In the article “macro research monograph II in the middle of the year – macro operation environment of the equity market in the second half of the year”, we clearly pointed out that the tone of the equity market in the second half of the year may continue the shock and adjustment in the first half of the year, mainly because the adjustment in the first half of the year is not complete and the problem of overestimation has not been solved, In particular, the so-called core value stocks led by Kweichow Moutai Co.Ltd(600519) have not been adjusted in place. From the external environment, the market liquidity will still maintain a relatively tight balance to implement the neutrality and continuity of monetary policy. However, there are still structural opportunities in the market. After the substantial adjustment of the equity market in July and August, we still believe that shock and adjustment are still the main tone in our report in September. Under the policy environment of developing “specialization and innovation”, the structural market will be further strengthened. In the October report, we also believe that it is unlikely to continue the rebound in September in October. In the November report, we believe that it is difficult for the market to develop a strong market, mainly structural market. From the actual overall trend, it basically confirms our view: in November, the Shanghai and Shenzhen 300 index and Shanghai 50 index fell by 1.17% and 2.45% respectively, while the China Securities 500 index rose by 2.84%.
The important macro reason is that from the perspective of PMI and other macro data, the downward pressure on the economy has increased significantly. At the same time, the price rising trend is obvious and the characteristics of stagflation are obvious. The macro environment is not only under the pressure of economic downturn, but also under the pressure of inflation. Historical experience and macro basic theory tell us that there is no bull market in inflation and no strong market in stagflation.
The theoretical basis of inflation without bull market is that in order to deal with inflation, the interest rate level is difficult to fall significantly, and the withdrawal of the United States from QE also limits the falling space of China’s interest rate level. Specifically, the market interest rate level such as treasury bond yield is difficult to decline, and the investment value of stocks will become relatively low in terms of the relative investment value of stocks and bonds. The valuation of the so-called core assets represented by Maotai will not be cheaper. This kind of dividend rate is lower than the yield of long-term treasury bonds.
From the relative investment value of stocks and bonds, the yield of 10-year Treasury bonds fell in November, rising from 2.94% at the end of October to 2.825% at present. Although the PE reciprocal of CSI 300 index, PE reciprocal of CSI 500 index and PE circulating in CSI have expanded, it is still not obvious. That is, compared with the bond market, the relative investment value of the stock market is not high. This is in sharp contrast to the situation in previous years.
