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Huatai Securities: Avoid Chasing Rally Before Holiday, Rebound Has Flaws
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Huatai Securities, as reported by Jinwu Finance via Tencent Stock, advises investors not to chase the recent market rally ahead of the long holiday. The brokerage notes that global capital markets, including US and Chinese stocks, rebounded last week after the Fed's rate decision, with growth stocks outperforming value stocks and the VIX falling below 15. However, Huatai identifies two flaws in the rebound: declining trading volume and increasing market reversal effects in the latter half of the week, as indicated by low and negative correlations between consecutive trading days for 40 CITIC industry indices. The firm's multi-dimensional scoring model shows all broad-based index scores remain in a cautious range, and its style and sector rotation models recommend a balanced allocation between growth and value. Therefore, Huatai believes it is not advisable to chase highs before the holiday.
Source report
Following last week's Fed rate decision, global capital market sentiment showed signs of recovery, according to Huatai Securities. The VIX index fell below 15, and both U.S. and A-share markets rebounded, with growth styles significantly outperforming value styles, signaling the emergence of positive returns.
However, the rebound exhibited notable weaknesses:
- Declining volume: Weekly trading volume continued to shrink.
- Reversal effect: The correlation coefficients of daily returns across 40 CITIC industry indices over consecutive trading days were 0.25, 0.14, -0.43, and -0.14, indicating a strengthening reversal effect in the latter part of the week. This suggests that the positive returns may not be sustainable.
Huatai's multi-dimensional scoring model for A-shares shows that all broad-based index scores remain in the cautious range, supporting the above assessment. Both the style timing model and the industry rotation model recommend a balanced allocation between growth and value styles.
Conclusion: The institution advises against chasing higher prices ahead of the long holiday.
Source
金吾资讯Eastern
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Chinese brokerages see A-share rebound continuing but warn of pre-holiday volatility