Recently, five major international investment banks, including Credit Suisse, Wall Street investment bank Bernstein, HSBC, Goldman Sachs and UBS, collectively look at China. Goldman Sachs believes that A-Shares are now more investment oriented. Bernstein analysts believe that the market expects the growth of new social financing in China, looser monetary policy and more attractive stock valuation compared with the rest of the world. UBS raised China’s rating to “overweight”, especially optimistic about Chinese Internet companies.
there was a correction in A-Shares during the year
The gem index fell nearly 15%
While overseas investment banks are optimistic about China’s stock market, Chinese institutions have differences on the future trend of a shares. Based on the market that has fluctuated and declined since the beginning of the year, some investors were short positions and bearish on the market in the first quarter even years ago.
As of February 18, the three major A-share indexes fell to varying degrees during the year, ranking the bottom in the performance of major global capital markets, among which the gem index fell by nearly 15% during the year.
In terms of individual stocks, more than 530 stocks fell by more than 20% during the year, Risen Energy Co.Ltd(300118) , Fujian Snowman Co.Ltd(002639) , China Reform Health Management And Services Group Co.Ltd(000503) and other more than 60 stocks fell by more than 30%, and the share price of Great Wall International Acg Co.Ltd(000835) was halved; Less than 200 stocks rose by more than 20% during the year. New shares also performed poorly. More than 60% of new shares fell after listing, and the market profit-making effect was poor.
Over the past few months, foreign investors have generally remained cautious about China’s stock market, but their attitude has begun to change slowly and they expect policies to support economic growth. Where does the confidence of China’s capital market come from? Securities Times · databao preliminarily confirmed the judgment of foreign investment from the four dimensions of valuation, asset allocation, economy and monetary policy.
Shanghai index valuation
is about half of the Dow
Although some stocks have higher valuations or even bubbles, the valuation of the A share market index is relatively low, which has been a phenomenon for many years.
According to data treasure statistics, as of the latest closing day, the price earnings ratio of NASDAQ index is close to 33 times, the price earnings ratio of Dow Jones index is more than 22 times, the price earnings ratio of Shanghai index is about 13 times, and the price earnings ratio of Shenzhen composite index is about 26 times. The overall valuation of A-share index is much lower than that of US stocks.
Morgan Stanley Capital International expects the MSCI China Index to rise 16 per cent this year because its valuation is lower than the bank’s target price earnings ratio of 14.5 times.
foreign capital to Chinese assets
lower configuration
Compared with the United States, whether bonds or stocks, the proportion of foreign capital in the allocation of Chinese assets is lower. According to data treasure statistics, overseas investors hold about 30% of US Treasury bonds, while overseas investors hold less than 5% of Chinese bonds.
From the perspective of stocks, the market value of Chinese stocks purchased by foreign investors through Beishang capital, QFII, rqfii and other channels is close to 3 trillion yuan, of which the market value of Beishang capital is 2.55 trillion yuan. Although the market value is more than three times that of 2018, it accounts for only 3% of the total market value of a shares. Including QFII, the market value of A-Shares held by foreign investors still accounts for less than 5%. Foreign investors hold about 15% of the total market value of U.S. stocks, and foreign shares in Japan, Brazil and South Korea account for a higher proportion.
With the continuous opening of China’s capital market, foreign investors will continue to increase their investment in Chinese assets. Since the beginning of the year, the total net inflow of funds from northbound has exceeded 20 billion yuan. Among the individual stocks that have been disclosed in the 2021 annual report, many stocks have been newly established by QFII.
China’s economy continues to improve
Covid-19 pneumonia virus is still prevalent on a large scale overseas. Zhang Yuxian, director of the economic prediction Department of the National Information Center, believes that China’s economy will continue to improve and the trend will not change. In 2020, China is a rare country with positive economic growth. In 2021, China’s GDP increased by 8.1% year-on-year, that of the United States increased by 5.7% year-on-year, and that of Japan was only 0.8%.
2022 is the year when the 14th five year plan is fully implemented. Although facing the triple pressure of demand contraction, supply shock and weakening expectation, Xing Ziqiang, chief economist of Morgan Stanley, believes that China’s economy will show a recovery trend in 2022, and the annual GDP growth rate is expected to reach 5.5%. At the same time, the United States is still deeply affected by high inflation, high unemployment and the high outbreak of covid-19. The IMF has significantly reduced the forecast data of U.S. economic growth in 2022 by 1.2 percentage points to 4%, down 1.7 percentage points from 2021.
us loose monetary policy
expected tightening
After nearly two years of monetary easing, the United States began to tighten monetary policy, while China still maintained a stable, flexible and appropriate monetary policy and increased cross cyclical adjustment. This year, the central bank carried out a series of medium-term lending facilities (MLF) operations. On January 17 and February 15, it carried out one-year MLF operations of 700 billion yuan and 300 billion yuan respectively.
The central bank’s incremental parity renewal of MLF is intended to increase long-term capital investment, guide financial institutions to increase their support for the real economy such as agriculture, rural areas and farmers, small and micro enterprises, and release the policy orientation of the central bank’s active and stable growth.
Under the expectation of policy contraction, foreign bond yields rose. The latest data show that the yield of us 10-year Treasury bonds is nearly 2%, the highest since 2020; Britain, India and France have reached the highest level since 2020. China’s current 10-year Treasury bond yield is 2.8%, slightly lower than that in early 2020 and 0.36 percentage points lower than that in early 2019. In addition, from the perspective of China’s broad money supply, it reached 243.1 trillion yuan in January 2022, with a year-on-year increase of 9.8% and a month on month increase of 2.02%.
At the same time, the RMB is expected to appreciate. Under multiple factors, for foreign investment, Chinese assets not only have the advantage of avoiding risks, but also obtain higher return on investment.
blue chips with excellent performance and undervalued value
outperformed small cap stocks
Foreign investment banks believe that undervalued blue chips are still attractive. According to the classification of stock market value, databao calculated the average rise and fall since the beginning of the year. It found that the average rise of stocks with a market value of more than 500 billion was nearly 2%, the average decline of stocks with a market value of 300 billion to 500 billion was about 3%, the average decline of stocks with a market value of 10 billion to 50 billion was more than 7.5%, and the average decline of stocks with a market value of less than 10 billion was about 6%. Large cap stocks fluctuated in a narrow range and small cap stocks retreated sharply, which is basically consistent with the views of investment banks.
Which stocks are the focus of institutions? According to the statistics of data treasure, since this year, it has been increased by going north. The return on net assets in the third quarter report from 2019 to 2021 has exceeded 10%, and the latest P / E ratio is less than 30 times. There are only 15 performance pre hi stocks with a market value of more than 10 billion. These 15 shares have been investigated by institutions since 2021, of which Qingdao Haier Biomedical Co.Ltd(688139) has been investigated by 590 institutions and Shenzhen Jinjia Group Co.Ltd(002191) , Zhejiang Orient Gene Biotech Co.Ltd(688298) has been investigated by more than 30 institutions.
According to the statistics of databao, Zhejiang Orient Gene Biotech Co.Ltd(688298) , Eastern Air Logistics Co.Ltd(601156) , Shenzhen Tagen Group Co.Ltd(000090) gained more than 1 percentage point of capital increase from going north during the year, Xinjiang Tianshan Cement Co.Ltd(000877) and satellite chemistry gained increase. The performance of Hubei Yihua Chemical Industry Co.Ltd(000422) , satellite chemistry and Zhejiang Orient Gene Biotech Co.Ltd(688298) in 2021 is relatively outstanding. Among them, the net profit of Hubei Yihua Chemical Industry Co.Ltd(000422) is expected to increase by more than 10 times. Since the beginning of the year, the company has increased its position by 0.28 percentage points, and the latest P / E ratio is less than 15 times.
