● comparison of five bottom valuations of a shares.
● near the bottom of 2440 points of Shanghai stock index, large and small non overweight repo increased significantly.
● policy efforts to maintain the stable development of the market have greatly increased.
● the capital market continues to promote the development of standardization, marketization and internationalization.
● blue chips gained incremental capital holdings, and the valuation focus continued to rise.
● Hong Kong stocks have been adjusted in place, and the upward trend of A-Shares has not changed.
There are five important bottoms in the history of Shanghai stock index, namely 325 points in 1994, 998 points in 2005, 1664 points in 2008, 1849 points in 2013 and 2440 points in 2019. Over the past 10 years, the index of the stock index has risen from the bottom of 1664 to the bottom of 2440 by 46.63%, while the total market value of A-Shares at 2440 is 47.12 trillion yuan, an increase of nearly 2.57 times over 10 years ago, and the proportion of the total market value of A-Shares in GDP has also increased from 48.80% to 52.34%. Obviously, in the past 10 years, the scale of A-Shares has increased rapidly, and the impact of market changes on the national economy is gradually increasing. The author believes that investors who choose to enter the market at a low level against the trend may see multiple positive factors, and A-Shares are in the early stage of a new bull market.
The 2440 Shanghai index in 2019 is different from the previous bottom of a shares. A-share investors are faced with multiple uncertain factors such as cyclical slowdown of economic growth and economic structure adjustment. Therefore, after the 2440 points of the Shanghai stock index, the A-share market did not show an overall upward trend in the past, but the undervalued blue chips continued to rise strongly, and the overvalued varieties with poor performance hit new lows one after another. Investors began to choose the varieties with good performance and good return, and quickly abandoned the varieties with poor performance and no return.
Obviously, the internal structural adjustment of the stock is conducive to the improvement of resource allocation efficiency. High performance and high return varieties are driving A-Shares out of the trough. The author believes that the development of A-Shares in the next 10 years will not only have a good growth in scale, but also significantly improve the efficiency of resource allocation. The varieties with excellent performance and high return will be given a higher valuation level, and the varieties with poor performance and no return will be gradually eliminated by the market. For the supporting factors that A-Shares are in the initial stage of a new bull market, the author believes that there are mainly the following six aspects:
First, the five bottom valuations of A-Shares are compared. From the comparison of P / E ratio indicators, the PE of 325 points, 998 points, 1664 points, 1849 points and 2440 points are 11.45 times, 14.37 times, 13.11 times, 10.86 times and 12.25 times respectively; From the comparison of price to book ratio indicators, the Pb of 998 points, 1664 points, 1849 points and 2440 points are 1.54 times, 1.91 times, 0.77 times and 1.23 times respectively. Obviously, there is little difference between the valuation level of 2440 points of the Shanghai stock index and other historical bottoms of a shares.
Second, near the bottom of 2440 points of the Shanghai stock index, the size of non overweight repurchase increased significantly. Under the background of the substantial growth of the total market value of a shares, A-Shares have also entered the full circulation state from the previous non circulation state of restricted shares. Therefore, the stock price level of A-Shares is no longer only the result of supply and demand in the secondary market, and a large number of chips in the hands of large and small non shareholders have gradually entered the A-share market. Obviously, in the view of industrial capital, excessively high stock prices are bound to face the pressure of large and small non holdings, while varieties underestimated by industrial capital benefit from large and small non holdings and stock repurchase of listed companies. In January this year, the scale of non net holdings and stock repurchase of all A-Shares was 14.372 billion yuan, the highest single month holdings and repurchase scale since 2016. Therefore, from the perspective of industrial capital, the 2440 point of the Shanghai index is an area where A-Shares are undervalued, and the probability of forming an important bottom increases greatly.
Third, the strength of policies to maintain the stable development of the market has greatly increased. Investors in the A-share market must not ignore the power of policy, and the previous bottom was mostly supported by favorable policies. Near the 2440 point of the Shanghai stock index, the regulators issued rescue measures to alleviate the risk of equity pledge, attract long-term funds into the market and explore channels for international funds into the market.
After the stock index reached 2440, the policy strength to maintain the stable development of the stock market has not weakened. Facing the uncertain impact of external factors, the regulatory authorities use a series of “toolbox” measures to hedge the impact of external adverse factors, and the pattern of A-share game is more biased towards the long market.
Fourth, the capital market continues to promote the development of standardization, marketization and internationalization. In 2019, the CSRC will intensify the investigation and punishment of illegal acts of listed companies. As of August 7 this year, the CSRC has issued 87 administrative punishment decisions on violations of laws and regulations of listed companies, involving insider trading, illegal information disclosure, dissemination of false information, market manipulation, illegal trading of stocks, failure to declare securities investment as required, etc. With the improvement of the quality requirements for listed companies, the overall valuation level of China’s capital market is expected to rise from the bottom.
At the same time, with the gradual improvement of the status of China’s economy in the global economic field, the ability of China’s capital market to serve the real economy should be gradually enhanced, and the internal requirements of A-share marketization and internationalization are becoming stronger and stronger. Since this year, despite the impact of increased external uncertainties, the A-share market-oriented reform has not stalled. The A-share market set up a science and innovation board, improved the multi-level capital market structure, and launched a pilot registration system. The market-oriented reform will help to improve the ability of A-Shares to serve the real economy and improve the efficiency of social resource allocation. The high return of good stocks will be valued, while the poor stocks without return will be eliminated.
In terms of the international development of a shares, in addition to the launch of Shanghai Luntong, the CSRC has issued a number of opening-up measures, including promoting the revision of QFII / rqfii systems and rules; Allow overseas shareholders of joint venture securities and fund management companies to realize “one participation and one control”; Reasonably set the net asset requirements of the controlling shareholders of comprehensive securities companies; Relax the access restrictions on foreign banks engaging in securities investment fund custody business in China; Comprehensively promote the reform of “full circulation” of H shares; Increase the opening of futures market; Liberalize the restrictions on private placement products managed by foreign private placement securities investment fund managers to participate in “Hong Kong stock connect” transactions; Study and expand the opening of the exchange bond market to the outside world; Study and formulate the management measures for Panda Bonds of the exchange. In addition, MSCI, FTSE Russell and S & P Dow Jones International Index are also increasing the weight of their international capital investment A-Shares as scheduled. International development will introduce the rational investment concept of mature capital market, change the structure of A-share investors, and then promote the integration of A-share capital pricing with international standards. The situation of long-term undervaluation of A-share blue chip varieties may change, and the focus of market valuation is expected to move up.
The author believes that the standardized, market-oriented and international development of China’s capital market is conducive to improving the quality of listed companies, improving the operation efficiency of the stock market, cultivating the concept of rational value investment, and conducive to the long-term healthy and stable development of a shares.
Fifth, blue chips obtained incremental capital holdings, and the valuation focus continued to rise. Near the 2440 point of Shanghai stock index, the P / E ratios of Shanghai Shenzhen 300 plate and Shanghai Stock Exchange 50 plate are 10.33 times and 8.33 times respectively; Near 2733 points of the Shanghai stock index, the P / E ratios of Shanghai Shenzhen 300 plate and Shanghai Stock Exchange 50 plate are 11.15 times and 9.31 times respectively. Obviously, in the process of this round of market rise, the valuation focus of blue chip stocks has increased. Since 2019, the market entry scale of northbound funds has exceeded 100 billion yuan, and the stock market value of QFII and northbound funds has exceeded trillion yuan, which is close to the scale of China’s public funds, of which the stock market value of undervalued blue chips accounts for a relatively high proportion. In addition, both the CSI 300 index and the SSE 50 index have shown a certain anti falling ability in the recent market fluctuations, and assume the main role of long in the process of market rise. The valuation focus of blue chip stocks in the future is expected to further rise.
Sixth, Hong Kong stocks have been adjusted in place, and the upward trend of A-Shares has not changed. The author believes that from the bottom of the valuation policy to the bottom of the market has been established, and the bull market foundation from 2440 is solid. From 2440 points to 3288 points, up 61 trading days, up 848 points; From 3288 to 2733 points, it has been adjusted for 81 trading days, down 555 points, with an adjustment range of 65%. Time and space are enough. The Hang Seng Index of Hong Kong stocks has returned to 24899, which is the low point near January 3 at the beginning of the year. Hong Kong stocks have formed a “golden bottom”. The Hang Seng index broke the net as a whole. The P / B ratio of Hang Seng China enterprise index is only 0.91 times. The bottom of the two markets has been confirmed at the same time. The future rising market will start from 2733 points of A-Shares and 24899 points of Hong Kong shares. The author believes that the negative factors have been fully reflected in the bottom of the market, and A-Shares have been in the early stage of a new bull market.
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(China Securities Journal)
