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Themain content of fundamental analysis - Macro analysis

The so-called fundamentals refer to the status of some basic factors that affectthe trend of the stock market. Through the analysis of the fundamentals, thebasic factors that determine the changes in stock prices can be grasped, whichis the basis of stock investment analysis.


Fundamentalfactors mainly include:

(1)Macroeconomic conditions

From along-term and fundamental point of view, the trend and changes of the stockmarket are determined by the level of economic development and economicprosperity of a country. Stock market price fluctuations also reflect changesin macroeconomic conditions to a large extent. It is not difficult to find fromthe historical trend of foreign stock markets that the trend of stock marketchanges generally coincides with the economic cycle. During the economic boom,companies are operating well, making more profits, and their stock prices arerising. When the economy is in a recession, the decline in corporate income andthe decline in profits will also cause its stock prices to continue to fall.However, the trend of the stock market and the economic cycle are not the samein terms of time. Generally, the changes in the stock market must be advancedto a certain extent, so the stock market price is called a barometer of themacro economy.

(2) Interestrate level

Among themany factors that affect the trend of the stock market, interest rates are arelatively sensitive factor. Rising interest rates may attract part of thefunds to the bank savings system, thereby feeding the amount of funds in thestock market and having a certain impact on stock prices. At the same time, dueto rising interest rates, business operating costs will increase, and profitswill decrease, which will correspondingly cause stock prices to fall.Conversely, if interest rates are lowered, people may invest more funds in thestock market due to their inherent need to maintain and increase their value,thereby stimulating stock prices. At the same time, due to lower interest rates,lower operating costs of enterprises and increased profits have alsocontributed to rising stock prices.

(3)Inflation

This factorhas pros and cons to the stock market. It has the effect of stimulating themarket and depressing the market. However, in general, it does more harm thangood, and it will increase the bubble component of the stock market. In theinitial stage of inflation, the increase in currency will stimulate productionand consumption, and the growth rate will increase the profitability ofenterprises, which will promote the rise of stock prices. However, wheninflation reaches a certain level, it will push interest rates up, which willcause stock prices to fall.

(4)Enterprise quality

For specificindividual stocks, the main factor that affects the price level is the inherentquality of the company itself, including a series of factors such as financialstatus, operating conditions, management level, technical capabilities, marketsize, industry characteristics, and development potential.

(5)Political factors

Refers topolitical reasons that directly or indirectly affect the stock market, such asthe international political situation, political events, relations betweencountries, changes in important political leaders, etc., which will have a hugeand sudden impact on stock prices. This is also an important aspect that shouldbe considered in the fundamentals.

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