Starting from July 11th, the securities lending business was officially suspended, with the Shanghai Composite Index rising by 0.77% in the first half of the day, closing at 2,962 points, and the ChiNext board increasing by nearly 2%. A-shares have entered their third consecutive day of rebound.

Despite the pullback of high-dividend stocks such as state-owned bank shares, as the index and individual stocks rebounded, trading volume also warmed up. In the morning of the 11th, the total turnover of the two markets was 528.1 billion yuan, and the daily turnover exceeded 700 billion yuan.

Senior industry insiders believe that after the suspension of the securities lending business, market confidence has been boosted, and some companies have announced half-year earnings forecasts, showing a situation where bad news has been fully priced in. On the other hand, in the first half of the year, funds flocked to "high dividends," and with the massive issuance of related products by public funds, it is expected that as the market's risk appetite increases, funds will continue to flow back into growth stocks in the short term.

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In this situation, how will the A-shares "turn around in July" after the "poverty in May and despair in June" continue?

The suspension of securities lending is good for A-shares.

On the evening of July 10th, the China Securities Regulatory Commission (CSRC) announced that it had approved the application of China Securities Finance Corporation to suspend the securities lending business, which was implemented from July 11th. Existing securities lending contracts can be extended, but they must be settled no later than September 30th.

The CSRC also approved the increase of the margin ratio for securities lending from no less than 80% to 100% by the stock exchanges, and the margin ratio for private securities investment funds participating in securities lending from no less than 100% to 120%, which will be implemented from July 22nd.

Deng Lijun, a strategy analyst at Huajin Securities, believes that on the 11th, the sentiment of A-shares has significantly improved, with the turnover in the first half of the morning approaching 53 billion yuan. The suspension of securities lending is a significant signal that further strengthens the short-term rebound of the stock market. There are two core reasons for the recent market decline: one is the economic and profit expectations, especially the pessimistic expectations caused by the decline in real estate sales and highway freight data in the early period, which have now significantly rebounded; the other is the low profit effect due to the large proportion of quantitative trading, which has led many active funds to exit the market, and the turnover continues to shrink, and now this aspect may be reversed. The suspension of securities lending is a significant signal that the sentiment may reverse.

Hu Yu, Chief Economist of Xinding Fund, analyzed to Yicai that the regulatory authorities have timely suspended securities lending, and the balance of securities lending has significantly decreased. The market is facing an important turning point, and the market can be more optimistic. The Shanghai Composite Index at 2,904 points has already confirmed that it is the second bottom since 2,635 points. Structural changes may occur, growth stocks have policy-driven factors, and cyclical stocks also have opportunities, such as the real estate industry, which has a lower market expectation and a significant expectation gap.

Lei Guoxuan, an analyst at Dongguan Securities, believes that after the suspension of the securities lending business, the short-selling force is limited, and the market stability and long positions are expected to gradually recover. After the new regulations are introduced, the first is to suspend the application for securities lending business. Securities lending, as a mechanism in the securities market, is conducive to improving liquidity in normal market operations. However, the recent market performance has been weak, with the average daily turnover hovering around 600 billion yuan. At this time, suspending the securities lending business helps to weaken the short-selling force, thereby stabilizing market sentiment and preventing the market from falling excessively.In the view of Fan Jituo, a strategy analyst at Cinda Securities, since the market adjustment in mid-May, the market turnover has rapidly declined. On July 5th, the total turnover of all A-shares was only 577.2 billion, with a turnover rate of less than 1% compared to the circulating market value. Historically, such a low turnover rate is mostly associated with a phased low point in the market. After the low trading volume, it is highly probable that July will be in a rebound window, but whether it can reverse still needs to be verified by changes in earnings, especially copper prices and second-hand housing sales data: if copper prices continue to rise after a consolidation, the probability of the economy bottoming out will be further increased, and the possibility of a reversal will be enhanced; additionally, the sale of second-hand housing is an indicator of whether there are still risks in the domestic economy. Referring to the experience after the U.S. subprime mortgage crisis, the process of real estate stabilization is slow, and stock market turning points pay more attention to second-hand housing sales.

Deng Lijun said that recently, high dividend stocks have shown signs of catching up with the decline (the long-term upward trend will not change), which is actually one of the signals of market stabilization. The market sentiment and profit effect are being repaired, and the short-term market is already on the trend of rebound and repair.

High dividend adjustment, capital returns to growth stocks?

With the continued popularity of dividend strategies, related thematic products have become the new direction that fund companies are competing to pursue. Wind statistics show that as of July 10th, calculated from the subscription start date, more than 50 products (only counting initial funds, the same below) with "dividend" in their names have been launched this year, with a total fundraising scale of over 17.2 billion yuan, far exceeding last year's performance.

However, the performance of high dividend stocks has not been ideal over the past week: on the morning of July 11th, Industrial and Commercial Bank of China fell by 1.83%, and China Construction Bank fell by 1.42%, with bank stocks clearly adjusting; China Shenhua, the leader of high dividend stocks with a net profit forecast reduction of about 10% in the first half of the year, fell nearly 4% on July 10th, and fell another 0.62% on the morning of July 11th, dragging a group of coal stocks to adjust collectively, and China Mobile also fell for three consecutive days.

Deng Lijun believes that the next market rebound, the market main line is most likely to be technology, from consumer electronics, semiconductors to autonomous driving. Historically, high-elasticity growth stocks are the vanguard of the rebound when the bottom is reached. In the short term, the catalysis of technology includes more industry trends and policies, with higher certainty; the most beneficial to the transfer of funds is the existing high-quality small and medium-sized stocks, because small and medium-sized stocks were previously more affected by quantitative factors. If active capital returns, high-quality small and medium-sized stocks closely related to thematic concepts may benefit the most. The logic of supply contraction in the cycle is also worth configuring.

Cheese Fund Investment Manager Hu Kunchao analyzed to the First Financial Journalist that high dividend assets have continued to be sought after by investors in the A-share market, especially in sectors such as energy and public utilities. These sectors operate steadily, have abundant free cash flow, and high dividend ratios. From a defensive perspective, they are very good investment choices. However, some high-dividend stocks have lower-than-expected performance, and the previous increase was relatively large, so some funds have chosen to take profits in the short term, leading to a sharp decline and dragging down the performance of coal stocks.

In response to this, Hu Kunchao believes that the public offering of a large number of new products by public funds to some extent reflects the pursuit of high dividend stocks, but excessive capital pursuit may bring risks: on the one hand, if the market's expectations for high dividend stocks are too optimistic, once the performance does not meet expectations, it may trigger market adjustments; on the other hand, with the increase in new products of public funds, the concentrated inflow of funds may lead to overvaluation of some stocks, increasing investment risks. In the future, if the economic recovery exceeds expectations, the market style may shift from defense to attack, and the high dividend sector may face some adjustment risks.

Xuanjia Fund General Manager Lin Jiayi said that the issuance of products by public funds is always chosen when the related sector is in a good trend, because it is easier to issue. However, looking at various thematic investment products in the past, because the issuance subscription time is often close to the peak of the sector, the return on underlying assets is relatively low, which is not very good for investor experience.