The week before the Spring Festival in the year of the tiger, the A-share market experienced a significant adjustment in the short term. Industry insiders interviewed by the reporter of the economic information daily generally believe that in the medium and long term, with the transformation and upgrading of China’s economy, high-quality development and the continuous deepening of the comprehensive reform of the capital market, A-Shares have a long-term upward driving force, and their investment value will continue to show.
new momentum surging
The long-term performance of capital markets is inseparable from economic fundamentals. According to various data, despite the impact of multiple internal and external adverse factors, China’s economy has been full of resilience in the past year, and the rapid growth of new kinetic energy in China’s economy has provided the foundation for the long-term upward movement of the capital market.
According to the data from the National Bureau of statistics, in 2021, industrial enterprises above Designated Size achieved a total profit of 8709.21 billion yuan, an increase of 34.3% over the previous year, 39.8% over 2019 and an average increase of 18.2% over the two years. In 2021, among the 41 major industrial industries, 32 industries’ total profits increased over the previous year, 8 industries decreased, and 1 industry changed from profit to loss.
More importantly, from various data, China’s economic innovation ability is constantly improving, and high-quality economic development is constantly realizing. In 2021, China’s investment in high-tech industry increased by 17.1% over the previous year, of which the investment in high-tech manufacturing industry increased by 22.2%, 8.7 percentage points higher than the growth rate of manufacturing investment, and the investment in high-tech service industry increased by 7.9%, 5.8 percentage points higher than the growth rate of service investment. According to preliminary estimates, China’s social research and experimental development (R & D) investment in 2021 will be 2786.4 billion yuan, an increase of 14.2% over the previous year, and an actual increase of 9.4% after deducting price factors; The ratio of R & D expenditure to China’s gross domestic product (GDP) reached 2.44%, an increase of 0.03 percentage points over the previous year. According to the global innovation index (GII) released by the World Intellectual Property Organization in 2021, China’s scientific and technological innovation capacity ranks 12th among 132 economies, an increase of 2 places over the previous year, and ranks first among middle-income economies.
Gao Shanwen, chief economist of Anxin securities, pointed out that with the continuous progress of technology and the continuous improvement of income level, China will continue to upgrade and transform to the field of high-end manufacturing and new services, especially in the field of major technological and business model changes, as well as the key areas that need to achieve technological autonomy, China will be able to maintain rapid growth, This is undoubtedly quite certain. For example, in electric vehicles, renewable energy, electronic manufacturing, medical and elderly care services and other fields.
On the other hand, the deepening reform of the capital market is also making significant changes in the ecological environment of the whole market. The 2022 system work conference of China Securities Regulatory Commission recently pointed out that more positive structural changes are taking place in the capital market, and there is a solid foundation for the stable and healthy development of the market. The meeting pointed out that we should take the full implementation of the stock issuance registration system as the main line and further promote the reform of the capital market.
Dong Dengxin, director of the Institute of Finance and securities of Wuhan University of science and technology, told reporters that the main line of this year’s capital market reform will focus on the whole market coverage of the registration system, which will greatly improve the growth and inclusiveness of the whole A-share market, and the ability of the capital market to serve the real economy will be improved. In addition, the expansion of the Beijing stock exchange will also be the highlight of the reform. Considering the changes of internal and external environmental factors, it is expected that more enterprises will seek to be listed in China, and the mission of the capital market to serve the high-quality development of the economy will be more important. At the same time, the delisting system of A-Shares will be further improved.
He said that with the promotion of reform, the ecology of the capital market will change significantly. From the perspective of the structural changes of listed companies, small and medium-sized innovative companies will become the highlight of the market. With the uncertainty of the overseas market, A-share investors will face more choices in the international market. From the perspective of institutional investors, various financial products, asset management products, the expansion of public funds and the entry of pensions into the market will also further improve the proportion and scale of institutional investors in the market.
Changjiang Xiangyang, director of Boshi fund, said that in the medium and long term, the process of improving the quality and efficiency of China’s economy is far from over. New and viable industries are constantly emerging, and the fundamental source of enterprise profitability – continuous innovation and self transcendence – will be full of vitality. The financing needs of China’s equity market for a large number of industries, especially emerging industries, and the investment needs for the preservation and appreciation of more and more national wealth. In the general direction of finance serving the real economy, the capital market system has been continuously improved and the efficiency has been continuously improved.
valuation advantage
In addition to the certainty brought by economic fundamentals and the factors of capital market reform, the valuation level of A-Shares is also one of the factors that many institutions are optimistic about the market. Insiders generally believe that the current overall valuation level of A-Shares is not high, which is a depression of medium and long-term capital allocation.
Li Huiyong, chief economist of Huabao fund, told reporters that in the medium and long term, the certainty of the A-share market mainly comes from three aspects. First, from the perspective of the strategic positioning of the capital market, the capital market should serve the economic transformation and attract more enterprises that can represent the new economy and the driving force of future growth through the reform of the registration system, Thus, more high-quality companies can enter the market and investors can share the benefits brought by their growth. Secondly, the development of the capital market is inseparable from the economy itself. From the current situation, driven by high-quality development, the new economy is injecting power into development and effectively ensuring the medium and long-term growth of China’s economy. Third, from a global perspective, whether the valuation level or the level of risk compensation, the cost performance of A-Shares is relatively significant. At present, the overall valuation of A-Shares is near the median of the past decade. Compared with other assets, the valuation advantage is obvious. It is a depression for medium and long-term capital allocation.
Gao Shanwen said that from the perspective of the valuation level of the market, the valuation of the benchmark CSI 300 index is currently at a slightly higher level than the median in the past decade. Considering the market’s consistent expectation of earnings in 2022, the dynamic P / E ratio is at a lower level of 20%. Haitong Securities Company Limited(600837) research points out that from the overall perspective of the stock market, the current CSI 300pe is only 13 times, the risk premium rate of the stock market relative to the ten-year Treasury bond is in the quantile from high to low 35% since 2013, and the ratio of the dividend rate of CSI 300 to the ten-year Treasury bond is also in the quantile from high to low 31% since 2013, so the valuation is not high. From the perspective of the industry, the historical quantile of 125 Shenwan secondary industry PE (TTM, overall method) is calculated. At present, the proportion of PE in industries with a quantile of more than 50% from low to high since 2005 is 31%. For comparison, the proportion data at the beginning of 2018 is 43%, at the beginning of 2011 is 60%, and at the beginning of 2008 is 88%. On the whole, the current valuation pressure of A-Shares is actually very small.
