Regardless of the valuation level, the current A-shares have reached a good investment value range from both horizontal and vertical comparison. Although the market has been affected by the risk aversion in the recent future, we believe that the current A-shares have excellent investment and cost-effectiveness, and long-term funds can be assured of entering the market.

Three reasons for the adjustment of the A-share in June

The decline in the A-share market in June exceeded investor expectations. In retrospect, there are three main reasons: the sharp contraction of credit expansion represented by the sharp decline in non-standard financing and the sharp escalation of the Sino-US trade war have both contributed to the downward trend of the stock market. This is the fundamental factor of the economy; On the market side, a large number of small stocks are undervalued and declined as the market fell; In terms of investor structure, the proportion of long-term funds in the A-share market is low, and a large amount of  short-term funds with absolute return targets enter the stock market. The decline in the market will lead to short-term absolute return target funds to gradually reduce or clear the position, the more investment value, the lower the position and the clearance.

In the future, we are full of confidence in A shares.

Looking ahead, despite the de-leverage and the short-term impact of the Sino-US trade war, we remain confident in the long-term prospects of China's economic fundamentals. The implementation of the new asset management measures and the deleveraging policy will break the redemption and removal of zombie enterprises, which will greatly improve the efficiency of resource allocation, substantially reduce corporate financing costs and reduce risk-free interest rates, and increase the potential growth rate of the Chinese economy. And improve the valuation of the stock market.