Hong Kong stocks have risen ten times in a row. How should investors face the bull market?

Views 27362024.05.22

Since $Hang Seng Index(800000.HK)$After crossing the 250 antennae line, the upward trend became more and more obvious. As of May 6, the schedule had been rising for 10 consecutive days. As a result, this upward trend also coincided with transactions, and the market's views on Hong Kong stocks also began to change greatly. The author wrote separately in March and AprilSubject indexwithHang Seng IndexArticles related to entering a technical bull market, the so-called “technical bull market” means that the index rebounded more than 20% from a low level, but whether this means that Hong Kong stocks have already entered a bull market will be mentioned in today's article.

Understand the perspective of a bull market and a bear market

When discussing the issue of a bull market or bear market, investors often think about choosing one of the two, that is, a bull market or bear market. If you think from this simple perspective, you can get the most direct answer from technical analysis, which is the 250 antenna “bullbear dividing line”. The index is a bull market above the 250 antenna and a bear market below the 250 antenna. This is an answer derived from the average price of the trading day over the past year, reflecting changes in stock price expression trends over the past year. This is not much objective data analysis, and there is not much objective data analysis, nor is there much objective data analysis. Discussion space.

However, since 2023, the index has continuously traveled to 250 antennas. Does this mean that the bull and bear market is constantly changing? The answer is definitely no. This is mainly due to a blind spot in investors' analysis. If investors are only concerned about changes in trends, it is fine to test the 250 antenna, but if it is to judge the direction of an economic cycle or stock market cycle, it is difficult to easily determine the direction of an economic cycle or stock market cycle. This point was also mentioned in the technical analysis course held in April, and the author does not suggest that investors simply refer to the 250 antenna or some technical analysis. Recently, many investors are more concerned about the cyclical expression of the entire stock market, which requires alternative analysis methods.

What is the stock market cycle

Academically, the Dow theory is a theory proposed by The Wall Street Journal and Charles Dow, founder of Dow Jones Company. Simply put, this theory is a link between the stock market and the market's economic expression, and there is a cycle of ups and downs, and each cycle consists of 3 steps. What is the formation of cow 1, cow 2, cow 3, and bear 1, bear 2, and bear 3

The following is a brief summary of the characteristics of various aspects of the hype

Bull 1: It's usually a time when the economy is in recession, but the stock market is hoping that the worst time has passed, and valuations start to rebound from a very low point

Bull 2: The economic outlook is stable, and there is actual data to support the continuous upward rise in valuation

Cow 3: Cow is in the air, and the atmosphere is amazing. High valuations lead to the concept of a future of continuous market consumption

Bear 1: Misjudging the situation, you will think of it as a health adjustment

Bear 2: It is easy to trigger panic selling, and the discovery of a bubble causes valuations to drop

Bear 3: The economy is in an extreme recession, and valuations will continue to test lower

How should investors face the current market conditions?

inMentioned in the April articleAt the time, it was mentioned that UBS first issued a research report indicating that the mainland property market is expected to improve next year. The bank also mentioned that some Chinese stocks are worth watching, and successively, Dama and Goldman Sachs published good research reports. The market began hoping that time had passed. It was in line with the flavor of a bear market turning into a bull market, also known as the Bull Market.

Source: WIND
Source: WIND

Source: WIND

We can see this from a valuation perspective. In the past year, on different platforms, the author also mentioned that we should not be too pessimistic about Hong Kong stocks. Recently, valuations have also rebounded from a level of two standard differences below the average. This is one sign of the transition from a bear market to a bullish market. If the market confirms that the entire “worst time has passed” concept is established, from a valuation perspective, it would not be impossible for the index to rise back to a 10-year average of 19747 points, and judging from the measured increase in the Hang Seng Index on the daily chart, it is also close to this level.

Therefore, although there are signs that the market is currently entering a bullish trend, investors should remember that the concept of rising stock market prices is mainly based on “the worst time has passed.” If you look at the current economic situation, it is likely that it is still in a relatively sluggish phase. However, in terms of investment, stock prices or the prices of many different types of assets are likely to take the lead, so fundamental analysis is always difficult at 1 o'clock, and it is often only after the fact that the situation improves. Examples include various bailout plans after the global financial crisis in 2009, and supply policy reforms after 2015.

Short summary:

Today, I mainly share my views and ways of thinking about the current market situation. As for investment suggestions, I think it would be better to start with individual stocks, and not without looking at technical analysis or fundamental analysis. In terms of technical analysis, it is as if the previous article explores the stock selection function in the form of Futubull and bulls $HYGEIA HEALTH(06078.HK)$An example. Also, from a fundamental analysis point of view, it is better to choose leading companies with stable cash flow and strong ability to control costs, and stable profitability, for example $TENCENT(00700.HK)$ $MEITUAN-W(03690.HK)$ $XIAOMI-W(01810.HK)$etc. The author will also publish an article at an appropriate time this week to share the application of Niu Niu's features or some live technical analysis. You can follow and follow this wave of Hong Kong stock prices.

Finally, I know that many bulls lack confidence. After all, the index had the same concept when it rebounded from a low of 14,597 points on October 31, 2022 to a high of 22,700 points on January 27, 2023. When judging the economic cycle, the time required to confirm the bottom line is often very long. Facing the risk of deflation after customs clearance came as a surprise to the market. The mainland certainly faced some high unemployment problems last year, leading to deflation risks, but there was no major wave of layoffs at the beginning of this year. The profitability of some large enterprises also improved in 2023, leading to a review of this year's market situation, which is also more likely than the previous year. I agree that the current market conditions fall within the high risk and high return stage. Investors definitely need to consider their risk tolerance to enter the market, but at least I think they shouldn't be reckless. In fact, if more macro-favorable factors are needed to support it, the index may have to break through the high of 22,700 points on January 27, 2023, and form a big double bottom on the weekly chart before confirmation. At that time, the valuation will also be at a level that is not cheap, and market conditions may have already entered the second phase of the bull market.

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