This week, the Chinese stock market performed remarkably, with some proclaiming that 'the upcoming epic bull market will break the 6124 high.'
The atmosphere has indeed changed. As early as June 26, we shifted our view on the Chinese market from cautious to optimistic in our report (Global Market Strategy: Mobilizing Forces for a Major Turnaround) and predicted it would reach 3700 points. We are now getting closer to that target.
As for whether this marks the start of an 'epic bull market,' a report released today by Swiss Baosheng Bank is worth referencing.
Baosheng Bank gives a relatively optimistic judgment: continue to overweight the Chinese market. Although the overall environment is complex, they believe there are still opportunities in the Chinese market, making it worth investing a bit more.
Baosheng is not the kind of large firm that makes headlines every day, but it acts more like a 'quietly profitable, deeply engaged wealth advisor.' If you see them express opinions, like this time on 'maintaining an overweight position' in China, it indicates that their clients—a group of truly wealthy individuals and family offices who vote with their money—still see the medium to long-term value in certain sectors of China. One can regard Baosheng's views as a 'high-end investment barometer.'
1) Why are we optimistic?
Baosheng's strategist Richard Tang mentioned a key term: 'Bottom-up fundamentals are improving.'
This sounds a bit abstract, let's translate it:
Top-down: Refers to government policies and economic data at the macro level, which currently seem slightly weak. For instance, everyone knows that the pressure on economic growth still exists, and although there are policies, their strength has not exceeded expectations.
Bottom-up: Focus on the performance at the corporate level. For example, corporate profits, dividend capacity, industry trends. These aspects are actually gradually improving, especially for companies with dividends and growth potential.
So Baosheng's advice is to choose companies that can pay dividends and also have room for growth, which are the targets that are 'nurturing and have a future.'
2) Why did it drop last week?
Baosheng also explained two main reasons:
Last week's meeting was not surprising enough: many investors had hoped the meeting would bring major initiatives (such as fiscal stimulus or stronger monetary policies), but the actual content was rather routine, leading some to choose to take profits and reduce positions.
Concerns over tariffs have resurfaced: the 'trade truce period' between China and the U.S. expires on August 12, and it remains unresolved, causing some capital to start avoiding risks.
3) How to view things moving forward?
Baosheng's conclusion is relatively robust: optimistic about China, but don't be too aggressive in the short term. Especially in offshore markets like Hong Kong stocks, there may still be some fluctuations and adjustments (don't rush in blindly; you need to pick positions and targets).
It should be noted that although market sentiment is recovering, confidence remains fragile, especially in the absence of 'unexpected policies.' Moreover, the China-U.S. friction is still a 'sword hanging over us' and cannot be ignored. Whether we can smoothly get through mid-August will be a barometer for short-term direction. This is a market suitable for 'selecting stocks steadily' for those with patience.
The so-called 'epic bull market' requires not only a triple resonance of policies, valuations, and capital but also an expectation premium of 'confidence penetrating reality,' which is still insufficient at present. Currently, it resembles a process where investors slowly regain confidence from pessimism after the overlap of policy and profit bottoms. The atmosphere has changed, but we cannot see the 'epic bull market' so far.