/ core view /
Looking back on the past 2021, the overall fluctuation of the index hit a record low, but the rotation of the main line accelerated and the market value style significantly sank. The small market value outperformed the large market value by nearly 30 points in the whole year. Towards 2022, can xiaopiao continue to maintain its strength since 2021? How should the spring market layout after the new year?
sinking market value is the core feature of A-Shares in 2021
In the report “year-end market of A-Shares in 2021” before New Year’s day, we put forward seven highlights that we must know about A-Shares in 2021. Among them, the sinking of market value is the core feature of A-Shares in 2021. Although there was a turnaround around the fourth quarter, the small market value factor outperformed the large market value by nearly 30 points throughout the year. Near the end of the year, the relative growth of value continues to pick up, and the style of large and small discs also tends to be balanced. Towards 22 years, how will the style of large and small discs be interpreted?
Who decides the excess return of small ticket?
On the style of large and small plates, after combining the historical experience at home and abroad, we can generally draw several conclusions:
（1） Prosperity is the fundamental variable that determines the style of large and small markets. In the final analysis, enterprise value is determined by performance growth. Behind the strength of the trend of large and small markets in the past, it is the result of the action of fundamental trends. From the experience of US stocks, this conclusion is also true. The relative trend of EPS determines the interpretation of the style of large and small US stocks.
（2） The allocation cost performance of the large market is an important variable affecting the excess return of the small market. Especially in the valuation cycle of large cap stocks, the excess return of small cap stocks is particularly obvious (except for 18 years). The continuous killing of core assets since 2021 is also an important reason for the small cap to win.
（3） The type of incremental funds also determines the strength of large and small markets to some extent. Since 2021, the capital game pattern has changed from “lying win” to “inside roll”, and the demand for small ticket mining has been significantly enhanced, which has directly driven the sinking of market value style since 2021.
the next half year is the balance period of style, and the market is expected to return
first, in the next six months, whether it is the top-down estimation or the correction based on the individual stock profit expectation, A-Shares are in the profit downward cycle from 2021q4 to 2022q2, and the marginal change of performance begins to tend to the market. secondly, since 2021, institutional conglomerates have continued to kill the valuation, and now it has fallen back to five years. From the perspective of the relationship between valuation and profit, the valuation of traditional core assets (excluding institutional group stocks of new energy and semiconductor) deviates from the profit expectation, and has medium-term allocation value at this stage. moreover, as the main incremental force in 2021, the probability of public offering and private placement continuing to exceed the expected admission in 2022 is decreasing. On the contrary, allocated funds (venture capital) may have a marginal positive contribution in 2022.
In conclusion, the significant excess return of small ticket in 21 years is driven by variables such as profit cycle, market price performance ratio and incremental funds, and these conditional variables are reversing in the medium term in the future. Therefore, perhaps from the dimension of longer cycle, small ticket can still continue to create excess; However, in the next six months, it should be the balance period of size and style, and we should pay more attention to the return of the market.
core conclusions and strategy suggestions
reiterate that weakening restless expectations, returning to fundamental pricing and steady growth are the core beta of the spring market. at the beginning of the year, the probability of “a good start” of incremental funds exceeding expectations is decreasing, the previous spring is restless, the logic of pure risk preference improvement is weakening, and the credit conditions are about to be stabilized in a real sense. The m1-ppi scissors gap will be repaired upward to continue to be optimistic about the spring market of 22 years, and steady growth is the largest beta main line in the next quarter. （1） Continue to be optimistic about the repair of value stocks in the medium term, and recommend food and beverage, high-quality developers, banks and power operations; （2） New and old infrastructure development direction, the first is: construction / building materials, UHV, communication; （3） Upstream cost reversal machinery, small household appliances, and independent main line military industry.
risk tips: 1. The epidemic situation is out of control; 2. A sharp recession; 3. Policy changes beyond expectations
/ monthly strategy report /
I. strategic view: does the small ticket represent the past or the future?
In the closing month of 2021, the overall recovery trend of A-Shares continued, and the Shanghai index finally stood at 3600 points, realizing the three consecutive positive of the annual line for the first time in history. Looking back on the past 2021, the overall fluctuation of the index hit a record low, but the rotation of the main line was accelerated and the market value style was significantly sinking. The small market value outperformed the large market value by nearly 30 points in the whole year; Although the market value style has obviously warmed up in the near future, the national securities 2000 index representing small votes quietly hit a five-year high. Towards 2022, can xiaopiao continue to maintain its strength since 2021? How should the spring market layout after the new year?
1.1. Sinking market value is the core feature of A-Shares in 2021
2021 is an unusual year for a shares. looking back at the end of the year, the Shanghai index ushered in the first three consecutive positive days in history, the transaction scale of the two cities hit a record high, the admission of public and private placement broke the record again, the rotation of the main line accelerated throughout the year, and the index fluctuation was the lowest in history. in the report “year-end market of A-Shares in 2021” before New Year’s day, we put forward seven highlights that we must know about A-Shares in 2021:
1. The stock index is now three consecutive positive for the first time, with valuation shrinking and performance leading. 2. “Carbon neutrality” is the main line throughout the year, and structural inflation is deduced to the extreme. 3. Market volatility hit a record low, and the rotation of the main line accelerated. 4. From “lying win” to “inside roll”, the market value style is obviously sinking. 5. Institutional leadership continued to “move inward”, and private placement contribution reached a record high. 6. All a transactions reached a new high, and trillion transactions gradually became the “new normal”. 7. The real economy has experienced a round of “deleveraging”.
among them, the sinking of market value is the core feature of A-Shares in 2021. after the adjustment after the Spring Festival, small cap stocks represented by CSI 1000 began to significantly outperform CSI 300. Although they turned back around the fourth quarter, throughout the year, the small market value factor outperformed the large market value by nearly 30 percentage points. Near the end of the year, the relative growth of value continues to pick up, and the style of large and small stocks also tends to be balanced. Towards 22 years, can the excess of small tickets continue? How will the style of large and small discs be interpreted?
1.2 who decides the excess return of small ticket?
As for the style of large and small plates, historical experience can provide a lot of materials, and the conclusions obtained in different periods are quite different. After combining the historical experience at home and abroad, we can generally draw several conclusions:
(I) the strength of the boom is the fundamental variable that determines the style of large and small markets. in the final analysis, enterprise value is determined by performance growth. Behind the strength or weakness of the trend of large and small markets in the past, it is the result of the trend of fundamentals. The relative strength of performance is measured by the growth difference of net profit attributable to the parent company. Behind the dominance of small A-share market in the period of 13-15 years is the continuous increase of performance growth of Shenwan small market relative to the large market index; After 15 years, the reason why the overall market value style is larger is that the performance growth rate of the large market relative to the small market began to pick up. From the experience of US stocks, this conclusion is also true. The relative trend of EPS determines the interpretation of the style of large and small US stocks.
(II) the allocation cost performance of the large market is an important variable affecting the excess return of the small market. from historical experience, if we observe the relative trend of large stock index / debt, we can find that the cost performance of large cap stocks is an important variable affecting the excess return of small cap stocks. Especially in the valuation cycle of large cap stocks (stocks lose bonds), the excess return of small cap stocks is particularly obvious (except for 18 years). Since 2021, the core assets have continued to kill the valuation, It is also an important reason for small cap to win.
(III) the type of incremental funds also determines the strength of large and small markets to some extent. since 2017, foreign capital, insurance capital and public offering have dominated the process of A-share institutionalization, and the total shareholding ratio has increased from 10.1% at the end of 16 to 17.5% at the end of 2020. Institutional incremental market entry superimposed on the market value style preference, and the “core assets” represented by Maotai experienced value revaluation. Since 2021, the proportion of insurance capital and foreign shareholding has begun to decline, and the marginal admission rate of public funds has slowed down from the high at the beginning of the year, while the capital contribution of private placement (including quantification) has increased significantly. The capital game pattern has changed from “lying win” to “inside roll”, and the demand for small ticket mining has been significantly enhanced, which has directly driven the sinking of market value style since 2021.
1.3 the next half year is the style balance period, and the market is expected to return
first, in the period of profit decline, the marginal change of performance began to tend to the market. historically, the core feature of small cap stocks is greater performance flexibility. The poor performance of small cap and large cap stocks is basically consistent with the profit cycle of the whole a, that is, in the profit upward period, the performance advantage of small cap stocks is more obvious, and vice versa in the profit downward period. In the next six months, whether it is the top-down estimation or the correction based on the individual stock profit expectation, A-Shares are in the profit downward cycle from 2021q4 to 2022q2, which is not conducive to small and medium-sized stocks with high profit elasticity.
secondly, since 2021, institutional conglomerates have continued to kill the valuation, and now it has fallen back to five years. after hitting a record high valuation at the beginning of the year, the institutional group stock portfolio has entered a continuous valuation cycle. After one year of valuation digestion, if the valuation (reconstruction of valuation system) since 2017 is taken as the standard, it has now fallen back to the average state. From the perspective of the relationship between valuation and profit, the valuation of traditional core assets (excluding institutional group stocks of new energy and semiconductor) deviates from the profit expectation, and has medium-term allocation value at this stage. (see rebalancing of new and old core assets 20211226 for details)
moreover, the probability of public offering + private placement continuing to exceed expectations in 2022 is decreasing. for public funds, the overall income of public offering in the past 21 years has decreased significantly compared with last year, and structurally, profit-making products are mostly concentrated in small-scale and flexible funds such as new energy and cycle style, which also means that the probability of demonstration effect of “Star” products is reduced. For private placement, quantitative private placement has contributed nearly half of the increment since 2021, but after the rapid expansion of scale, it is also under the pressure of limited strategic capacity and continuous regulation. Therefore, as the main incremental force in 2021, the probability of public offering and private placement continuing to exceed the expected admission in 2022 is decreasing. On the contrary, allocated funds (venture capital) may have a marginal positive contribution in 2022.
In conclusion, the core feature of A-Shares in the past 21 years is the sinking of market value. Behind the significant excess return of small notes, it is jointly promoted by variables such as profit cycle (credit cycle), market performance price ratio and incremental funds, and these conditional variables are reversing in the medium term of the future. Therefore, perhaps from the dimension of longer cycle (more than 1 year), small tickets can still continue to create excess; However, in the next six months, it should be the balance period of size and style, and we should pay more attention to the return of the market.
reiterate that weakening restless expectations, returning to fundamental pricing and steady growth are the core beta of the spring market. in the previous report, we proposed to dilute the restlessness expectation at the beginning of 22. The core is that the probability of “a good start” of incremental funds exceeding the expectation at the beginning of 2022 is decreasing, and the pure logic of risk preference promotion in the previous spring restlessness is weakening. Resumption of trading: steady growth and wide credit cycle in the past 10 years, from steady growth to the bottom of credit conditions, with a time lag of less than one quarter. Therefore, at the beginning of the year, the credit condition probability rate ushered in a real stabilization, superimposed with the upward repair of m1-ppi scissors, and the index continues to be optimistic about the spring market of 22 years, while steady growth is the largest beta main line in the next quarter.
core conclusions and strategic suggestions: (I) the credit conditions are expected to stabilize in a real sense at the beginning of the year, the inflection point at the bottom of m1-ppi has been confirmed, the probability continues to repair upward in the later stage, continue to be optimistic about value stocks in the medium term, and recommend food and beverage, high-quality developers, banks and power operations; （2） New and old infrastructure development direction, the first is: construction / building materials, UHV, communication; （3） Upstream cost reversal auto parts, small household appliances, and independent main line military industry.
II. Industry comparison: industry allocation ideas and key industry recommendations in 2022
2.1. Banks & state-owned enterprise developers: supporting policies or driving valuation repair
the bank’s performance is expected to be robust, and there are valuation repair opportunities under the underpinning policy. the high growth of non interest income drives the growth of bank revenue, while the low base + less provision drives the continuous high growth of profits, and the bank’s non-performing indicators improve steadily. In terms of fiscal policy, the direction of “promoting the formation of physical workload by the end of 2021 and the beginning of 2022” is determined; In terms of credit, the credit situation meeting was held in advance to boost credit growth expectations, and Q1 has always been the peak of bank credit.
the real estate policy may further loosen the margin, reduce the heat of local auction, and improve the gross profit of high-quality real estate enterprises. the role of the “stabilizer” of the real estate economy can not be ignored. The policy emphasizes “promoting the stable and healthy development of the real estate industry”, and the real estate policy may be further loosened. The heat of the second batch of local auction market decreased significantly, reflecting that the land acquisition attitude of real estate enterprises tends to be cautious, while the land acquisition advantages of high credit real estate enterprises are highlighted accordingly, and the land acquisition cost is reduced, which promotes the improvement of the gross profit margin of high-quality real estate enterprises represented by state-owned enterprise developers.
2.2. Food and beverage: the demand for food and beverage increased steadily, and the price increase helped to improve profits
the demand for food and beverage has increased steadily, and the measures to promote consumption are expected to be further boosted. in terms of social zero items, the average year-on-year growth rate of beverage retail sales has been basically the same as that before the epidemic, and the growth rate of grain, oil and food retail sales is even high compared with that before the epidemic. In addition, at the Politburo meeting in December, “implementing the strategy of expanding domestic demand and promoting the sustainable recovery of consumption” was put at the top of the key work. The follow-up measures to promote consumption were accelerated and introduced, which is expected to further boost consumer demand.
the food and beverage industry raised prices to transmit cost pressure downward and promote its own profit recovery. cost pressure gave birth to a new round of price increase window: the food and beverage industry transmitted the price pressure to downstream consumption channels and consumers through price increase to achieve its own profit improvement. At present, the price increases of some enterprises in the industry have been implemented one after another, which is expected to reproduce the industrial price increase wave that the leader took the lead in raising prices and conducted downward.
2.3. Scenery & energy storage: the installed capacity of scenery continues to be high, and the demand for energy storage is growing rapidly
industrial chain factors drive the upward demand for photovoltaic, and the valuation of wind power is still expected to improve. the price reduction expectation of silicon material is gradually released, and the superposition of the price reduction of silicon wafer in the early stage is expected to promote the upward demand for photovoltaic installation. In 2021, China’s wind turbine bidding is obviously large, and the demand for wind power is expected to maintain high growth in the future. At the same time, the problems of wind power consumption, abandonment and power limitation continue to improve, and the wind power valuation is expected to rise further.
new energy penetration stimulates demand, and policies boost the growth of new energy storage. with the rapid increase of the proportion of fluctuating power sources such as photovoltaic and wind power, and the rapid growth of power demand, the energy storage demand with flexible regulation ability will usher in a centralized outbreak. Electrochemical energy storage, especially lithium energy storage, has a wide range of application scenarios and excellent comprehensive performance. It is an important direction of new energy storage. Since the second half of the year, China’s new energy storage supporting policies have been gradually implemented, and China’s new energy storage will grow rapidly during the 14th Five Year Plan period.
2.4 green power operation and maintenance: new power welcomes opportunities and market-oriented mechanism helps development
the realization of the dual carbon goal inevitably requires the improvement of energy structure, and new power construction and operation and maintenance related industries usher in development opportunities. according to the opinions of carbon peak carbon neutralization, it is proposed to “comprehensively establish a clean, low-carbon, safe and efficient energy system” and “by 2060, the proportion of non fossil energy consumption will reach more than 80%. New power ushers in development opportunities, and rich investment opportunities have emerged in power engineering industrial chains such as clean energy construction, energy storage, operation and maintenance.
market mechanisms such as electricity price and carbon price further promote the development of renewable energy. the realization of the dual carbon goal requires policy guidance and the gradual improvement of the market-oriented mechanism. Recently, the national development and Reform Commission has further promoted the market-oriented reform of electricity price, and the electricity price mechanism is gradually liberalized. Green power trading has also been initially carried out. With the gradual implementation of relevant policies and the increase of transaction frequency, green power demand and transaction scale are expected to increase.
2.5. Automobile & household appliances: the marginal supply of automobile chips is improved and the cost pressure of household appliances is relieved
the decline in raw material prices and the improvement in the marginal supply of automobile chips are expected to significantly benefit the automobile industry, especially the parts industry. from the perspective of industry, the newly listed models need to be developed and suppliers determined in advance. It is difficult for traditional car enterprises to quickly realize the transformation of intelligent electric, while auto parts can quickly enter the new energy vehicle industry chain, so as to give priority to benefit. In addition, from the perspective of valuation, auto parts are also more cost-effective.
ease the cost pressure of household appliances and pay attention to domestic small household appliances and white electricity. in the early stage, the cost pressure of raw materials has seriously squeezed the profits of the household appliance industry, and the decline of commodity prices is expected to promote the reversal of white electricity Fundamentals (kitchen electricity is more relevant to real estate). Focus on domestic small household appliances: the bargaining power of small household appliances is weak, the impact will be more serious in 2021, and the subsequent profit elasticity will be stronger. Considering the peak consumption of overseas durable goods, domestic and foreign enterprises will usher in differentiation.
2.6. Semiconductors & Military Industry: the performance of semiconductors continues to increase, and weapons and equipment are installed in large quantities
strong demand and localization drive the continued high growth of semiconductor performance, with strong certainty in the direction of equipment and materials. the downstream demand for semiconductors represented by the automotive field continues to be strong, and the domestic substitution trend of the semiconductor industry continues, which are the two important supports for the high prosperity of semiconductors. High capital expenditure continues to drive the increase of localization share, and the direction of equipment and materials is highly deterministic.
the large-scale loading of weapons and equipment boosted the economy, and the mass production and large-scale of the supply side increased profits. the construction of comprehensive combat readiness capacity will lead to large-scale loading of weapons and equipment. In 2022, with the release of production capacity, equipment delivery and procurement demand, it will speed up again. The main battle equipment has changed from “development” to “batch production”, and the profit link of the military industry chain has changed from “scientific research end” to “production end”; The production mode has changed from multi variety and small batch to mass production, with prominent economies of scale.
appendix: Trading sentiment and market resumption
(I) trading sentiment: the trading structure was optimized and the medical heat increased significantly
For details, see our weekly market sentiment series released every Wednesday.
(II) market resumption: smooth closing on the eve of new year’s day
(strategy Xiao said)
