Last week, the major indexes of the A-share market diverged. Among them, the Shanghai Composite Index rose 0.18%, the Shanghai-Shenzhen 300 Index fell 0.07%, and the ChiNext Index fell 2.95%. From a structural point of view, the previous strong ChiNext significantly underperformed the Shanghai Composite Index, and the valuation differentiation between growth and value has converged. In terms of industries, cyclical sectors such as real estate, banking, and transportation saw the highest gains, while non-ferrous metals, pharmaceuticals, and national defense and military industries, which saw larger gains year-to-date, saw the bottom of their gains. On the topic, food security and biological breeding are relatively active. From the perspective of transaction volume, the transaction amount of Windquan A has dropped significantly compared with the previous week, and the market transaction activity has declined.

Looking back on the market trend, the strong sector has stagnated since early July-consumer and technology strong stocks began to show signs of weakness after the new high in mid-July. Correspondingly, the low valuation value sector has a dominant trend, and the value and growth of the sector are dominant. The valuation differentiation has converged. The reasons for this structural change can be analyzed from the changes in the internal and external environments. On the one hand, Sino-US frictions have risen again, and bilateral relations have been strained to suppress market risk appetite; on the other hand, the Politburo meeting of the Communist Party of China has expressed the monetary policy in the second half of the year. According to the adjustment, combined with the financial relations data released by the central bank, the scale of new social financing in July was slightly lower than expected. The adjustment of policy expressions and the verification of financial data caused the market to diverge on the expectations of ample liquidity, and the marginal monetary policy was tightened. It is expected to start to affect the market structure. In the early stage, the valuation of growth sectors such as consumption and technology, which benefited from loose liquidity, was under pressure, and the stock price trend showed a pattern of growth and value valuation convergence.

Strategically, with the continuous advancement of vaccine research and development in the current stage, expectations of the gradual recovery of the global economy will continue to increase. The value sector that has fallen behind in the previous period is expected to continue to repair valuations, and the growth and value of the valuation convergence market is expected to continue. In the medium and long term, upgrading domestic demand and making up for shortcomings in the supply chain are the main directions, and consumption and technology representing the new economy are still the focus of the market.