investors are looking forward to the successful start of A-Shares in 2022. However, reality hit the face again.
After new year’s day, in the first week of 2022, the three major A-share indexes closed down in four trading days from January 4 to 7. The Shanghai Composite Index fell by 1.66%, the Shenzhen Component Index fell by 3.46% and the gem index fell by 6.8%.
Investors are a little confused when the hope for a good start fails. What are the reasons for the disadvantage of opening the door? How to interpret the market in 2022 and how should investors layout it
behind the green door
With the end of the last trading day, A-share ended successfully in 2021. Looking back on the whole year of 2021, the Shanghai Composite Index rose by 4.80%, the Shenzhen Component Index rose by 2.67%, and the growth enterprise market index rose by 12.02%. All three indexes achieved the annual line of “three consecutive positive”. Among them, the “three consecutive Yang” of the Shanghai stock index also broke the curse of “bull for only three years” for decades.
In addition, the annual turnover of A-Shares in Shanghai and Shenzhen reached a record high of more than 254.5 trillion yuan in 2021, with a total turnover of less than 257 trillion yuan in 2021; The longest trading volume in history broke the trillion record – from July 21 to September 29, 2021, the trading volume of Shanghai and Shenzhen stock markets broke the trillion for 49 consecutive trading days, the highest in history, exceeding the trillion for 43 consecutive trading days in 2015; The net purchase of northbound funds exceeded 430 billion yuan, a record high; The number of new shares issued and the amount of financing reached a new high – 481 new shares were issued in Shanghai and Shenzhen stock markets in 2021, exceeding any year in history; The fund raised was 585.7 billion yuan, breaking 500 billion yuan for the first time; The number of bull stocks reached a new high – although the index’s increase in 2021 was the smallest in recent three years, the proportion of stocks rising in Shanghai and Shenzhen stock market reached 60% in 2021, and 344 stocks rose by more than 100% in the whole year. The number of bull stocks was the largest in recent three years, of which 90% were small and medium-sized stocks and about half were new energy stocks.
One record after another has been refreshed. In addition, according to past experience, there will be a cross year market from December to February of the next year. Investors are looking forward to a good start for A-Shares in 2022. However, reality hit the face again.
A number of institutions have conducted in-depth analysis on this. To sum up, there are several main reasons behind the green door. First, with the liquidity passing smoothly at the end of the year, the central bank’s reverse repo decreased rapidly. On January 4 and 5, 260 billion and 200 billion funds were recovered respectively, which had a certain impact on the market capital. Second, on January 5, China Mobile officially landed on the Shanghai Stock Exchange. Its IPO raised nearly 56 billion yuan, which is the largest A-share IPO in recent 10 years, diverting market funds. Third, in the new year, with the reduction of assessment pressure, institutions, especially the willingness of some positions to focus on the capital balance structure of popular sectors, have significantly improved, and the operation of position adjustment and stock exchange is somewhat radical. Fourth, affected by covid-19 epidemic. Omicron is coming with a menacing force. Not only the number of confirmed cases abroad has reached a record high, but also the epidemic situation in China is sporadic and frequent. The strict zeroing policy also makes the economy face greater challenges in the short term. Fifth, at the end of the year and the beginning of the year, the macroeconomic forecast results released by many institutions were more pessimistic, and the market responded in advance. In addition, China and the United States have diverged monetary policies, and the market is also cautious about this. It is worried that the tightening of monetary policy in the United States and the rising real interest rate of the US dollar may narrow the interest rate gap between China and the United States, and the US dollar will have a siphon effect.
It is worth noting that the short-term market adjustment does not change the market fundamentals. A number of institutions said that under the tone of steady growth, the market fundamentals remained well supported. Looking ahead, China International Capital Corporation Limited(601995) believes that the market does not need to be overly pessimistic. Combined with the recent introduction of detailed rules for local steady growth policies, after some forward-looking economic indicators gradually improve, the market may reverse the downturn and gradually turn positive
the comprehensive registration system reform has entered the countdown
Looking forward to the A-share market in 2022, the comprehensive registration system has to be proposed. In December 2021, the central economic work conference clearly called for the pilot of comprehensive reform of market-oriented allocation of factors and the full implementation of the stock issuance registration system. On January 6 this year, Yi Huiman, chairman of the CSRC, said again, “at present, the pilot of the registration system has reached the expected goal, and the conditions for the full implementation of the registration system have been gradually met.” In addition, it is reported that the CSRC is stepping up the formulation of the reform plan of the whole market registration system to ensure the smooth implementation of this major reform. All this shows that the full implementation of the registration system in China’s capital market has entered the countdown.
Then, how will the full implementation of the registration system affect China’s capital market?
Guotai Junan Securities Co.Ltd(601211) securities research points out that the promotion of the registration system aims to improve the ecology of securities listing, help to increase the proportion of direct financing and solve the problem of enterprise financing; Under the registration system, the pricing power of the market for securities is enhanced, the role of the capital market in the survival of the fittest is brought into play, and the vitality of the capital market and the competitiveness of enterprises are fully stimulated.
Hou Shoufa, chairman of Guorong securities, believes that the biggest difference between China’s capital market and overseas relatively mature capital markets is “short bull and long bear”. The reasons for this situation are: first, retail investors account for a large proportion in the Chinese market; second, many companies with relatively low long-term investment value flood the market.
According to Hou Shoufa, with the comprehensive registration system reform, the “retail” feature of China’s capital market is gradually being reversed. On the one hand, the number of professional institutional investors such as public funds began to increase significantly in the past two years; On the other hand, it is more difficult for non professional individual investors to obtain income, and a large number of retail investors are being “forced” by the market to participate in the capital market through investment funds. This will certainly promote the capital market to a new stage of more rational value investment.
In addition, Hou Shoufa said that with the implementation of the new delisting regulations, more enterprises that do not have long-term growth ability and investment value will be delisted. The capital market will also achieve a better “metabolism” on the asset side, leaving more high growth enterprises with investment value, so as to realize the characteristics of short-term speculation such as “small speculation, poor speculation, new speculation and shell speculation” on the current investment side of the capital market.
For securities companies, investment banks and other institutions, Hou Shoufa believes that their business opportunities have increased greatly in the era of capital market registration system, but it will have a subversive impact on their business model. The project pricing and underwriting ability of securities companies and investment banks will gradually become their core competitiveness. This requires the support of securities companies and investment banks with strong industry research team and institutional investor resources. The essence behind this is that investment banks and other intermediaries need to return to the original intention of serving the long-term value growth of enterprises
the market is risky and investment should be cautious
As for the prediction of A-share market in 2022, as of January 10, most securities companies have released forecast reports. Among them, the divergence lies in the study and judgment of the general trend of a shares. Some think it is “stable before rising”, and some expect it to be “up before down”; The similarity lies in the judgment of loose liquidity. Wide credit will be an important feature in 2022, which does not rule out the possibility of reducing reserve requirements or interest rates again. Public and private institutions are expected to bring more than 2.5 trillion yuan of incremental “living water” to a shares.
Citic Securities Company Limited(600030) it is expected that with the support of a package of stable growth policies, China’s economy is expected to return to the potential growth level in 2022, the growth rate is expected to reach about 5.5%, and there are more opportunities in the first half of the year than in the second half of the year.
China Industrial Securities Co.Ltd(601377) believes that although it is difficult to have a big market in the A-share market as a whole in 2022, it is more a structural market, at least the market is not a bear market under the background of surging incremental funds.
Chen Guo, chief strategy officer of China Securities Co.Ltd(601066) securities, also gave the market prediction of “structural bull”. He stressed that the key is to grasp the strong direction of fundamental growth.
According to Chen Guo’s analysis, from the perspective of valuation and liquidity logic, 2022 is more favorable than 2021, and the overall index valuation of the A-share market in 2021 is shrinking. 2022 is a process of liquidity marginal easing and overweight. We don’t have to worry about valuation. We only need to worry about whether there is profit growth. If there is relatively strong growth, the final income will be good. In addition, from the perspective of micro liquidity, under the trend of stabilization and recovery of social finance and M2, and the downward trend of risk-free rate of return, the proportion of wealth flowing to equity will further increase in the process of residents’ asset allocation. In his view, structural opportunities will appear in carbon neutrality, manufacturing and small and medium-sized stocks.
China International Capital Corporation Limited(601995) it is suggested that investors should pay attention to three main lines in configuration: first, high prosperity and competitive manufacturing growth track in China, including new energy vehicle industry chain, new energy and technology hardware semiconductors. Second, the middle and lower reaches share prices are relatively fully adjusted and the medium and long-term prospects are still clear, such as agriculture, forestry, animal husbandry and fishery, medicine, food and beverage, Internet and entertainment, automobiles and parts, household appliances, light industry and household appliances, etc. Third, the sectors that may be supported by China’s stable growth policy.
Since it is an investment, there are risks. According to Guotai Junan Securities Co.Ltd(601211) securities, A-Shares may show a sideways pattern in 2022. Firmly optimistic about the spring Market in 2022, and investors should do a good job in defense in summer.
