On Monday, the Japanese stock market opened with a significant drop. The Nikkei 225 index saw its decline expand to 3% at one point, and as of the time of writing, the drop stands at 2.97%. The South Korean stock market also plummeted, with the KOSPI index falling 1.36% as of the time of writing.

U.S. stocks also experienced a significant decline.

Last Friday, U.S. stocks had already seen a substantial drop.

The Dow Jones Industrial Average fell by 1.01%, the S&P 500 index fell by 1.73%, and the Nasdaq Composite fell by 2.55%. Amazon dropped by 3.65%, and American Express fell by 3.08%, leading the Dow Jones decline. Tesla plummeted by 8.45%, and Nvidia fell by 4.09%. Most Chinese concept stocks declined, with Legend Biotech dropping by 10.66%, and Zeekr falling by 9.78%.

Gold, silver, and crude oil rebounded slightly on Monday's open after experiencing a significant drop on Friday.

The fear index surged.

In terms of news, the U.S. non-farm payroll data announced did not support a substantial interest rate cut by the Federal Reserve in September, and the Fed remained tight-lipped about the extent of any rate cut; the Bank of Japan also indicated a possibility of raising interest rates; and Warren Buffett has started to sell off a large amount of stocks again. These three pieces of information led to a surge in the global fear index.

Advertisement

The U.S. announced its non-farm payroll data for August, with the Bureau of Labor Statistics showing that the U.S. non-farm employment increased by 142,000 people in August, estimated to be 165,000, and the previous value was an increase of 114,000. The employment growth in August is consistent with the average employment growth in recent months but is below the average monthly growth of 202,000 in the previous 12 months.

Federal Reserve's "third in command," John Williams, stated that it is appropriate to lower the federal funds rate now and expressed more confidence in the sustainable convergence of the inflation rate towards 2%, with policy gradually moving towards a more neutral direction.

Williams also indicated that the job market is unlikely to trigger inflationary pressures. However, Williams did not comment on the possible extent of the first interest rate cut.Since September, the Chicago Board Options Exchange Volatility Index (VIX) has surged, spiking approximately 49% last week. As the interest rate decision meeting approaches, it seems that investors may need to seek more definitive information and confidence from the economic outlook and the Federal Reserve's monetary policy to determine whether the volatility risks have been fully released.

Buffett Sells More Stocks

Entering September, Buffett's pace of selling Bank of America shares did not slow down. Berkshire Hathaway continued to reduce its holdings in Bank of America shares on September 3rd, 4th, and 5th, 2024, over three consecutive trading days, totaling 18.746 million shares and realizing approximately $760 million.

According to statistics, since Berkshire began selling Bank of America shares on July 17th, it has realized a total of about $6.97 billion.

Based on Buffett's habits, when he starts selling a stock, he will eventually sell all his holdings in that stock. Moreover, in recent years, Berkshire has completely sold out of the stocks of several banks, including U.S. Bancorp, Wells Fargo, and BNY Mellon.

Market analyst and TheStreetPro columnist Doug Kass expressed concern about Buffett's stock selling strategy, especially regarding the reduction of holdings in Apple and Bank of America stocks, which were considered to be "permanent holdings."

A-Shares Have Bottom Conditions

Regarding A-shares, many securities analysts believe that the market has bottom conditions and that there is significant room for a rebound in the future market.

Galaxy Securities analysts believe that there is significant room for a rebound in the A-shares market.

The current valuation of the A-shares market is still at a historically moderate-low level, indicating significant room for a rebound. Looking ahead, in terms of A-shares allocation: the 2024 semi-annual report performance shows that the financial sector's performance has improved beyond expectations, and financial stocks have a high dividend payout ratio. With the acceleration of financial mergers and acquisitions, it is expected that the financial sector will continue to outperform the overall A-shares market. In September, new products in the consumer electronics industry will be unveiled, which is expected to drive the outbreak of related thematic market trends. U.S. manufacturing activity remains in a contraction zone, and the vitality of the U.S. job market is further weakened. The expectation of a rate cut in September is heating up, and the rate-cutting cycle is expected to begin. It is recommended to pay attention to A-shares industries that may benefit from the Federal Reserve's rate cuts.CICC's research report points out that the market is showing many characteristics of a bottom.

The market is showing many characteristics of a bottom, but the repair of confidence still requires more positive factors to support it. Looking forward, although there are still many factors suppressing the market internally and externally in the near term, the market itself is in a value range, and attention should be paid to the marginal changes of positive factors during the index adjustment. Recently, the market has already had some characteristics of a bottom: the turnover rate of A-shares, calculated based on free float market value, has dropped to a historically low level of 1.5%; in terms of valuation, the dividend yield of the CSI 300 is 1.1 percentage points higher than the 10-year government bond yield, and the valuation of the CSI 300 index is near the historical bottom one standard deviation, which has good valuation appeal; the catch-up decline of strong stocks is also a common phenomenon at the historical stage bottom. Subsequently, pay attention to the progress of fiscal expenditure and the marginal impact of the Federal Reserve's interest rate cuts on China's monetary policy, exchange rate, and capital market.

In terms of allocation, the dividend sector's attractiveness has increased after adjustment, and it is currently necessary to pay more attention to the sustainability of the fundamentals and dividends on the molecular side; since the middle of July, consumer electronics, semiconductors, etc., have all adjusted by more than 10%, the valuation is not high, coupled with the recent consumer electronics sector may have more news catalysts and other factors, it may be expected to have a phased market; pay attention to the field of technological innovation, especially the sectors with industrial autonomy logic; the export chain and global pricing of resources have been affected by overseas fluctuations and may be differentiated after a short-term correction.

SWHY analysts believe that the market will continue to be weak.

In the short term, economic data verification is weak, and the direction of strong expectations for the second-quarter report is very few. Before there is a significant change in policy expectations, the market may continue to run along the original path. At this stage, the management's policy statements do not support the fermentation of particularly optimistic policy expectations, and the market's policy game is still not to let the hawk out without seeing the rabbit. Setting aside all the complex discussions, the short-term environment faced by A-shares is weak fundamentals + vague policy expectations. The original path of the market is weak volatility.

The third-quarter report on consumer services may more reflect the decline in demand (which was not fully reflected in the second-quarter report), the appreciation of the renminbi, and the current revenue of the export chain may be further under pressure. Coupled with the high base of the third-quarter report, under the existing path, the profit growth rate of the third-quarter report may further decline. In this case, to break through the market's original path, there needs to be a significant change in policy expectations, especially in monetary policy. At this stage, the central bank's statements support a loose direction, but the statements on the magnitude and strength are still restrained. It does not support particularly optimistic policy expectations. The market's policy game is still not to let the hawk out without seeing the rabbit. In the stage where the fundamentals are weak, the visibility of policy formulation, implementation, and effectiveness is low, and the market will continue to be weak.