core conclusion: ① policy: the signal of “steady growth” is clear, and the follow-up policy is expected to be strengthened. ② Fundamentals: it is estimated that the GDP in 22 years will be 5% ~ 5.5% year-on-year, and the roe peak of A-Shares will be 22q1. ③ Liquidity: the long-term trend of asset allocation transferring to equity remains unchanged, and the supply and demand of funds in the stock market is unbalanced in 22 years. ④ Fed interest rate hike: it is possible to start from 22q2, when there will be upward pressure on China US bond interest rates. ⑤ Style: 22 year value, slightly dominant market, CSI 300 is stronger than CSI 500. ⑥ Hard technology: the absolute value of profit growth in 22 years is high, but it is lower than that in 21 years. The opportunity for valuation digestion is market adjustment. ⑦ Consumption: the current valuation is medium and high, the performance growth rate has dropped, and the big opportunity still needs to wait. ⑧ Optimistic about the market in the first quarter, the configuration is balanced, such as undervalued financial real estate, high prosperity hard technology, and consumption following the rebound.
open the door seven questions
For life, there are seven indispensable things to open the door, namely firewood, rice, oil, salt, sauce, vinegar and tea. For the stock market, at the beginning of the new year, investors also have many doubts to be solved. We summarize them as seven questions. Here we will analyze these problems.
question 1: is the policy strong?
The signal of “steady growth” is clear, and the follow-up policy is expected to be strengthened. at present, the increasing downward pressure on the economy has basically become a consensus, and the policy inflection point has also appeared, but some investors are still worried that the follow-up policy is not strong enough. The central economic work conference on December 8-10 proposed that China’s economic development is facing triple pressures of shrinking demand, supply shock and weakening expectation. Under the background of increasing downward pressure on the economy, “stability” is the most prominent keyword of the central economic work conference in 2021. There are 25 words “stability” in the press release of the conference, which puts forward that the economic work in 2022 should be “stable” and “seek progress in stability”. Since the second half of 2021, the loose tone of macro policy has been continued in this central economic work conference, and the conference reintroduced the expression of “counter cyclical”, emphasizing that “fiscal policy and monetary policy should be coordinated and linked, and cross cyclical and counter cyclical macro-control policies should be organically integrated”. Under the general tone of “stability”, the meeting proposed that all regions and departments should shoulder the responsibility of stabilizing the macro economy, all parties should actively launch policies conducive to economic stability, and the policy force should be appropriately advanced. In this context, we believe that monetary policy, fiscal policy and real estate policy are expected to be relaxed. In terms of monetary policy, the one-year LPR interest rate will be lowered by 5bp on December 20, 2021, and it is expected to be further relaxed in the future. In terms of fiscal policy, according to Xinhua news agency, Vice Minister of Finance Xu Hongcai disclosed at the regular policy briefing of the State Council on December 16 that recently, the Ministry of finance has issued a new special debt limit of 1.46 trillion yuan in 2022 to all localities in advance. According to the prediction of Haitong macro team, the growth rate of infrastructure investment will reach 6% in 2022, of which the proportion of investment in generalized new infrastructure may increase to about 18% (about 16% in the past two years). In terms of real estate policy, we expect that the real estate policy will be adjusted gradually to reduce the downward pressure on the real estate market. Looking back on the global financial crisis in 2008, China has launched four rounds of counter cyclical policies to stabilize growth, including 08 / 11-09 / 08, 11 / 12-12 / 12, 14 / 04-15 / 01 and 18 / 12-19 / 04. In the early stage of policy easing, the market still hesitated, but with the introduction of more powerful policies to stabilize growth and the gradual emergence of policy effects, the market performed well.
question 2: will the fundamentals stall?
it is estimated that the GDP in 22 will be 5% ~ 5.5% year-on-year, and the roe peak of A-Shares will be 22q1. although the steady growth policy mentioned above has gradually made efforts to hedge the downward pressure on the economy, investors are still worried that the economy will stall in 2022 and the fundamentals will be very poor. From the perspective of macroeconomic growth, we believe that the real GDP growth rate in 2022 is about 5% ~ 5.5%, while the biennial growth rate from 2020 to 2021 is 5%. From the perspective of micro A-share earnings, combined with the top-down and bottom-up methods, we expect that the net profit of A-share in 2022 will be 5% year-on-year, and excluding financial net profit, it will be 3% year-on-year. For details, see earnings: better market and middle and lower reaches – A-share outlook series 2-20211217 in 2022. After the 730 Politburo meeting, China’s policy began to fine tune. At present, the policy is gradually moving from broad currency to broad credit. According to historical experience, it is expected that the roe recovery can last for 7 quarters and will last until the first quarter of 2022, reaching about 10.2%. Looking back, after the second quarter of 2022, the A-share roe probably began to enter a downward cycle, because historical experience shows that the A-share roe will gradually deteriorate in the later stage of inflation. In this round of inflation cycle, the year-on-year low of CPI was – 0.5% in November of 20 years, and the year-on-year low of PPI was – 3.7% in June of 20 years. As of November of 21 years, the two had risen for 12 and 18 months respectively. At the current time point, we believe that inflation will continue to rise, which is due to the upcoming upward cycle of China’s pig price in 2022, which will boost CPI, and the economic recovery of foreign us and Europe will bring imported inflation and PPI. According to historical experience, each round of inflation cycle lasts for 2-2.5 years. It is expected that this round of inflation cycle will enter the later stage after the first quarter of 2022, when the downward pressure on A-share roe will increase.
question 3: is the policy strong?
the long-term trend of the transfer of asset allocation to equity remains unchanged, and the supply and demand of funds in the stock market is balanced in 22 years. in the past three years, funds have continued to flow into the stock market. We have gradually become accustomed to the migration of funds from the housing market to the stock market. Will this migration trend continue next year? How much money flows into the stock market? This is also an important topic of concern. In the partial balance between supply and demand of funds in the stock market – A-share outlook series 6-20211231 in 2022, we mentioned that from the long-term perspective, the asset allocation structure of Chinese residents has obviously emphasized real estate over equity for a long time. Compared with the asset allocation of residents in various countries, the proportion of equity (stocks, funds, etc.) asset allocation of Chinese residents in 2019 was only 2%, far lower than 34% in the United States, 12% in Germany and 9% in Japan. In the long run, the asset allocation of Chinese residents is expected to transfer from the real estate market to the stock market. The core reasons are as follows: first, China’s leading industry is changing from real estate to science and technology services. Second, the average age of China’s population has increased from 31 years in 2000 to 38.8 years in 2020. The rigid demand allocation of residents to real estate will decline. However, in the short term, the rhythm of capital entering the market is related to the market situation. Historical experience shows that the net inflow of bull market funds and the net outflow of bear market funds shake the tight balance of the market. For the 22-year-old A-shares, we believe that first of all, the cross-year market at the end of the year and the beginning of the year is worth looking forward to. However, from the perspective of the whole year, A-shares may usher in a phased rest in 22 years after experiencing three-year rise in 19-21 years, which is backed by the dual disturbance of high inflation and cyclical decline of profits. Therefore, we believe that the capital level in 2022 can refer to the volatile market in the history of a shares. We expect that the annual inflow in 22 years may slow down significantly compared with that in 21 years. On the whole, the capital inflow and outflow items are unbalanced. The specific calculation data are as follows.
Question 4: what is the impact of the Fed’s interest rate hike on a shares?
the Federal Reserve may start raising interest rates in 22q2, and there will be upward pressure on China US bond interest rates at that time. at present, some investors in the market are more concerned about how the Fed’s interest rate hike will affect A-Shares in 2022. We can learn from history for analysis. First, as for the timing of the Fed’s interest rate increase, the Fed’s interest rate meeting in December 2021 decided to speed up taper, twice as much as before. According to this calculation, taper will end in March 2022. At the same time, the Fed’s dot matrix shows that it is expected to raise interest rates three times in 2022. According to Bloomberg data, at present, the market is expected to have a high probability of the Fed raising interest rates after May this year. We think we need to be vigilant about the Fed raising interest rates in the second quarter. According to the prediction of IMF, the year-on-year growth rate of global GDP is expected to reach 4.9% in 2022, including 5.2% in the United States. The global economic recovery will promote the rise of internationally priced commodity prices, and then push up global inflation expectations. At that time, the Federal Reserve may tighten monetary policy, which may have an impact on a shares. Historical rules show that at the initial stage of the Fed’s interest rate hike, A-Shares tend to fall. This is because with the Fed’s interest rate hike, the interest rate center of U.S. ten-year Treasury bonds is likely to move up. Under the background of the improvement of global economic synchronization, it is difficult for China’s treasury bond interest rate to go down, which restricts the valuation of a shares. In addition, the Fed’s interest rate hike will often push up the dollar, resulting in global capital outflow from emerging markets, and emerging market stock markets outperform developed market stock markets.
question 5: which style will dominate the market?
The annual value of 22 is slightly superior to the market, and the CSI 300 is stronger than the CSI 500. from the index level, the small market value is dominant in 2021, and the performance of CSI 500 is better than that of CSI 300. What kind of market style will be dominant in 2022? We analyzed in style: slightly better market and value – A-share outlook series 1-20211210 in 2022. Behind the change of style is the change of relative profit trend. Historically, the trend of roe difference and cumulative year-on-year difference of net profit attributable to parent company between CSI 300 / CSI 500 and CSI 300-csi 500 is relatively consistent. The reason why CSI 500 is dominant in 2021 is also due to the decline of roe difference between CSI 300-csi 500, that is, CSI 500 is relatively more profitable. In addition, the market environment is also an important factor affecting the style. The bull market stage is usually dominated by growth and small market, and the bear market stage is usually dominated by value and large market. The characteristics of shock market style are not obvious. 2021 is still in a bull market, so the small cap style performs better. Looking forward to 2022, from the perspective of profit, we expect the annual net profit attributable to parent company of CSI 300 to be 7% year-on-year and that of CSI 500 to be 2%; From the perspective of market environment, we believe that A-Shares may usher in periodic repair under the dual disturbance of high inflation and cyclical decline of earnings. Therefore, when the performance is relatively dominant and the market may adjust, the CSI 300 is expected to be slightly better than the CSI 500 in 2022.
question 6: can hard technology continue to lead the rise?
The absolute value of profit growth in 22 is high, but it is lower than that in 21 years. The opportunity for valuation digestion is market adjustment. in 2021, hard science and technology sectors such as new energy vehicles, photovoltaic wind power and semiconductors performed well, and the proportion of institutional allocation represented by public funds was high. Investors were concerned about whether the growth of hard science and technology sector could still be the top in 2022. In this regard, we analyze from the matching degree of profit and valuation. Firstly, the profit growth rate of hard science and technology sector is indeed higher than that of all a shares. According to wind’s unanimous expectation, the cumulative parent net profit of 21q3 / 21e / 22e new energy vehicle industry chain is 83.1% / 105.0% / 42.5%, photovoltaic wind power industry chain is 54.1% / 69.1% / 35.5%, semiconductor industry chain is 67.5% / 65.7% / 28.5%, which is significantly higher than 25% / 30% / 5% of all a shares. However, judging from the trend, the profit growth rate of the hard science and technology sector is declining, and the valuation has been at a historically high level. As of December 31, 2021, the bottom-up quantile of PE (TTM, the same below) / 13 years has been 48.9 times / 92.8%, that of photovoltaic wind power industry chain is 48.5 times / 70.3%, and that of semiconductor industry chain is 35.7 times / 65.2%. The performance of the hard technology sector in 2022 depends on the changes of the market environment. For this, we pointed out in the evolution of the new energy vehicle industry from smart phones – 20210906 that the new energy vehicle industry chain in 2021 is similar to the apple industry chain in 2010, and the high boom supports the overvalued value. However, the profit of the apple index declined in 2011, and the apple index digested the valuation simultaneously with the overall adjustment of the market. Therefore, we believe that hard technology sectors such as new energy vehicles will also experience the stage of valuation digestion, but we need to wait for the market environment to change. The market is expected to continue the upward trend in the first quarter of this year. If the market is adjusted in the future, we need to be vigilant against this situation.
question 7: are consumer stocks worth configuring?
at present, the valuation is medium and high, and the performance growth rate has dropped. Great opportunities still need to wait. consumer stocks were once the best public offering fund, and the largest proportion of the stocks in 2019 and 2020. However, the recent trend of big consumption is weak. Recently, the consumer stocks represented by Baijiu are facing a wave of rebound. Is there a disposition value of consumer stocks? On the whole, we believe that the current valuation of consumer stocks is at a historically medium high level. At the same time, the performance growth rate in 2022 is low, and the overall opportunity needs to wait patiently. Judging from the valuation, Baijiu PE (TTM, the whole law, the same below) reached the highest level in 71 at the beginning of 2021, and the valuation continued to shift down to 2021/12/31, Baijiu PE was 47.9 times, and the 85% point from low to high in 2005, and the highest PE reached 67 times in early 2021. Thereafter, the valuation fell down step by step, and the PE of food was 44.6 times, which is now the 72% place from 2005 to low. At the beginning of 2021, the highest pharmaceutical PE reached 85 times. Since then, the valuation has been continuously corrected. At present, the pharmaceutical PE is 46.2 times, which is 69% of the valuation from low to high since 2005. On the whole, the valuation of consumer stocks is at the historical medium and high level. In terms of performance, historical experience shows that the consumption data will improve only after China’s economy stabilizes and picks up growth. As mentioned earlier, there will be great downward pressure on the economy in 2022, so it is difficult to see a significant improvement in the short-term performance of consumer stocks. Specifically, 21Q3 Baijiu net profit accumulated 19% year-on-year, industry analysts forecast net profit growth of 15% in 2022, and 29% and 5% respectively. It can be seen that the current valuation of the large consumer sector is not cheap. Combined with the low performance growth in 2022, we believe that the consumer stock market in the whole year is mainly volatile.
optimistic about the market in the first quarter. as early as the middle of November last year, we proposed that the restless market is expected to start in advance and may cross the year. At present, the overall trend of the market is in line with our judgment. Although the index has not risen sharply in the past two months, the bottom of the market has been rising slowly. We think the rising trend will continue in the first quarter of this year, There are three specific reasons: first, after the 730 Politburo meeting, the effect of the credit easing policy is showing, and residents’ housing loans and local government special bonds have begun to improve recently. From December 8 to 10, the central economic work conference was held in Beijing. The conference required that the economic work in 2022 should be stable and strive for progress while maintaining stability, all regions and departments should shoulder the responsibility of stabilizing the macro economy, all parties should actively launch policies conducive to economic stability, and the policy force should be appropriately advanced. On December 24, the fourth quarter regular meeting of the monetary policy committee of the central bank said that monetary policy should be more forward-looking, accurate and independent, give full play to the dual functions of the total amount and structure of monetary policy tools, and be more proactive and promising. At the same time, it also stressed the need to better meet the reasonable housing needs of home buyers and promote the healthy development and virtuous cycle of the real estate market. The fourth quarter regular meeting of the central bank reflects that the current policy is more active. Drawing lessons from history, with the increase of counter cyclical policy, the market will perform well. Second, the current roe is still in the recovery cycle. All A-share ROE (TTM) in this round bottomed out in 20q2 and began to recover in 20q3. So far, it has only lasted for five quarters. With the force of the wide credit policy, we expect the rise of roe to continue to 22q1. Third, from the review of previous restless market at the end of the year and the beginning of the year, the cross year market usually occurs every year. The reason behind this is that the end of the year and the beginning of the year are often the time window for major meetings. At the same time, there are few fundamental data disclosure of A-Shares from November to March, and the capital interest rate usually drops at the beginning of the year, so the risk preference of investors at the beginning of the year is relatively higher.
It is necessary to reduce expectations for the whole year of 2022 . in the long run, there is a law of mean regression in everything, and so is the operation of the stock market. From 19 to 21, the annualized growth rates of wandequan A and common stock fund indexes were 22% and 37%, higher than the annualized growth rates of 13% and 18% since 2005. We believe that the index will be relatively flat in 2022, and investors need to reduce their expectations of annual yield. After the market in the first quarter of this year, the market will face two disturbances: first, the pressure of inflation. The global economic recovery, especially in Europe and the United States, will promote the rise of internationally priced commodity prices. China is facing imported inflation pressure. At the same time, due to the effect of the pig cycle of 10 months, the pig price may start to rise from May to June this year, thus pushing up China’s CPI. Under inflationary pressure, the Fed’s expectation of raising interest rates is rising, and China’s treasury bond interest rate is also facing upward pressure, which restricts the valuation of a shares; The second is the cyclical fluctuation of earnings. Since 2002, the five rounds of A-share roe rise cycle has lasted for an average of 6-7 quarters. This round of roe began to rise in 20q3 and is expected to peak in 22q1. After that, the inflation cycle will enter the later stage. At that time, the downward pressure on A-share roe will increase.
in the first quarter the market balanced the undervalued big finance, high prosperity hard technology and consumption following the rebound. First, underestimated big finance. As the downward pressure on the economy is hedged and concerns about real estate debt subside, the big financial industry is expected to usher in repair. In 2021, the growth, valuation and fund positions of large financial sectors were at a low level. At present (2021 / 12 / 31, the same below) Pb (LF), banks are 0.6 times (at 0.0% quantile), real estate is 1.0 times (at 4.4% quantile), securities are 1.8 times (at 44.5% quantile), and the proportion of fund allocation is low. Among the heavy positions of 21q3 fund, securities companies are 5.8 percentage points lower than CSI 300, banks are 8.7 percentage points lower, and real estate is 0.7 percentage points lower. We believe that the most important thing in big finance is securities companies. The net profits of securities companies in 2019 and 2020 were 75% and 36% year-on-year respectively, corresponding to the largest increase of securities company index in the whole year of 56% and 55%, while the cumulative net profits of securities companies in the first three quarters of 21 years were 24% year-on-year, and the Shenwan securities company index fell by 4.2% in 21 years. In addition, there have been positive changes in the current real estate policy, and credit risk concerns are expected to decline. At present, the domestic bond issuance policy of real estate enterprises has begun to loosen, the reasonable capital needs of real estate enterprises are being met, and personal housing loans have returned to normal. We believe that real estate is still expected to welcome the opportunity of valuation and repair. Historically, there is a high probability of bank real estate repair in the restless market in spring. Second, high prosperity hard technology. As we have analyzed above, the new energy vehicle industry chain is expected to maintain a high boom, but the profit growth rate has declined, the superimposed valuation is at a historical high, and it is difficult to appear in the first quarter due to changes in the market environment such as the need to digest the valuation periodically. Third, consumption followed the rebound. In 2021, the large consumer industry declined significantly, which is behind the deterioration of the fundamentals of the consumer industry. Looking back, the fundamentals of the consumer sector are expected to pick up and the cost performance will improve, but the overall opportunity to look at the consumer sector will not be great.
risk tip: enters stagflation. Inflation rose sharply and macro policies outside China tightened.
(Haitong strategy)
