1. The style rotation of large and small discs is not frequent. From the perspective of long-term cycle, there are four stages of rotation of large and small discs since 2000. In the 20 Hualan Biological Engineering Inc(002007) Years, the style of the market was dominant, and the style of small sectors was dominant in the 20082015 years. The style of the market was dominant in the 20162020 years. Since the Spring Festival of 2021, the small sector style has started to win again, and the three turning point corresponds to the three high points of the Shanghai and Shenzhen 300 index. After the market bubble is the big switch of style. The trend and stage of economic operation, the direction of industrial policy support, the cycle of M & A and the phased characteristics of stock market operation jointly determine the rotation of large and small market style.
2. Valuation rather than performance is the core factor that dominates the long-term cycle of large and small stocks. The trend and stage of economic operation provide the background of large and small disk rotation. When the economic operation is stable or in the upward trend, the overall market style is biased towards the large market. When the economic fluctuation is increased or in the rapid downward period, the small market style is dominant; Macro and industrial policy orientation is the core of raising valuation. In a long period of time, policies focusing on emerging industries or traditional industries will bring completely different market style interpretation; The change of M & a cycle can also explain the rotation of large and small stocks from 2010 to 2018, but the explanatory effect is weakening.
3. In the stage when the long-term small cap is dominant, the phased tangential market often occurs before and after the steady growth policy. The improvement of market expectations and the substantive stabilization of the economy are the main reasons driving the rebalancing of style. In typical periods, such as October 2011 to January 2012, September 2012 to January 2013 and October 2014 to January 2015, the stronger the steady growth is The more obvious the trend of economic stabilization and recovery is, the smaller the market is, but it will return to the pattern of small market dominance after phased switching.
4. At the stage when the long-term market is dominant, the phased tangential small cap is mainly due to the changes in economic expectations caused by the impact of risk events, and the decline of large cap stocks. The phased favorable policies for emerging industries or small and medium-sized enterprises can also drive the style to switch from the large cap to the small cap. Typical periods are February 2018 to April 2018, November 2018 to March 2019, and November 2019 to March 2020, However, the sustainable small cap stock market needs the guarantee of performance, and it will return to the dominant pattern of the market after the phased switching.
5. Since the beginning of this year, the size of the market has been in a seesaw state. In the medium and long term, it is the general trend that the small market is dominant, and the market value dimension still needs to sink. In the short term, the interpretation of the steady growth policy and the stabilization and recovery of the short economic cycle support the large cap stocks. However, it should be noted that the current valuation quantile of the large cap is still significantly higher than that of the small cap, and the valuation quantile difference has reached 60% in recent five years. Referring to past experience, this quantile difference means that the small cap style is difficult to significantly outperform the large cap. According to comprehensive judgment, the style of large and small sectors is expected to be relatively balanced this year, and the price comparison between large and small sectors is in a pattern of top and bottom.
Abstract
1. The style rotation of large and small discs is not frequent. From the perspective of long-term cycle, there are four stages of rotation of large and small discs since 2000. In the 20 Hualan Biological Engineering Inc(002007) Years, the style of the market was dominant, and the style of small sectors was dominant in the 20082015 years. The style of the market was dominant in the 20162020 years. Since the Spring Festival of 2021, the small sector style has started to win again, and the three turning point corresponds to the three high points of the Shanghai and Shenzhen 300 index. After the market bubble is the big switch of style. The trend and stage of economic operation, the direction of industrial policy support, the cycle of M & A and the phased characteristics of stock market operation jointly determine the rotation of large and small market style. The large market style is mainly composed of Finance and consumption, which is highly correlated with the economic cycle, while the small market style industry distribution is relatively scattered, focusing on growth and cycle, with large performance and stock price elasticity and relatively strong growth attributes. In the four stages of long-term rotation of large and small stocks since 2000, large and small stocks have won alternately. Since the Spring Festival last year, small stocks have won. The three style inflection points since 2000 coincide with the three phased highs of the Shanghai and Shenzhen 300 index. The core of the long-term rotation of large and small stocks is the trend and stage of economic operation. China’s economy has roughly experienced four periods: the period of rapid economic growth driven by investment, “the lower stage of economic growth led by the post-4 trillion” transformation policy, the period of steady economic development under the background of supply side structural reform, and the period of economic trend decline in the current post epidemic era. Industrial policies in different periods have different emphases, which can be roughly divided into two directions: reforming traditional industries and developing emerging industries. In addition, the relaxation and tightening of M & A policies are related to the rotation of large and small disk styles. It is worth noting that the loose and tight macro policies have a relatively limited impact on the long-term rotation of large and small disk styles, and the liquidity environment is not the core factor to judge the long-term rotation of large and small disk styles.
2. The trend and stage of economic operation are the core factors of large and small disk rotation. When the economic operation is stable or in the upward trend, the overall market style is biased towards the large market. When the economic fluctuation increases or in the rapid downward period, the small market style is dominant; Macro and industrial policy orientation is also very important. In a long period of time, policies focusing on emerging industries or traditional industries will bring completely different market style interpretation; The change of M & a cycle can also explain the rotation of large and small stocks from 2010 to 2018, but the explanatory effect is weakening. In terms of economy, during the economic boom period from 2000 to 2007, large cap stocks dominated; From 2008 to 2015, the economic growth rate went down rapidly, and the small cap performance was dominant at this stage; From 2016 to 2020, the economic downturn slowed down, there was a long recovery cycle, and the market style turned to the market again; Since the Spring Festival last year, the economy has resumed its downward trend and the style has shifted to small cap. In terms of policy, optimizing the traditional industrial structure and developing strategic emerging industries are the two major directions of industrial policy. In the incremental stage, policies tend to support the development of emerging industries, such as the strategic emerging industry policy after the stimulus of RMB 4 trillion and the “specialized and special new” promoted last year. When mapped to a shares, the small cap style is dominant. In the stage of changing the stock, the policy pays more attention to the optimization and quality improvement of traditional industries. For example, from 2000 to 2007, it paid attention to the optimization and upgrading of traditional industrial structure, and launched the supply side structural reform in 2016. Under this background, the market style is dominant. At the same time, the M & a cycle is related to the rotation of large and small disk styles. During the period of loose M & A policies from 2013 to 2015, the small cap style had significant advantages. From 2016 to 2018, the M & a market entered the tightening stage, the small cap was damaged, and the large cap style outperformed significantly. After 2018, the M & a policy continued to be in a loose cycle, and the explanatory effect of large and small disk rotation became weaker.
3. In the stage when the long-term small cap is dominant, the phased tangential market often occurs before and after the steady growth policy. The improvement of market expectations and the substantive stabilization of the economy are the main reasons driving the rebalancing of style. In typical periods, such as October 2011 to January 2012, September 2012 to January 2013 and October 2014 to January 2015, the stronger the steady growth is The more obvious the trend of economic stabilization and recovery is, the smaller the market is, but it will return to the pattern of small market dominance after phased switching. The three periods of rebalancing of the market style from 2010 to 2015 usually last for about a quarter, and there are traces of steady growth in the background. The end of 2011 and the end of 2014 are in the force stage of the steady growth policy. Although the economy is still in a downward trend, with the gradual easing of monetary and fiscal policies, the expected marginal improvement of the market on the economy.
The style rebalancing phenomenon at the end of 2012 was based on the stabilization and recovery of China’s economy. The PMI index continued to rise in the fourth quarter of 2012, and the financial sector represented by banks rebounded sharply, driving the phased dominance of the market style. After rebalancing, the market style returned to small cap under the environment of falling economic growth and rising relative prosperity of emerging industries.
4. At the stage when the long-term market is dominant, the phased tangential small cap is mainly due to the changes in economic expectations caused by the impact of risk events, and the decline of large cap stocks. The phased favorable policies for emerging industries or small and medium-sized enterprises can also drive the style to switch from the large cap to the small cap. Typical periods are February 2018 to April 2018, November 2018 to March 2019, and November 2019 to March 2020, However, the sustainable small cap stock market needs the guarantee of performance, and it will return to the dominant pattern of the market after the phased switching. The three periods of rebalancing of small cap style from 2016 to 2020 usually last for 1-2 quarters. There are roughly two types of situations. One is that the impact of risk events leads to changes in economic expectations. For example, the upside down of US bond interest rates from February 2018 to April 2018, the opening of the Sino US trade war, and the outbreak of covid-19 epidemic from January 2020 to March 2020 all lead to a sharp decline in economic expectations and the make-up decline of large cap stocks, Small cap stocks were relatively resilient. Second, when the policy is good for small and medium-sized enterprises, the small cap style with low valuation shows a make-up market. For example, the private enterprise rescue policy was intensively implemented in the fourth quarter of 2018 and the refinancing policy was fully relaxed in the fourth quarter of 2019. During these two periods, small and medium-sized enterprises with low valuation have ushered in valuation repair, and the small cap style is dominant in stages. It is worth noting that the sustainable small cap stock market needs the guarantee of performance, and will return to the dominant pattern of the market after periodic rebalancing.
5. Since the beginning of this year, the size of the market has been in a seesaw state. In the medium and long term, it is the general trend that the small market is dominant, and the market value dimension still needs to sink. In the short term, the interpretation of the steady growth policy and the stabilization and recovery of the short economic cycle support the large cap stocks. However, it should be noted that the current valuation quantile of the large cap is still significantly higher than that of the small cap, and the valuation quantile difference has reached 60% in recent five years. Referring to past experience, this quantile difference means that the small cap style is difficult to significantly outperform the large cap. According to comprehensive judgment, the style of large and small sectors is expected to be relatively balanced this year, and the price comparison between large and small sectors is in a pattern of top and bottom. From the perspective of long-term cycle, since the Spring Festival in 2021, the market has been in a new round of long-term dominant pattern of small and medium-sized stocks. The downward trend of economic growth after the epidemic and the shift of the focus of industrial policy to “seeking increment” are in line with the conditions for the dominant market value style of small and medium-sized stocks under the long-term cycle. From the perspective of short cycle, the phenomenon of phased shift of market style to the market often occurs before and after the steady growth policy. In 2022, under the background of the steady growth policy, the gradual stabilization of the economy may lead to the phased shift of the market style to the market. However, it is worth noting that the current market valuation quantile is still significantly higher than that of the small market, and the valuation quantile difference has reached 60% in the past five years, which means that the market style is difficult to significantly outperform the small market. According to comprehensive judgment, the style of large and small sectors is expected to be relatively balanced this year, and the price comparison between large and small sectors is in a pattern of top and bottom.
Risk tip: the limitations of comparative research, the market facing unexpected external shocks, drastic changes in the market operating environment, etc.
