Today, although we broke through a 10-year high, we are still in the early stage of the second phase of the bull market. There is still a significant proportion of skeptical voices. One concern that many investors have is: Can the current fundamentals support the A-share bull market?
Now let’s directly answer this question.
The divergence between the stock market and economic fundamentals is indeed a concern, but the stock market is not solely determined by fundamentals. There are three major supporting factors for this round of A-share reversal and bull market.
First, liquidity. Against the backdrop of a continuous decline in the risk-free interest rate (the one-year deposit rate of state-owned banks has fallen below 1%), residents' excess savings (amounting to 60 trillion) are beginning to seek products with excess returns, while the stock market's profitability effect is gradually strengthening, bringing positive feedback. In July, deposits in non-bank financial institutions surged by 2.14 trillion, an increase of 1.39 trillion year-on-year, reaching a new high since 2015, with funds entering the stock market through various means.
Second, leverage ratio. A-shares have experienced several years of bear market, leading to very low leverage. Even though the recent margin balance has exceeded 2 trillion, it only accounts for 8.5% of the circulating market value, while the peak in 2015 exceeded 20%. Compared to previous bull markets, leverage is not only controllable but also has significant room for growth.
Third, foreign capital. The Federal Reserve's interest rate cuts are driving international funds from dollar assets to emerging markets. Northbound funds saw a net inflow of over 60 billion in a single month, and global long funds net purchased 2.7 billion USD worth of Chinese stocks in July, doubling compared to June.
These are the fundamentals supporting the rise of A-shares. $East Money(SZ300059)$