"Elephants" lead the market to the upside

-Capital Securities Zhang in the early June of the three trading day, the broad blue chips led up, has replaced small and medium-sized stock market has become the mainstream hot spot. The continuation of the economic recovery trend is the basic support of the cyclical industry strength, and the increasing flood of liquidity on the stock market has brought positive impetus.　　In the short term, the market is expected to continue to be active, and drive the market shocks upward. Cyclical industry has become the mainstream hot spot with the economic recovery expectation and the increase of inflation expectation, the cyclical and resource industries have been gradually transformed into the mainstream hot spot of the market.　　This week, the top 6 industries were cyclical industries, including non-ferrous metals, real estate, financial services, mining, ferrous metals and transportation, with the largest weighting of the financial services sector rising 9.1% per cent, contributing significantly to the rise in the index. Loose monetary policy is an important basis for economic expectations, particularly in the banking sector, and the stock market is flush with cash, but investors are wary of follow-on credit as the central bank has referred to "moderate fine-tuning".　　We believe, however, that, given the precarious basis for economic recovery, the likelihood that monetary authorities will turn to policy is slim, and that the easing of liquidity is not going to change. New loans fell to $591.8 billion in April, and new loans are expected to fall steadily in May. Although new lending has fallen sharply in the second quarter, it is still a higher level than usual in previous years. In fact, the revised capital ratios for fixed assets investment projects announced late in May are expected to further spur credit expansion. The adjustment showed that the minimum capital ratio for most industries had been lowered by 5%-10% per cent, while the "affordable housing and general merchandise housing projects" had been lowered by 15%. The policy reflects the government's clear stance of continuing to stimulate investment to maintain growth, while also demonstrating the need to stabilize demand with easy credit.　　We expect the next monthly new credit will remain at a high level of 3000.5 trillion yuan. A stable credit scale will provide a good basis for bank performance. In addition, with the future gradual decline or even negative growth of the bill financing, the credit structure of the bank tends to be optimized, which also facilitates the improvement of its net spreads. In terms of valuation, the financial services industry has a dynamic earnings ratio of 15.6 times times, of which the banking sector is valued at only 13.2 times times.　　If optimism is expected to push the bank's valuation further up, it is expected to continue to drive the market. At the same time, the inflationary expectations of the dollar's depreciation have also led to a strong rebound in commodity prices, which is expected to continue in the short term and spur the metal, energy and property sectors.　　But we should also see that in the midst of an initial stabilisation of the global economy, the rise in commodity prices will have a negative impact on the economic recovery, which will affect the sustainability of the market and need further observation. Focus on blue-chip hot spots from the current situation, the main idea of the government's growth is still focused on stimulating fixed asset investment, supplemented by stabilizing consumer demand and curbing the decline in exports. In the context of continued strong credit support and timely easing of relevant policy restrictions, fixed asset investment is expected to continuecontinued to play a key role in the second half of the economic recovery of the possibility of increasing. The statistics bureau recently released 22 regional industrial data show that the cumulative main business revenue in February-April fell by 2.7%, 0.7% and 0.8% respectively, the decline in corporate profits were 39.5%, 32.2% and 27.9%. Overall, the firm's profit year-on-year decline is still relatively high, but with the "Go to inventory" of the promotion of industrial enterprises profit deterioration is being curbed. On the key industries in the first 4 months of data, in addition to a few industries such as steel to maintain the downturn, non-ferrous metals, electricity, transportation equipment manufacturing and many other industries present to a good situation.　　The above information suggests that stimulus policies are having a positive effect, as well as providing fundamental support for the recent sharp rebound in related sectors. At present, the valuation multiples of the small stock and the central stock are at the highest level in the history, and it is difficult to upgrade the valuation, which makes the periodical industry with relatively reasonable valuation become the focus of the market. Investors are advised to pay close attention to banks, real estate industry, and continue to hold non-ferrous, coal and other resources of the plate.