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July 2023 Market Insights

2023-08-10

The market sentiment significantly improved in July due to the Politburo meeting and further easing of real estate policies. Each sector has experienced varying degrees of upward movement, especially in the pro cyclical sector. On the policy side, there is a lot of focus on increasing consumption, indicating that boosting consumption is the core of current economic work. But it is difficult for us to see substantial measures to increase residents' income in policy documents. As mentioned in our previous monthly reports, the low proportion of residents' income is the core reason for sluggish consumption. Currently, the high leverage of enterprises and the residential sector no longer supports the 2017 style process of increasing leverage to promote sales. Therefore, even with the relaxation of real estate restrictions, regulatory environment, and continuous easing of monetary policy, we do not believe that there is a foundation for a bull market in the short term.

In addition, there are rumors in the market that the goal of revitalizing the capital market is to rely on T+0 and reduce stamp duty. In fact, these measures can increase market liquidity in the short term, but A-share liquidity is not weak. This approach will further increase speculative trading and amplify short-term market volatility, which is not beneficial for improving fundamentals.

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