In the second half of 2021, there are many investment opportunities for small and medium-sized stocks. The valuation of the iconic indexes of CSI 500 and CSI 1000 are relatively low, and there is a certain allocation value.
Which of these two growth indexes has the better effect of income enhancement? How do fund managers deal with the contradiction between scale and excess return? Can the market of small and medium-sized stocks continue?
ye Letian, deputy general manager of financial engineering and Index Investment Department of CCB fund company, and Zhao Yunyu, senior fund manager of financial engineering and index investment department, said, “is the spring of small and medium-sized stocks coming?” Speaking for the theme, from the current point of time, the valuations of CSI 500 and CSI 1000 are still not high, and the overall profit trend of large and small cap stocks will tend to be balanced in the future, rather than large cap stocks being better than small and medium cap stocks. Both have opportunities.
They stressed that due to the significant improvement of market effectiveness next year, it is difficult for fund managers to obtain significant excess returns simply by selecting individual stocks.
CSI 500vs CSI 1000 long-term trend upward
brokerage China: what is the style of the index on the market now?
ye Letian: the overall style of the market this year is still very different from that in the past few years. In the past two or three years, large cap stocks represented by food and beverage, medicine and leading blue chips have occupied the absolute main force, and the overall differentiation of the market is very serious. This year is from February 8 to August 2. Small and medium-sized stocks in the market have risen very much, especially small cap stocks, but the CSI 300 has still fallen significantly. This year is a market with strong style switching.
Zhao Yunyu: according to our current judgment, the market may move towards a relatively balanced state of large and small cap stocks in the future. Make another return from the market that small cap stocks are obviously stronger than large cap stocks this year, and return to the same state on both sides. The reason why small cap stocks are doing well this year is that the company’s profit growth corresponding to small cap stocks is very good. Therefore, the overall fundamentals of this year are that small cap stocks are better than large cap stocks. We expect that large cap stocks and small cap stocks will tend to be balanced by next year.
brokerage China: what are the reasons for the good performance of CSI 500 and CSI 1000 this year?
ye Letian: more fundamental reasons. The profit growth rate of CSI 500 constituent stocks in recent two years is very different from that in previous years. The profit growth rate in previous years was lower than that of CSI 300, and the profit of constituent stocks was a little worse. But this year, first, the support of policies, specializing in the support of special and new policies for small and medium-sized enterprises; Second, the market force. There are many cyclical stocks, new energy companies and some small area leading companies in the CSI 500. The performance in the past two years is very good, and the driving of fundamentals is a very important aspect. On the other hand, the CSI 500 fell a lot before, and the valuation is very low. This year, the fundamentals are relatively good, and the valuation is even lower. Under the dual impetus of valuation and fundamentals, it has a relatively good performance.
Zhao Yunyu: roughly speaking, CSI 300 is the largest 300 companies in the A-share market, CSI 500 is the largest 500 after CSI 300, and CSI 1000 is actually the largest 1000 after CSI 500.
At present, there are more than 4000 stocks in the A-share market. Many people will wonder why the CSI 500 should be the top 800 in the market. Why has it become a small and medium-sized market? This is because the number of large cap stocks in the A-share market is relatively small, but the market value of small large cap companies is particularly large. For example, the median market value of 300 stocks in Shanghai and Shenzhen is about 100 billion; The median market value of the 500 stock companies of CSI 500 is about 20 billion, and the median market value of CSI 1000 is only about 10 billion. From this figure, we can clearly find that CSI 300 is indeed the representative of large cap companies. CSI 500 is small and medium cap as a whole, and CSI 1000 is a pure small cap target.
The reason for the good performance of CSI 1000 this year is very similar to that of CSI 500, and it is also a factor for the superposition of fundamentals and valuation. We can also start from these two perspectives. The profit growth rate of CSI 1000 is higher than that of 300, and it is cheaper than its own valuation. Therefore, the increase of CSI 1000 this year is much higher than that of 300 and 50.
Investor: in terms of industry, is there any segmentation difference between CSI 500 and CSI 1000?
Ye Letian: in the CSI 500 industry, cyclical stocks account for a lot of weight, chemical and nonferrous metals account for some, and the rest are electronics and medicine. The industries are evenly distributed, with the top five industries accounting for 20% and 30%, and the overall industry is relatively scattered. Compared with CSI 1000, the overall market value of CSI 500 will be slightly larger, making its performance sandwiched between CSI 500 and CSI 300.
Zhao Yunyu: from a rough point of view, the industry distribution of CSI 500 and CSI 1000 is very similar. For example, in terms of the proportion of the previous three industries, CSI 500 and CSI 1000 are both chemical, electronic and pharmaceutical industries. It is precisely because of this industry configuration that the performance of the two indexes tend to converge in many times. Although the performance of CSI 500 is between 300 and 1000, in fact, CSI 500 and CSI 1000 are closer. Historically, the correlation between the trend of CSI 500 and CSI 1000 is greater than 90%.
brokerage China: CSI 500 and CSI 1000, which index is more suitable for fixed investment?
Zhao Yunyu: the two core requirements are: the index should have long-term upward momentum; Volatility should be as large as possible.
As for whether there is a long-term growth trend, CSI 500 and CSI 1000 themselves represent a group of enterprises with relatively small market value in the A-share market. As long as China’s economy is developing as a whole, these enterprises with small and medium market value will grow. In the long run, CSI 500 and CSI 1000 must be upward.
Both CSI 500 and CSI 1000 are very suitable indexes for fixed investment. They themselves are the composition of small and medium-sized market capitalization companies. Naturally, the performance fluctuation will be greater than that of large market stocks. Therefore, the index performance may fluctuate more than that of Shanghai and Shenzhen 300 and Shanghai Stock Exchange 50.
differentiated allocation index enhanced, multi factor thickened return
brokerage China: why should ordinary investors pay attention to index enhancement fund products?
ye Letian: different indexes have different dominant management methods. For stocks with large market, especially SSE 50, because there are too few constituent stocks, they have attracted much attention, and the fluctuation is relatively small, so it is very difficult to enhance them. However, for small and medium-sized stocks, especially CSI 500 and CSI 1000, because the coverage of analysts is limited, the effectiveness of information transmission is greatly weakened. In a market with strong market inefficiency, we mine things that are not fully reflected by market information through strengthening, and the efficiency is still very high. Therefore, it is more suitable for small and medium-sized stocks, And the enhancement effect is very prominent.
brokerage China: how does index enhancement operate?
ye Letian: our enhancement is different from the general active fund. We attach great importance to the enhanced stability from the daily frequency and weekly frequency α The stability of the active fund has won 300 this year, and it’s OK to lose next year. It’s OK to win for a few years. We not only want to win every year, but also hope to win every month, even a little every day.
In short, for 500 stocks, I buy more for those who are optimistic, less for those who are not optimistic, or even don’t buy. It forms a differentiated configuration with CSI 500, which brings enhancement.
A professional statement is that we will establish a multi factor stock selection model, one is a risk model, the other is a risk model α Model, risk model is mainly tracking error. Quantification is unique to enhancement. The risk model mainly ensures that our style is consistent with the industry index itself. For example, the market value of the top three industries of CSI 500 index, chemical industry, electronics and medicine, is less than CSI 300 and more than CSI 1000. The market value distribution of our enhancement index is also less than CSI 300 and more than CSI 1000, so as to ensure that the overall performance is particularly close to CSI 500. This is also very different from the initiative. The industry and market value will not deviate and will not make active choices.
The stock selection model mainly scores stocks through multiple dimensions. Popular understanding is like the paper for stocks, including mathematical problems, physical problems and chemical problems. Each paper has a total score to synthesize a final total score, and then judge the quality of individual stocks. We are also divided into three categories of factors: Fundamentals, emotions and technology. Our factors are very rich. Our analysis of individual stocks is much more comprehensive than that of individuals, and the amount of data used is much larger, which is also the role of quantification. After scoring individual stocks, we get an optimization result through the optimization model. There is no manual intervention. The warehouse adjustment program is also a process of algorithmic trading. On the whole, it is more procedural and quantitative overall logic. Through the multi-dimensional decentralized approach, we try to make us stable and enhanced, which is the effect we have been pursuing.
Investors: what indicators should ordinary investors pay attention to when choosing index enhancement funds?
Zhao Yunyu: looking at the market this year, the overall return of active stock funds may not be as good as the passive CSI 500 index. First of all, I suggest you pay more attention to index products. Why choose index enhancement? At present, on the whole, those who enhance the index on A-Shares can still obtain good excess returns, that is, on the whole, they can beat the index with great probability every year.
How to choose index enhancement? The core of index fund is the index itself. First of all, we should determine what is the purpose of buying index fund. If you are optimistic about China’s economy as a basic configuration, you can come to CSI 300, CSI 500 and CSI 1000 as a uniform configuration of small and medium-sized stocks. On this basis, choose enhanced products. Whether the enhancement is good or not depends on whether it really outperforms the index; The second is to see whether it outperforms the index.
the cross year market opens and tends to be balanced as a whole
brokerage China: what changes will the popularization of quantitative investment bring to the future market?
ye Letian: the biggest change should be the significant improvement of market effectiveness. Quantifying and patching the market from various angles is equivalent to selecting which factor is effective and using it until it is invalid. Eventually, the excess return of individual stocks selected by any stock selection index will be average, which greatly improves the effectiveness of the market. Through the algorithm, you will find many factors that affect the stock in real time that you can’t feel, which will greatly improve the effectiveness and increase the market liquidity.
brokerage China: how to look at the cross year market? What is the market situation in 2022?
Zhao Yunyu: we think that in the short term, large cap stocks are relatively performing well. First, the concept of stable growth has been put forward, which makes us have more expectations for large cap stocks. Therefore, I am relatively more optimistic about the market in the new year. From the perspective of the industry, we will be more optimistic about the new infrastructure sector as a whole, including communication and some science and technology sectors. From the current point of time, the valuations of CSI 500 and CSI 1000 are still not high and are below the historical median. We judge that the overall profit trend of large and small markets will tend to be balanced in the future, rather than the large market is better than small and medium-sized markets. Both have opportunities.
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(brokerage China)
