core conclusion: ① CSI 300 has experienced five rounds of decline. Referring to history, the time and space of this adjustment has been significant, and the market valuation is at the medium and low level since 2013. ② There is little negative feedback pressure on Funds: the proportion of leveraged funds is not high, the net redemption of funds is not obvious, and the funds going north will flow out in the short term, but will still flow in the medium and long term. ③ The market fluctuated throughout the year. The callback in the past two months has left room for the subsequent market to focus on value and growth attacks, such as photovoltaic wind power and data center cloud computing.
has the market been fully adjusted
Since this year, the A-share market has continued to adjust, especially the recent sharp decline in the market. On March 9, 2022, Shanghai and Shenzhen 3 million and wandequan a once fell by nearly 5%. There was an obvious panic in the market. Fortunately, the decline narrowed sharply in the afternoon and rebounded from March 10 to 11. However, there was another sharp fluctuation on March 11, and the market seemed to be in shock. Is this round of adjustment sufficient? This report will discuss this topic.
1, reference history, the adjusted space-time has been significantly
compared with history, the time and space of the current round of adjustment of Shanghai and Shenzhen 300 have been obvious we review that since 2005, CSI 300 has experienced four complete cycles of ups and downs. See Table 1 for the specific time and space of ups and downs In terms of adjustment time, the average number of rising months of CSI 300 in the past four rounds of rising range is 21.0 months, and the average number of falling months in the falling range is 11.6 months. The number of falling months is about 0.5 of the number of rising months. The rising month of CSI 300 in 2019 / 1-2021 / 2 is 25.5 months. Since 2021 / 2 (as of 2022 / 3 / 11, the same below), it has fallen for 13 months, with a ratio of 0.51 From the perspective of adjustment space, the decline points of CSI 300 in the past four rounds of decline range are 0.7 ~ 0.8 times the increase points, while the increase points of CSI 300 from 2019 / 1 to 2021 / 2 are 2995 points, and the decline points since 2021 / 2 are 1863 points, with a ratio of 0.62 Moreover, by further analyzing the adjustment range of CSI 300 in the past four rounds of decline, we can find that the decline range of CSI 300 gradually narrowed, from 73% to 47%, 48%, and then to 33%, which is related to the partial institutionalization of the structure of A-share investors. Similar to the era of equity investment and financing opened in the 1980s in the United States, the proportion of institutional investors increased by cultivating institutional investors and introducing long-term funds, So as to promote the continuous improvement of the market center and gradually narrow the fluctuation. Compared with history, the time and space of the CSI 300 adjustment has been very obvious.
the current A-share valuation is at a historically medium low level first of all, the current CSI 300 valuation is at a historical low. As of March 11, 2022, the PE (TTM, overall method, the same below) of CSI 300 is 12.4 times, which is at the 48% quantile from low to high since 2013, and the Pb (LF, overall method, the same below) is 1.51 times and 50% quantile. Due to the rapid adjustment of China’s economic structure in recent years, the composition of CSI 300 has changed greatly. If calculated according to the initial composition at the beginning of 2013, the PE of CSI 300 is 9.8 times, which is in the 18% quantile from low to high since 2013, and the Pb is 1.24 times and 2% quantile. Secondly, if we look at all a shares, as of 2022 / 3 / 110000, the total a PE is 17.7 times, in the 42% quantile from low to high since 2013, Pb is 1.79 times and 40% quantile, and the historical quantile of PE in 73% of A-share industries is below 50%, and 60% of industries is less than 20%. Finally, as of March 11, 2022, the dividend yield of CSI 300 / 10-year Treasury bond was 0.78, and the average value of this ratio since 2013 was 0.71, which is currently in the historical quantile of 28% from high to low. The risk premium rate is measured by the reciprocal of all A-share PE minus the yield of 10-year Treasury bonds. As of 2022 / 3 / 11, the index was 2.87%, while the average value of the index since 2013 was 2.37%, which is currently in the historical quantile of 32% from high to low.
from the perspective of profit growth, the current point of CSI 300 is similar to 2935 at the beginning of 19 let’s think from another angle. In the long run, the increase of stock price reflects the growth of fundamentals. If we only consider the fundamentals of listed companies, and do not consider emergencies such as war, conflict and natural disasters, we can calculate the approximate position of index points according to the growth rate of index earnings. Taking the CSI 300 index as an example, in 2018, A-Shares fell as a whole, reaching a low of 2935 points on January 4, 2019. At that time, the market sentiment was relatively low and the index valuation was at a historical low. Therefore, if 2935 points were multiplied by the profit growth rate, the CSI 300 was calculated to be similar to the low level at the beginning of 19. In earnings: better market and middle and lower reaches – 2022 A-share outlook series 220211215, we predict that the parent net profit of CSI 300 will increase by 7% year-on-year, so we can get that the annualized growth rate of parent net profit of CSI 300 from 19 to 22 is 9.3%. If the index increases at the same compound growth rate, we can roughly deduce that the point of CSI 300 is almost the same as now.
2, funds have little negative feedback pressure
According to the previous analysis, compared with history, combined with valuation and profit growth, the time and space for the adjustment of CSI 300 has been more significant. However, some investors are worried that this adjustment may trigger negative feedback of funds and lead to market oversold. Let’s analyze this from the perspectives of leveraged funds, fund redemption and northbound funds.
at present, there is little pressure on A-share leveraged funds one of the factors that may trigger the negative feedback of stock market funds is financing transactions. We have counted and compared the two financial highs and lows before and after market adjustments from July 15 to the end of January 16, January 18 to the beginning of early 19, January March 20, February March 21 and December 21. On the whole, before and after the previous adjustments, the proportion of the balance of the two financial institutions in the circulating market value of A-Shares and the proportion of the transaction volume of the two financial institutions in the transaction volume of A-Shares have gradually decreased, and the fluctuation range of the two financial institutions has also weakened during the previous adjustments. Specifically, from the perspective of the balance of the two financing, in the first four rounds of adjustment, the high point of the balance of the two financing accounts for about 2.5% of the circulating market value of A-Shares (except that it reached 4.7% from July 15 to the end of January 16), and the low point is usually about 2.2%. During the current round of adjustment, the high point of the balance of the two financing accounts for 2.5% of the circulating market value of A-Shares and the low point is 2.4%, with little fluctuation; From the perspective of the transaction volume of the two financial institutions, in the first four rounds of adjustment, the high point of the balance of the two financial institutions in the proportion of the circulating market value of A-Shares is mostly about 11% (except for the round from July 15 to the end of January 16, which is more than 20%), and the low point is usually 7-8%. During this round of adjustment, the high point of the transaction volume of the two financial institutions in the proportion of the transaction volume of A-Shares is only 8.0%, the low point is only 6.4%, and the decline is also decreasing.
Therefore, compared with history, the current A-share leveraged funds have little pressure.
the net redemption of public funds is not obvious another factor that may trigger the negative feedback of stock market funds is fund redemption, because if there is a large-scale redemption, it may lead to stock selling. We analyze the application and redemption of funds from two perspectives: first, the data of high-frequency ETFs. The shares of SSE 50 and CSI 300 ETFs dominated by institutional investors change in reverse with the corresponding broad-based index, which means that institutional investors are always “buying low and selling high”. The relationship between the share of China concept Internet ETF dominated by individual investors and the corresponding index has changed in the last year: when the Hang Seng technology index fell in 18 years, the share of China concept Internet ETF fell, but after the Hang Seng technology index fell in February 21, the share of China concept Internet ETF accelerated upward, and individual investors began to “fall and buy”; The second is the time lag data of public fund shares. In the past three years, the market has retreated three times, namely, the impact of the global epidemic in March of 20 years, the sharp decline of core assets in February of 21 years and the sharp decline of growth stocks since December of 21 years. In these three market declines, the fund has not been redeemed. In March of 20 years, the fund made a net subscription of more than 100 billion yuan, in March of 21 years, and in January of this year, the fund made a net subscription of more than 100 billion yuan. In contrast, in 2018, whether from the annual level or the monthly level, the fund was net redeemed when the market fell. This is because in the past, individual investors often regarded the stock market as a short-term trading market. When the market fell, investors would choose to redeem funds and buy real estate and high-yield products instead. Over the past three years, the background of residents’ asset allocation has undergone profound changes. The new asset management regulations have led to the demise of high-yield rigid exchange products, the change of population age structure has led to the decline of real estate allocation demand and the rise of residents’ medium and long-term allocation demand for rights and interests. In contrast, there may be selling and position reduction of absolute income products and accounts in the near future, such as bank financial outsourcing, pension, annuity, some private placement products, etc., which is related to the requirements of control withdrawal of the product itself.
northbound capital does flow out in the short term and is expected to flow in the medium and long term in addition to leveraged funds and fund redemptions, large outflows of foreign capital often disturb a shares. As of March 11, 2022, the net outflow of funds from northbound in March reached 34.1 billion yuan, with a cumulative outflow of 13.3 billion yuan since the beginning of the year, which raised the concern of investors about the withdrawal of foreign capital from a shares. Looking back on the inflow in recent years, there were several monthly net outflows of funds going north in 2018 and 2019 due to Sino US trade frictions and other factors. In March 2020, covid-19 epidemic spread and overseas stock markets fluctuated sharply, resulting in a significant outflow of 67.9 billion yuan of funds going north in the current month. There was another wave in Sino US relations in the second half of 2020, and there was another significant outflow of funds going north from August to September. Although there have been many monthly net outflows of northbound funds, if we look at the year, from the opening of Shanghai Hong Kong stock connect in 2014 to 2021, northbound funds have been net inflows into A-Shares every year, it can be seen that the monthly net outflow in that year does not affect the trend of foreign capital inflows into a shares. For a long time, the inflow of foreign capital into A-Shares is a long-term trend with great certainty. With the rapid increase of the importance of China’s economy in the world, the market value of A-share listed companies in the global capital market will also rise to 13% in 2020. However, the proportion of A-Shares in the global portfolio is still very low. For example, MSCI acwi index is the benchmark tracked by many overseas passive funds. After the latest adjustment of MSCI, the weight of A-Shares is only 0.4%, and the weight of Chinese stocks other than A-Shares is 3.6%. In addition, we can also see the positions of large global investment institutions. For example, the investment management company of the Norwegian central bank is one of the world’s largest sovereign funds. According to its latest disclosed data, Chinese listed companies account for only 3.8% of their stock portfolio.
3, open the rising space after callback
year-round shocks the market, opening up room for rise after the correction we put forward in “Qu Zequan, waste is straight – China’s capital market outlook 202220211211” that “2022 is a rest in the bull, a stage of shaking the market and gaining momentum”, “Looking forward to 22 years: our three special judgments – 20211219” further points out that “the market amplitude will increase… If the stock fund index returns to the historical average next year, the increase of the fund index from now to the end of next year will be about – 6%, and investors need to reduce the expectation of annual return.”. The stock index of Shanghai and Shenzhen has fallen by less than 13% in the past quarter, and it has fallen by less than 1% this year. Compared with December last year, the factors leading to the market decline exceeding expectations mainly come from the periphery. Specifically, the first is the Fed’s expectation of raising interest rates. The number of expected interest rate increases in 2022 implied by interest rate futures (calculated by 25 BP per interest rate increase) has risen from 2-3 times in December last year to the highest 6-7 times in February this year. From the performance of various assets, the US bond interest rate has continued to rise in the past three months, the US dollar index has strengthened, and the US stock market has adjusted at a high level, which shows that the impact of the Fed’s interest rate hike on a large number of assets has been reflected. The second is the conflict between Russia and Ukraine. Since Russia officially declared war on Ukraine on February 24, global stock markets fell sharply and commodity prices soared in the short term. In the recent week, European and American stock markets stabilized. Germany’s DAX index rose by 4.1%, France’s CAC40 index rose by 3.3%, Britain’s FTSE 100 index rose by 2.4%, Brent crude oil fell by 13%, and the impact of the conflict between Russia and Ukraine on risky assets may weaken. With the gradual fading of external disturbance factors, we believe that internal factors will become the positive energy affecting the trend of a shares. The shock pattern of the whole year and the correction in the past two months have left room for the subsequent market. In the “two sessions”, the government work report put forward that the annual GDP growth target is about 5.5%, which is the upper edge of the market expected value of 5-5.5%. The relevant steady growth policies continue to work. Specifically:
In terms of monetary policy, the government work report proposes to strengthen the implementation of prudent monetary policy and expand the scale of new loans. In the early stage, the central bank lowered the interest rates of MLF, SLF and LPR. After the “good start” of financing in January, the performance of social financing and credit data in February became significantly weaker. However, combined with the data in January, the total amount of social financing from January to February is still stable, and the sustainability of credit expansion needs to be observed. Considering the annual GDP growth target of about 5.5%, the policy focus this year is “stable growth”. The current situation of credit expansion is less than expected, which may mean that the overweight certainty of policies in all aspects is higher. In terms of fiscal policy, the government work report proposes to improve the efficiency of active fiscal policy. The scale of fiscal expenditure is more than 2 trillion yuan larger than that of last year. Superimposed on the fiscal funds retained last year, there is plenty of fiscal space this year. On March 8, the central bank released a news that “this year, the people’s Bank of China turned over the balance profits to the central government according to law, with a total amount of more than 1 trillion yuan, which is mainly used to offset tax rebates and increase transfer payments to local governments”. This more than 1 trillion yuan is targeted to help finance, equivalent to increasing the deficit ratio by nearly 0.9 percentage points, which fully reflects the enthusiasm of finance, The next infrastructure investment is worth looking forward to. In terms of real estate policy, the report proposes to continue to ensure the housing needs of the masses. At present, local real estate policies tend to relax. On March 4, the China Banking and Insurance Regulatory Commission and the people’s Bank of China issued the notice on strengthening the financial services of new citizens, which clearly supports the financial needs of 300 million new citizens to live in peace.
focus on Value: the valuation of bank real estate is low, and the potential of securities companies is greater in late November last year, we put the value sector represented by financial real estate in the first tier. During this period, financial real estate also ran out of excess returns. Shenwan real estate index bottomed out and rebounded from 2021 / 11 / 2. So far (as of 2022 / 03 / 11, the same below), the increase is 0.17% (compared with the excess return of Shanghai and Shenzhen 300 is 16 percentage points, the same below), and the maximum increase during the period is 22.4%, The Shenwan bank index has bottomed out and rebounded since 2022 / 1 / 4, with an increase of – 1.3% (12 percentage points) so far, with the largest increase of 10.1% during the period. Looking back on history, there have been six times that the financial real estate sector has run out of excess returns relative to the market since 2010 (see Table 3 for details). Among them, the average excess return of banks relative to CSI 300 is 18 percentage points and that of real estate is 20 percentage points. It can be seen that the excess return of banks and real estate has been more obvious at present. However, at present, the overall valuation of the large financial sector is still at the bottom. At present (as of March 11, 2022, the same below), the Pb (LF) of banks is 0.62 times (0.2% from low to high since the beginning of 2013), the real estate is 0.99 times (1.7%), and the securities are 1.34 times (7.2%), and the over allocation proportion of fund positions relative to Shanghai and Shenzhen 300 is low. Undervalued and low configured banks and real estate may continue to rise in the future, but there may be little room for excess returns, while the brokerage index has no absolute and relative returns at present. At the moment, we believe that we should pay attention to securities companies in big finance. Securities companies benefit from policies and make good profits: from the central economic work conference in December 2021 to the system work conference of the CSRC in January 2022, the central conferences have repeatedly mentioned the goal of fully implementing the registration system. This government work report mentioned again that we expect the full registration system to accelerate its implementation. As of March 12, 2022, a total of 22 A-share securities companies have disclosed their performance in 2021, accounting for 46% of all listed securities companies. The total net profit attributable to the parent company of these companies has reached 100.4 billion yuan, an increase of 41% over 2020.
growth attack: low carbon economy, digital economy under the catalysis of policies and performance, growth is expected to gradually dominate. However, there will be differentiation within the growth industry. Combined with the fundamental differences, policy support and early performance of the current growth industry, we believe that the next low-carbon economy, wind power, photovoltaic, UHV, cloud computing and data center in the digital economy deserve attention.
low carbon economy, focusing on wind power, photovoltaic and UHV in “where are the highlights of stable growth in infrastructure? – 20220113”, it is proposed that China’s new infrastructure policy this year is expected to work hard. Under the “double carbon” goal, the construction of Fengguang large base is accelerated, which is expected to drive trillion investment. New power grid facilities such as UHV are also being constructed. ① Wind power and photovoltaic: the new infrastructure represented by wind power and photovoltaic is an important driving point of the current steady growth policy. According to the prediction of new analysts of Haitong power, the new installed capacity of wind power in China is expected to be more than 71gw in 2022, with a year-on-year increase of about 50%. The new installed capacity of photovoltaic in China is expected to reach 80gw in 2022, with a year-on-year increase of more than 50%. The latest annual report or performance express also verified the high prosperity of wind power PV. The cumulative net profit attributable to the parent company in Tongwei Co.Ltd(600438) 2021 was 127% year-on-year, Tianjin Zhonghuan Semiconductor Co.Ltd(002129) was 269% and China Three Gorges Renewables (Group) Co.Ltd(600905) was 56%. ② UHV: the construction of China’s scenery base projects has been started one after another, giving birth to the new demand for UHV. At the same time, UHV is also an important driving force for the construction of new infrastructure. According to China Energy News quoted by China first finance and economics, the State Grid UHV investment plan during the 14th Five Year Plan period is 380 billion yuan, which may become an important structural increment of power grid investment.
digital economy, focusing on cloud computing, data center, etc in “expanding and strengthening the digital economy: what areas deserve attention? – 20218”, we proposed that according to the “14th five year plan” for the development of digital economy, the CAGR of the added value of the core industries of digital economy is expected to reach 14.1% in 20-25 years ① Cloud Computing: “computing from east to west” requires collaborative construction between data center and network, cloud computing and big data. With the support of policies, China’s cloud computing may develop rapidly. According to the white paper on cloud computing issued by China Academy of information and communications, the scale of cloud computing market will exceed 100 billion yuan at the end of the 14th five year plan, and the annual compound growth rate will be as high as 36.8% in the period of 22-25 years ② data center: in February, the national development and Reform Commission and other departments jointly issued a notice and agreed to start the construction of eight national hub nodes of the great computing power network in Beijing, Tianjin, Hebei and the Yangtze River Delta, marking the full start of the project of “computing from the east to the west”. We expect that by the end of 2023, the average annual growth rate of the national data center rack scale is expected to remain at about 20%. According to the prediction of China information and Communication Research Institute quoted by the economic reference daily, the investment in the data center industry may reach 1.4 trillion yuan in the next three years.
risk warning: the conflict between Russia and Ukraine worsened, affecting the global economy and inflation.
