Key investment points:
In terms of overseas epidemic development, although the case growth rate of Omicron variant virus is amazing, it has lower mortality and less occupation of medical resources than “delta”. Its relatively mild characteristics and the continuous listing of covid-19 oral drugs weaken the impact of Omicron variants on the risk appetite of global capital markets, and the risk appetite will rise steadily.
In the macro aspect, the promotion of price stabilization and supply guarantee measures in the third quarter and the gradual easing of the problem of “core shortage”, the inhibitory effect of the supply side on the economy continued to ease, but the problem of sluggish demand is still significant. In terms of regulation and control policies, weak economic month on month expansion combined with high base impact will make the economy face greater growth pressure in the first half of 2022, and the strong demand for stable growth will continue to promote the care policy. The retention of fiscal surplus in 2021, the post issuance of special bonds and the pre issuance of special bonds in 2022 provide necessary financial support for Kuan finance. The promotion of major projects in the 14th five year plan makes the formation of physical quantity possible, and the recovery of the growth rate of new and old infrastructure investment has become an important focus of stabilizing demand.
In terms of liquidity, the reduction of reserve requirement and interest rate shows the caring attitude of monetary regulation towards stable growth. Although the reduction of reserve requirement and interest rate is still expected to be put into use again in 2022, the use of refinancing and other tools will not only undertake the task of structural adjustment, but also become an important starting point for stabilizing total supply. In terms of capital, under the structural market, the pace of capital mobilization is still relatively slow. In addition, northbound funds are expected to return to their normal inflow rhythm after the management strictly controls the short-term fluctuations caused by “fake foreign capital”.
In the A-share market, the performance of both index level, industry level and individual stocks showed strong characteristics of making up for rise and fall in December. In January, the return of overseas risk appetite and the easing of China’s liquidity pressure created good external conditions for the A-share market. The A-share market has also entered the vacuum stage of economic data and performance, superimposing valuation switching and other factors. We believe that the market has entered the game stage, and we are not pessimistic about the performance of the index in January.
At the style level, after the Spring Festival over the years, the market style will generally be dominated by small and medium-sized stocks; In the years with small and medium-sized stocks as the main line before the Spring Festival, the style of small and medium-sized stocks will continue after the Spring Festival. Considering that the current market style is dominated by small and medium-sized stocks, and from the performance side, the performance of small and medium-sized stocks represented by China Securities 500 in the third quarter is superior to that of Shanghai and Shenzhen 300. At the same time, on the valuation side, the current valuation level of China Securities 500 is below the average level since 2015, the valuation is not expensive and the performance is acceptable, so the market of small and medium-sized stocks is expected to continue.
In terms of industry allocation, in addition to continuing the recommendations on the two main lines of trend continuation and dilemma reversal in the annual report, based on the retrospect of the performance of various industries in the past cross-year market, we suggest to focus on the industries with the lowest marginal improvement, and observe the possibility of taking off in the first quarter of 2022 after “squatting” in the fourth quarter of 2021. Specifically, we can focus on steel, real estate industry chain including building materials and architectural decoration, big finance including banks and securities companies, and consumer sectors including household appliances, medicine and biology, food and beverage and leisure services.
Risk tip: the economic downturn exceeded expectations, and the policy promotion was less than expected.
