Several institutions believe that, when looking at a longer time horizon, the current position is an investment phase with cost-effectiveness. Although there is no exclusion of the possibility of further declines, the room for decline is now very limited.

Since the beginning of 2024, the A-share market has continued to be sluggish. After falling below 2900 points at the start of the year, on January 17th, the A-share market once again set a new low for the year.

On that day, the three major important indices all set new low levels for the phase, and the Northern 50, which had previously shown a unique performance, also failed to walk out of an independent trend on that day. By the close, the Shanghai Composite Index fell by 2.09%, reporting 2833.62 points, setting a new low in three and a half years. The Shenzhen Component Index fell by 2.58%, and the ChiNext Index fell by 3%, losing 1700 points, both setting new lows in recent years. The Northern 50 fell by 2.78%, setting a new closing low since 2024. More than 5000 stocks in the two cities fell, accounting for more than 90%.

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The Shanghai and Shenzhen stock markets accumulated a transaction volume of 637.6 billion yuan, and the northbound capital net sold 13 billion yuan, setting a new high for the net selling amount since October 2022.

On the morning of January 17th, the State Council Information Office held a press conference to introduce the operation of the national economy in 2023. According to the introduction, the preliminary accounting showed that the total GDP (Gross Domestic Product) for the whole year of 2023 was 1260582 billion yuan, an increase of 5.2% over the previous year at constant prices.

"The market may have already expected this good news, so the actual data announced did not bring the expected positive market response. The market often pays more attention to the future trend," said Chen Xingwen, Chief Investment Executive Officer of Kurosaki Capital.

Huang Cendong, a strategy analyst at Guojin Wealth Center, told "Finance" that "the biggest problem in the market now is the lack of confidence, and pessimistic sentiment is spreading. The reason for the lack of confidence is multifaceted."

The three major stock indices set new lows.

On January 17th, the three major important indices of the A-share market all showed a clear one-sided decline. The Shanghai Composite Index opened lower and went down all the way. By the close, the Shanghai Composite Index fell by 2.09%, reporting 2833.62 points, setting a new low since April 2020. The Shenzhen Component Index, STAR 50, and ChiNext Index also fell by more than 2%.Wind (Wang De) data shows that on January 17th, there were only 278 individual stocks that rose, while the number of declining stocks reached 5,031, accounting for 94.30%.

Northbound capital continued to experience net outflows. On that day, northbound capital net sold 13.058 billion yuan, setting a new high for the single-day net selling amount since October 2022. Among them, the Shanghai-Shenzhen Stock Connect net sold 6.373 billion yuan, and the Shenzhen Stock Connect net sold 6.685 billion yuan. In the 12 trading days since the beginning of 2024, northbound capital has only achieved net inflows on 5 trading days.

In terms of specific industries, according to the classification of the 31 first-level industries by Shenwan, all industries turned red. The industry with the smallest decline was textiles and apparel, down by 0.37%; banks were next, down by 0.66%. The remaining 29 industries all fell by more than 1%. Among them, nonferrous metals led the decline with a drop of 3.30%. The food and beverage, social services, power equipment, and commercial retail industries all fell by more than 3%.

In terms of individual stocks, Kweichow Moutai broke below the 1,600 yuan/share integer mark in the afternoon, marking the first time in nearly three months, with the intraday drop expanding to 2.5%. CATL and BYD also hit new daily lows in the afternoon.

As of the time of writing, the FTSE China A50 futures fell by 2.37%, touching a new low since January 2019. On the same day, the Hong Kong stock market also performed poorly. The Hang Seng Index fell by 3.68%, reaching a low not seen in nearly 14 months. The Hang Seng Technology Index fell by 5.07%. SenseTime-W fell by 11.65%, NIO and XPeng Motors both fell by more than 9%. Alibaba Health fell by 8.57%, Bilibili-W fell by 7.11%, and JD Health fell by 7.01%.

Since the beginning of the week, the Hong Kong stock market has fallen for three consecutive days, with daily declines all exceeding 2%. "Although there is no direct connection between the Hong Kong stock market and the A-share market, a significant drop in the Hong Kong stock market can often cause a certain resonance effect in the A-share market, leading to a bottoming out and decline in the A-share market as well," said Chen Xingwen.

In fact, on January 17th, the main stock markets in the Asia-Pacific region closed lower across the board. The South Korean Composite Index fell by 2.47%, to 2,435.9 points, reaching a two-month low. The Nikkei 225 Index fell by 0.4%, to 35,477.75 points. As of the time of writing, the Indian SENSEX 30 Index fell by nearly 2%, marking the largest decline in a year. The MSCI Asia Emerging Markets fell by 2.35%.

On the same day, the global market also performed poorly. As of the time of writing, the UK FTSE 100 fell by 1.33%, the French CAC 40 fell by 1.29%, the German DAX fell by 1.06%, and the Italian FTSE MIB fell by 0.83%.

"The decline in the main global markets does not actually have an obvious common influencing factor," Huang Cendong of Guojin Wealth told Caijing.

Why did A-shares fall?On January 17th, why did the A-share market experience a significant decline? Yi Xiaobin, Director of Equity Investment at Shunshi Investment, believes that the market's downturn may be related to the economic data released.

The data released by the State Council on the morning of January 17th showed that the GDP for 2023 was 126,058.2 billion yuan, representing a 5.2% increase over the previous year at constant prices.

"Although China's GDP grew by 5.2% in 2023, exceeding the original target, the recovery is far more unstable than many analysts and investors had anticipated," said Yi Xiaobin. In December 2023, retail was weak, the real estate market was sluggish, the population declined for the second consecutive year, and the birth rate hit a historical low, casting a shadow over the economic recovery.

Liu Youhua, Deputy Director of the Wealth Research Department at Paipai Network, believes that there are several main reasons for the A-share market's volume decline on January 17th: First, the US dollar index surged the day before, leading to a significant sell-off by foreign capital, putting pressure on the market; second, recently released economic data have been below expectations, leading to a cautious sentiment among capital; third, facing the long Spring Festival holiday, the capital market is relatively tight, with significant liquidity pressure; fourth, the market has been continuously shrinking and falling, and pessimistic sentiment has accumulated to a certain extent and was released in a concentrated manner.

Confidence has become an important factor affecting the current trend of the A-share market.

Huang Cendong stated, "The biggest problem in the A-share market at present is the lack of confidence." Yi Xiaobin also said that the current policy support is very strong, but the market is extremely lacking in confidence.

However, many institutional investors also believe that the market is not far from the low point.

Liu Youhua said that the market is still in the bottom-building stage, the overall market valuation is already at the bottom, and the market is currently in an extreme volume reduction state. "According to past patterns, the market is not far from the bottom, but the current market confidence is insufficient, so it is difficult to judge when it will rebound, and it is necessary to further observe the bottom signals given by the market."

"The market is currently accelerating its decline, and it should not be far from the low point, but in the context of a lack of liquidity, it is difficult to predict the specific position, and we can only wait patiently," Yi Xiaobin also said.

Pan Xinyi, Director of Research at the Equity Department of Yuanrong Investment, believes that the overall market liquidity is currently tight, and as it is close to the Spring Festival, the funds in the market are decreasing, and the funds outside the market are more cautious, with the market in a slow clearing stage, and it is highly likely to be in the bottom-scraping stage before the Spring Festival.Multiple institutional figures remain relatively optimistic about the future.

"Looking at a longer time horizon, the current position is a very cost-effective investment phase. Although there is no exclusion of the possibility of further declines, the room for decline is very limited, and investors are advised to gradually build positions," said Liu Youhua.

Chen Xingwen believes that after a severe cold, there must be a scorching heat. The deeper the fall and the longer the rain, the brighter the future sunshine after the worst is over. After a prolonged period of decline, the market usually experiences a rebound or recovery, especially when valuations become more attractive.

Furong Fund stated that financial data shows that the short-term economy is still in a bottoming-out phase, and there has been no directional marginal change in medium and long-term related data. Unlike the strong market expectations after the optimization of epidemic prevention and control measures at the beginning of 2023, the pendulum of the market at the beginning of this year began to swing continuously towards a pessimistic direction. After the technology sector, which was the most anticipated in 2023, saw a significant decline, under the combination of weak market expectations and weak reality, one should not be overly pessimistic about the equity market. It is recommended to remain rational, respect the market, and after the pessimistic sentiment is vented, the medium-term bottom range may be approaching.

Some fund managers believe that the market needs a bull market. "Compared to micro-cap stocks, the dividend race has more support. However, the market needs a bull market even more, to prevent fund managers who are willing to make money for investors from being eliminated by the market, rather than seeking stability and complacency in the dividend race," said a growth stock fund manager.