China’s top two annual policy meetings have kicked off in Beijing. At the same time, speculation on sectors that might benefit from a policy boost has taken a pause, awaiting actual announcements.
China’s A shares usually gather momentum in the run-up to the “two sessions” each year.
Over the past decade, there have been six popular themes during the period, including environmental protection, the aging population, healthcare reform, rural issues, income distribution and education reform, according to GF Securities.
But this year, resources such as steel and cement were the biggest gainers ahead of the key meetings.
If the “sell on fact” pattern is to repeat, these top gainers are likely to see more pullbacks in the next few weeks.
Nevertheless, the overall market uptrend typically remains intact after a modest correction.
Data shows that the benchmark index has a 71 percent chance of rising one month after the two sessions, and the average gain was 5 percent in the past.
A shares have performed relatively steady this year and the Shanghai and Shenzhen markets have posted a rally of 4 percent and 1.9 percent, respectively.
Therefore, the market has limited profit-taking pressure.
Another interesting thing about two sessions is that it usually produces some fresh market themes such as the Belt and Road Initiative in 2014, Internet Plus in 2015 and supply-side reform last year.
It would take years for these policies to be implemented, so speculative interest can last for quite a while.
The central government has pledged to deepen supply-side reform this year. Among others, mixed-ownership reform and population policy could also become important themes this time.
This article appeared in the Hong Kong Economic Journal on Mar. 3
Translation by Julie Zhu
[Chinese version 中文版]
– Contact us at [email protected]