Before the holiday season, looking at the A-share market, cyclical stocks were undoubtedly the “most beautiful boy”!

On April 3, cyclical stocks continued to be active, leading in the gold direction. As of press release, Xiaocheng Technology rose and stopped by 20cm, Zhongrun Resources rose or stopped, and Sichuan Gold and Hunan Gold followed suit; oil and gas stocks had the highest gains, quasi-oil stocks rose and stopped, and CNOOC Oil Services and Xinchao Energy continued to rise sharply.

The performance was even more impressive. At one point, CNPC rose more than 3.8% in the intraday period, hitting a new high in eight years.

In addition to the above sectors, cyclical sectors such as pork, chicken, nickel metals, rare earth permanent magnets, cobalt metals, and shipping all rose sharply.

According to the corresponding news, due to factors such as geopolitical conflicts, the international gold price once broke through 2,300 US dollars/ounce, reaching another record high. Furthermore, San Francisco Federal Reserve Chairman Daly said that cutting interest rates three times this year is not a forecast; it can be increased or decreased if necessary. Cleveland Federal Reserve Chairman Meister also expects to cut interest rates 3 times this year, and cutting interest rates in June is not ruled out.

US WTI crude oil broke through $85 on Tuesday and hit a new high since October. Furthermore, according to information released by the Development and Reform Commission, starting at 24:00 on April 1, domestic gasoline prices will increase by 200 yuan/ton and diesel prices will increase by 190 yuan/ton. The rise in international oil prices has spread to the domestic market. Price changes will have a great impact on the entire petroleum and petrochemical industry chain, and industries such as oil extraction, oil services, and petroleum trade will decline and benefit.

April's new main line?

Recently, there is a typical characteristic of the market. The “cyclical market” continues to ferment. As AI hot stocks continue to adjust, market popularity is also gradually shifting from the previous technology main line to the cyclical sector. The seesaw effect of the two is becoming more and more obvious.

One direct reason for this phenomenon may be related to the direction of increase in Northbound capital holdings. According to recent data, almost all of the top ten sectors in market capitalization of Northbound Capital increased its holdings in the last 5 trading days, such as banks, non-ferrous metals, precious metals, etc. Among these, banks and non-ferrous metals increased their holdings the most.

Land Stock Connect - Industry Statistics

So, why did the direction of increasing foreign holdings change abruptly, and why have cyclical stocks become the “new favorite”? This type of stock actually has two medium- to long-term deterministic logics.

First, it was recently announced that the PMI index turned strong and red in March, indicating a steady recovery in the macroeconomy. First, marginal changes are most sensitive to cyclical industries such as upstream resources and materials. Long-term fundamentals have bottomed out, and prices have bottomed out.

Second, the Federal Reserve is expected to cut interest rates,The most critical point is that the market seems to have a crisis of trust in banknotes. In particular, the dovish views of the Federal Reserve continue to make global capital lose confidence.People are generally turning to gold investments, mainly because of expectations that the future is risky.The world is waiting for the dividend cycle of the dollar flowing to the world. Prices of global commodities are rising, and gold and oil have been bullish for a long time.

Analysts believe that overall, cyclical stocks have continued to be active recently, and the profit effect has spread further, and the overall trend is more towards expansionary supplementary hype.However, this situation is expected to continue in the future, but we are currently very close to the critical turning point of the trend. It still takes courage to chase higher or continue to be optimistic. At this time, caution should be the main focus.

What do agencies think?

Since this year, many industry insiders have expressed optimism about China's macroeconomic recovery.

Wanjia Foundation believes that overall, China's economy is expected to continue to recover in 2024 for two reasonsFirst, the central government is leveraging. The GDP target is higher than the current actual momentum, which means that the direction of the economy is upward. Second, the export and inventory cycle has certain restorative power.

Wang Shuai, the ETF business director of Yinhua Fund, also believes that China's macroeconomic economy is expected to stabilize. He stated:

“In January 2024, manufacturing PMI was 49.2% (previous value: 49.0%); non-manufacturing PMI was 50.7% (previous value: 50.4%). On a month-on-month basis, there was a slight recovery, ending the previous three months of continuous decline, which is a sign that the economy is beginning to stabilize.”

Wang Shuai also said, “Since 2023, fiscal and monetary policies have continued to gain strength, and the economy has begun to recover moderately. Although aggregate demand is still weak, manufacturing PMI data shows that domestic demand has improved, credit data for January has also improved beyond expectations, and exports are also expected to grow due to a recovery in overseas inventories. The real estate market is expected to achieve a soft landing under the impetus of a series of policies, contributing to economic recovery and the improvement of people's livelihood. Overall, the domestic economy is expected to recover in 2024.”

Generally speaking, cyclical theme sectors such as non-ferrous metals, petroleum and petrochemicals will benefit from macroeconomic recovery.

Furthermore,Other industry insiders suggest paying more attention to cyclical stocks with overseas revenue.

Manulife Fund Zhuang Tengfei expressed concern about investment opportunities for cyclical assets in the next 3 to 5 years. He also pointed out thatOverseas markets will be the future “sea of stars” for leading companies in the domestic cycle industry.

“As interest rates on US long-term bonds are breaking through the long-term downward channel of the past 40 years, Southeast Asia, India, Latin America, and the Middle East regions, which have a young population structure, are developing rapidly. In another 5 to 10 years, the domestic export industry structure may shift from the current mainly downstream, partly to the middle and upstream cycle industry.Higher overseas growth rates and higher gross margins will drive the growth and profit centers of these cyclical companies to increase as the share of overseas revenue increases.In the long run, this means a change in the investment paradigm in the domestic equity market. The past cycle industry may no longer be a cycle; it will regain growth, and the market valuation system will change accordingly.” This is what Zhuang Tengfei said.