Two major conferences have ended! How to invest?

This week, two major conferences were held, and there were reactions in A-shares, Hong Kong stocks, and U.S. stocks of Chinese concept stocks.

How do investors understand and respond? Let's talk about this specifically today, focusing on the following points:

● First explain the positioning of these conferences, the relationship between conferences, and the market reactions.

● Explain the focus of the Political Bureau meetings and the Economic Work Conference, and their impact on the market separately.

● From the perspective of investors, explain the relevant investment strategies under the current background.

First: What are these meetings? What are they for?

First, let's talk about the logical deployment of China's economic policies: The Central Political Bureau meeting sets the policy tone for the next year, the Central Economic Work Conference formulates the overall economic arrangements, and the "Two Sessions" (National People's Congress and the Chinese People's Political Consultative Conference) government reports are specifically implemented.

The Central Political Bureau meeting held on Monday is held once a month, a total of 12 times a year. Among them, March, July, and December are specifically for discussing economic matters, serving as an "indicator" for economic work, to set the tone for the next stage of economic operation.

This December's meeting is more anticipated because firstly, it immediately follows the Central Economic Work Conference, and secondly, the Political Bureau meeting in September just experienced a turning point, so everyone wants to see if the warm wind can continue to blow this time.

The Central Economic Work Conference held on Wednesday and Thursday is the highest-level economic policy conference in the country, held once a year in December to summarize the economic work of the past year, analyze the current economic situation, and deploy economic policies for the coming year.

Generally speaking, this conference may have an impact on the market. The key deployment directions mentioned in the meeting may also become hot topics for market trading the following year. Additionally, because 2025 is an important year for wrapping up the "14th Five-Year Plan" and starting the "15th Five-Year Plan", the importance of this conference has increased.

How will the capital markets respond to this? In fact, the logic is quite simple. Before and after these two meetings, what is being observed is the expectation difference. Moving forward, the comparison between policy expectations and policy realities will be crucial. If the policies are implemented well, it will be bullish; if the ground performance falls short of expectations, it will be bearish.

What signals did the Political Bureau meeting release?

P.S. In order to provide a clearer understanding, let's first explain a few terms.

In general, this meeting sent out very strong and positive signals, exceeding market expectations. The following summarizes several key points.

1. The general tone is set as "implementing more proactive and enterprising macro policies", a statement rarely heard, set at quite an ambitious level.

Specifically, there are several key keyword combinations: "strengthening extraordinary countercyclical regulation," a "more proactive fiscal policy," and "moderately loose monetary policy."

"Strengthening extraordinary countercyclical regulation" is a first-time term. Previously, the term was generally "increased countercyclical regulation." The current double overlay of "strengthening" and "extraordinary" clearly indicates an unprecedented strength.

The longstanding expression of "prudent monetary policy + proactive fiscal policy" has transformed into "moderately loose monetary policy + even more proactive fiscal policy."

The last time there was an emphasis on "even more" in fiscal policy was in July 2020 under the impact of the epidemic. The last time a moderately loose monetary policy was proposed was during the 2008 global financial crisis, when China launched a massive fiscal stimulus of "four trillion" and the money supply surged by 30 trillion.

In other words, the next monetary and fiscal policies will step on the accelerator, perhaps leading to the introduction of large-scale economic stimulus policies. Of course, unlike in 2008, this time will certainly focus more on the balance between economic stimulus and risk prevention.

It directly addresses the most concerning issues by proposing to "stabilize the real estate and stock markets," and "vigorously boost consumption, improve investment returns, and comprehensively expand domestic demand."

"Stabilizing the real estate and stock markets" is easy to understand; the real estate and stock markets are considered stock wealth and liquid wealth respectively, and stabilizing both is necessary to maintain everyone's wealth expectations. Stabilizing the real estate market may involve safeguards on the supply side through increased special bonds, and boosting demand through relaxation of property purchase restrictions and guiding LPR declines. Stabilizing the stock market may involve more long-term funds, including social security, entering the market, ultimately aiming to enhance the long-term ROI of the stock market, as wealthier residents are more inclined to consume.

However, it is worth mentioning that the shift in the stock market sentiment from the September "efforts to boost the capital market" to the current "stabilizing" is more neutral. This may indicate that the speculation during the National Day was too intense and a stable and improving trend would be healthier.

What signal is there in "Vigorously boosting consumption, improving investment efficiency, and comprehensively expanding domestic demand"? Consumption and domestic demand have already been placed in a more prominent position in the economy than technology, which may be the top priority of next year's policies. After all, with Trump coming to power, we may face the impact of insufficient external demand, and using consumption to drive the economy can no longer be delayed.

What else is mentioned? "To give full play to the leading role of economic system reform, promote the effectiveness of landmark reform measures. To expand high-level opening up to the outside world, stabilize foreign trade and foreign investment."

How should we understand this? The key words in this passage are actually "reform and opening up", which is always the hard truth of development. So, there may be several landmark events to enhance everyone's confidence and stabilize expectations.

After this meeting, the market also had a reaction.

On the afternoon of December 9th at 3 o'clock, after the press release, the Hong Kong stock market soared. The Hang Seng Index saw a sprint-style rise in the last 40 minutes before the close, jumping from a 0.33% decline to a 2.76% increase. U.S.-listed Chinese stocks and related indices also had abnormal performance, with A-shares opening significantly higher the next day. This is enough to show that the conference released strong positive signals.

However, the market did not sustain the momentum, quickly falling back. On one hand, this is due to the quick upward surge and turnaround during the National Day, where people are now more cautious. On the other hand, it is also because knowing whether to do it or not is one thing, while how to do it and how well is another, especially since the Economic Work Conference has not yet started.

What signals did the Economic Work Conference convey?

It can be said that the Political Bureau meeting basically expressed the top decisions, and the interpretation of the Economic Work Conference requires attention to detail.

From the entire meeting draft, basically following the logic of the political bureau meeting, relevant detailed descriptions were made, which still align with expectations. It mainly points out a few key aspects:

1. Firstly, candidly facing the current internal and external issues.

"The deepening adverse impact brought by the current external environment changes has made our country's economic operation still facing many difficulties and challenges. Mainly due to insufficient domestic demand, some enterprises are struggling in production and operation, and the increase in income and employment of the people is under pressure, with many hidden risks still existing.

It's a simple truth, only by recognizing the problems can solutions be considered. By pinpointing the issues, it's time to actively seek changes and put in efforts.

2. Both fiscal and monetary policies have proposed specific measures and directly stated the need to increase the deficit ratio, lower reserve requirements, and interest rates, which is a rare expression.

On the fiscal front, the shift from 'active' to 'more active' has clearer guidance, one is to raise the fiscal deficit ratio, which was clearly stated at the Central Economic Work Conference last time, back in 2015. Another is to increase the issuance scale of ultra-long-term special national bonds and special bonds, as well as optimize the structure of fiscal expenditures.

Increasing the deficit ratio and optimizing the structure of fiscal expenditures aims to direct funds towards truly boosting domestic demand and ensuring the basic line of 'three guarantees' for grassroots. Ultra-long-term special national bonds mainly support the implementation of the 'two major' plans and the construction of security capacities in key areas. Increasing special debts mainly corresponds to 'stabilizing the real estate market, prudently disposing of risks in local small and medium-sized financial institutions.'

* 'Three guarantees' refer to safeguarding basic livelihoods, wages, and business operation. 'Two major' refer to the implementation of major national strategies and the construction of security capabilities in key areas. 'Two new' refer to a new round of large-scale equipment renewal to promote industrial upgrading and improve production efficiency, as well as encouraging consumption by replacing old products with new ones.

In 2025, it is highly likely that the government's debt size will cross over from nearly 12 trillion to 15 trillion yuan.

In fact, everything that needs to be mentioned has been covered. specifics like how much will the deficit rate increase? Specifically, how much will the issuance of special national debt increase? How much will the issuance and use of local government debt increase? How to evaluate the usage range and profit space? These are all things to look at later.

In terms of monetary policy, there are two key points. One is directly mentioning the required reserve ratio and interest rate cuts, so the reduction next year may be higher than this year. This is actually also a key point to look out for next, to see if there will be a required reserve ratio cut this month. If a cut occurs, it will more likely meet expectations; if not, the market may have doubts, doubting whether there is a gap between policy expectations and execution.

The other point is mentioning 'exploring and expanding the central bank's macro-prudential and financial stability functions, innovating financial instruments, and maintaining financial market stability,' then tools like '500 billion plus another 500 billion,' '300 billion plus another 300 billion' may be more. The objective of macro-prudential policy is to prevent systemic financial risks, specifically focusing on stabilizing the stock market, bond market, and exchange rates.

Boosting consumption is a key task, which is related to stabilizing the real estate market, the stock market, and promoting income growth for residents.

Compared to last year, the expression of expanding domestic demand has changed from 'focused expansion' to 'comprehensive expansion,' and it has been placed at the beginning, verifying what was said earlier that this is the focus of next year's economic work.

How to expand domestic demand? This includes using the 'two news' and 'two weights' mentioned earlier to drive consumption, of course, there are also some pro-people measures, such as increasing income and reducing burdens for the middle and low-income groups, raising retirement benefits, and so on.

Moreover, if there is to be a major shift towards domestic demand, there may be opportunities for emerging industries, as mentioned in the article 'actively developing the first release economy, ice and snow economy, and silver release economy.' At this point of expanding domestic demand, for people to have money to spend, income must increase, so 'stabilizing the real estate market and stock market' becomes very important; otherwise, people cannot afford to spend freely.

The draft also mentioned, "Next year, it is necessary to maintain stable economic growth, maintain overall stability of employment, prices, and international balance of payments, promote synchronized growth in residents' income and economic growth." The first four are traditional goals, and "promoting growth in residents' income" is seen for the first time. This may be achieved through the introduction of the "Private Economic Promotion Law" to support the confidence of private economy, thereby providing more job security and higher wages for LBX Pharmacy Chain Joint Stock.

4. Technology innovation still needs to be emphasized, and some details related to reform and opening up have been provided.

In addition to "AI + mobile" in technology, this time it also mentions "rectifying 'internal competition' style." Compared to the previous "supply-side reform," rectifying internal competition is more suitable for the current environment as it may directly address issues such as resource wastage and cutthroat competition in the technology industry.

Overall, the outcome of this conference neither forms a bullish trend nor a bearish trend.

But how did the market react? A-shares and Hong Kong stocks responded directly with a sharp decline, indicating that for the market now, stability rather than exceeding expectations might be more predictable.

The implementation of the two major conferences has raised market expectations. It remains to be seen whether the policies actually implemented can meet expectations. From now until the two sessions next year, there are still many variables, with expectations that various ministries will act immediately after policy decisions and hopefully make some noise before March.

What should investors focus on? What should they do?

If one word is to be used to summarize, it would be cautious optimism. The current policy direction may bring opportunities, but one should also be alert to market volatility risks.

From a long-term perspective, there is no need to worry about the economic strength and prospects of China, as there is relatively ample room for policy adjustments. The current tone is very likely to inject liquidity into the market, increasing investment opportunities and potential returns in the medium to long term.

However, in the short term, only results exceeding expectations may stabilize market expectations. Therefore, discrepancies between implementation and expectations may lead to increased short-term market volatility, requiring everyone to adapt to this rapid rise and fall in the market.

In this context, here are some tips for everyone:

1. Consider a combination of long and short-term strategies, capturing policy dividends in the long term and handling market fluctuations in the short term. This requires financial coordination, with some funds allocated for the long term and some for the short term.

2. In the medium to long term, focus on industries that may benefit from policies, including consumer, technological innovation, infrastructure, finance, real estate, etc., with a greater focus on the emerging industry mentioned earlier. Of course, also prioritize the fundamentals of companies, choosing those with core competitiveness and good performance.

Long-term investments inevitably involve fluctuations, but it depends on how you manage these fluctuations. For some people, volatility greatly affects investment confidence, but if you are firm enough, volatility can also become an opportunity to bottom fish and average down costs.

3. In the short term, focus on the speed and intensity of policy implementation, determining the short-term opportunities that may arise. For example, as mentioned earlier, keep an eye on whether the required reserve ratio will be lowered this month. If it is lowered, it will be more in line with expectations, strengthening the subsequent anticipation.

Of course, apart from domestic policies, also consider changes in Sino-US relations, the global economic situation, and geopolitical risks.

Short-term trading really tests your timing ability, and what is most feared is turning short-term into long-term. This is a problem because their trading logic is inherently different. During the National Day market rally, some people may have just went along for the ride and ended up with no returns, or even losses.

So in short-term trading, pay special attention to setting stop-loss and take-profit points. I recommend a useful tool - stop loss and take profit orders.

Simply put, after buying stocks, if you are worried about a significant drop in stock price to reduce losses, you can consider setting a sell stop order; if you are concerned that the stock price will decline after rising and want to secure profits, you can consider setting a sell take-profit order (also known as a touch order). For more information, you can learn from"3 types of orders: help you earn more, lose less!"。

4. It is recommended to flexibly use tools other than the underlying stocks to diversify risks or reduce costs. In the long term, you can consider more ETFs, and in the short term, make more use of options.

Okay, that's all for today. How do we apply the signals from the two meetings to investments?click hereGrab exclusive benefits for a limited time, as well as more investment tips, seize the deployment opportunities!