocks to tamp the foundation

It is worth noting that yesterday's last hour, the market showed a trend of higher and lower, and finally the Japanese K line chart received a line with the shadow line.

In this regard, the industry is expected that this week after a strong rebound in the market may be repeated shocks to confirm the bottom, the bottom of the concussion is the main suction, digestion and hold the plate, cleaning float, waiting for further confirmation of the policy.

Technically, since the Shanghai stock index fell below the 30 average line in July 25th, the first breakthrough in three months has been achieved. If the stock index can effectively stand on the 30 day moving average, the intermediate rebound will be formally established.

Northeast Securities believes that after three consecutive days of sharp rises, some investors may be able to make profits or reduce the normal adjustment of their positions, but the stock index still has room for improvement from the moderate increase in market volume and favorable factors of economic and policy level.

Two factors to establish reversal

The positive news is continuous, but the macroeconomic policy turn has not yet been established, and the market is still in the process of shaking the bottom.

Analysts pointed out that the main reason for this decline is the sovereign debt crisis and the relatively tight monetary policy to prevent domestic inflation.

Therefore, the two decisive factors for determining the bottom of the A stock market and reversing the downward trend of the market are: international factors, whether the EU's second round of summit meeting can reach a consensus on solving the European debt crisis; domestic factors, the decline of CPI, and the beginning of monetary policy easing.

In the absence of such two factors, the market may rebound to a certain extent, but it can not be turned into a trend reversal.

According to data from data services firm Markit, in October, PMI in the euro area dropped by nearly two to 47.2, especially in France.

The risk of recession in the euro area is increasing, indicating that the vicious circle of fiscal tightening and economic contraction may even threaten some of the largest economies in Europe and increase the difficulty of the eurozone's efforts to solve the debt crisis.

The worsening outlook may force the French government to slash its budget more vigorously to protect its AAA credit rating, which will further damage the French economy and add doubts to Europe's ability to pay for the weakest eurozone members.

At the same time, both the donor countries and the recipient countries, from their own interests, will inevitably make the road to solve the crisis rugged.

At present, the European rescue plan and measures are only at the planning stage, and whether they can be truly implemented remains to be seen. Even if the plan is implemented, whether the expected effect can be achieved is still to be confirmed.

Therefore, the possibility of a Greek default has not been lifted. If the default will exacerbate the crisis and further slow down the global economy, it will undoubtedly impact the global stock market, including A shares.

For the relaxation of domestic monetary policy expected by the market, Premier Wen Jiabao emphasized recently that we should grasp the intensity, rhythm and key points of macroeconomic policies and make timely and appropriate adjustment.

Haitong Securities said that this is not a signal of relaxation of macroeconomic regulation and control.

The relaxation of monetary policy can only be achieved in the case of a sharp fall in inflation and a slowdown in economic growth beyond the tolerance of management.

At present, the conditions still do not exist, so it may only be a partial relaxation of local financing, such as small and medium-sized enterprises, real estate regulation and other aspects will not be loose.

From this point of view, the European debt crisis has not been solved, and the economic tightening policy has not changed. It is too early to define the market reversal.