In the just past 2021, the A-share market closed in red, and the wandequan a index rose by 9%. However, the mainstream index showed differentiation, with the CSI 300 falling by 5% and the CSI 500 rising by 15%. The public offering partial stock hybrid fund index rose 7%, maintaining a single digit positive return after a sharp rise for two consecutive years.
macroeconomic “stability first”
For China’s macro-economy in 2022, the central economic work conference made an authoritative judgment that it is facing the pressure of “demand contraction, supply shock and weakening expectation”. Among them, the impact of the adjustment of the real estate industry is particularly noteworthy. Some developers who adopt the development mode of high leverage and high debt are expected to need long and difficult debt digestion and reorganization; Some places that rely heavily on “land finance” will face the pressure of income reduction and expenditure; Under the background that the total population is about to reach its peak and the aging is deepening, there is a slowing trend in the demand for real estate. With the promotion of the pilot of real estate tax, the public’s expectations for house prices and the motivation for house purchase may further become rational. The real estate industry is bidding farewell to the rapid progress of the past 20 years. Its optimization and adjustment is conducive to the long-term stability of the economy, but it will inevitably bring short-term pressure.
Overseas, after the gradual withdrawal of the fiscal stimulus policy, the US economy has shown signs of slowing down, and the high inflation has forced the Federal Reserve to gradually withdraw from the quantitative easing and is expected to raise interest rates in 2022. Overall, in 2022, we need to pay attention to the weakening of overseas demand and the disturbance of US monetary policy.
In the macroeconomic work in 2022, the central government proposed to “face up to difficulties and strengthen confidence”, emphasizing “stability first” and “grasp time and efficiency, establish first and then break, and organically combine cross cycle and counter cycle”. After the central economic work conference, the central bank has implemented a RRR reduction. It is expected that RRR and interest rates will still be reduced in 2022, and the monetary and fiscal policies will be stable and loose throughout the year. Green investment, new infrastructure and advanced manufacturing may become an important direction of steady growth.
It should be recognized that the prudent policy orientation and risk resolution in some areas in 2021 are the initiative of the decision-making level. With the achievement of phased results and the adjustment of follow-up policy steps, it is expected that economic growth will stabilize and recover in the second half of 2022, with annual GDP growth of 5% – 5.5%, CPI slightly higher than that in 2021, and PPI returning to steady state. It is expected that the annual export will slow down moderately and the consumption will rise slightly after stabilizing. Investment, especially manufacturing investment, may be a bright spot worth looking forward to.
the performance of Shanghai and Shenzhen 300 index in 2022 may be stronger than that of last year
In the history of a shares, in the year of economic slowdown, the performance of listed companies tends to fall. Looking forward to 2022, the performance of A-share listed companies is estimated to increase by about 5% in single digits, and the growth rate of large cap stocks represented by SSE 50 and CSI 300 will be slightly higher.
In the classic “dog and master” model, macro-economy can only be used as a reference for observing and judging the stock market. With the gradual improvement of market pricing efficiency in recent years, the A-share market always seems to be “half a position” ahead of macro fundamentals, highlighting the effect of “barometer” more and more.
The macro economy and A-share market in 2021 have gone out of the combination of economic recovery + liquidity tightening + valuation contraction. The economic growth and earnings data of listed companies perform well, but the performance of CSI 300 index is not ideal due to valuation contraction. In this regard, we speculated in the 2021 market outlook that “the valuation has quietly crossed the center” and “the higher the short-term market, the more rational it should be”.
In the A-share market in 2022, the probability is a combination of economic slowdown and loose liquidity, while the trend of valuation is relatively complex. For the large cap stocks represented by CSI 300, even if Contemporary Amperex Technology Co.Limited(300750) and Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) with high static valuation are included, the overall valuation is still in a reasonable range; The valuation of medium cap stocks represented by CSI 500 is also in a low historical quantile; On the contrary, some small cap stocks have high valuations.
Generally speaking, when the economy is good, the trend is important, and when the economy slows down, the quality is important. In 2022, with the economic slowdown, the market may return to the general market style. Without too many unexpected shocks, it is expected that the performance of CSI 300 index in 2022 will be stronger than that in 2021, while small cap stocks will be relatively inferior.
In the past few years, the structure of the A-share market is better than the total.
In market outlook 2021, the author used the “new five golden flowers” to outline the possible structural opportunities in the future market. The A-share market in 2021 will mainly interpret two main lines in structure, one is the cyclical products with rising prices in the later stage of economic recovery, and the other is new energy under the background of double carbon. According to the statistics of Shenwan strategy report, the number of listed companies involving new energy content more than 8 times in the announcement in 2021 reached 1349, accounting for 39% of the total profits of listed companies.
After three years of deduction, the structural opportunities of the market are not so easy to identify. For companies with future, the valuation is expensive, while for companies with cheap valuation, they don’t see much.
As far as 2022 is concerned, “new five golden flowers” is still the main clue for us to find structural opportunities.
First of all, the consumption has been adjusted for nearly a year, the current valuation is reasonable, and the future space is still predictable; Secondly, in the context of “double carbon”, new energy still belongs to a long-term boom track and is a “place with many fish”. However, the valuation of some core targets has been high, so we need to have a more accurate grasp of the fundamentals; There are also high-end manufacturing and independent innovation encouraged by policies, including not only manufacturing companies with increasing global competitiveness, but also semiconductors and military industries with new industry driving logic; In addition, although the market is worried about policy disturbance, as an industry that has benefited from the aging of the population for a long time, the medicine and medical service sector is still worthy of deep cultivation.
If the economic growth slows down, the method of looking for investment opportunities according to the scene will be slightly cramped. At the same time, the market risk appetite will not be too high and will be relatively determined. Some industries that were in trouble in the past may have opportunities for improvement, such as some targets with strong consumption attributes in the real estate industry chain.
find the backbone driving slow bull
Looking forward to the next 3-5 years, the biggest variable affecting the macro-economy may be the peak of the total population and the deepening of structural aging.
According to the research of Cai Fang, a famous scholar, China ushered in the peak of the working population in 2010, and the economic growth rate has reached a new level since then. 2017 will usher in the peak of the population over the age of 16, and between 2025 and 2030, we will usher in the peak of the total population, accompanied by the deepening of aging.
The disappearance of demographic dividend will not only bring the pressure of demand contraction in the medium term, but also bring a series of challenges, such as the weakening of traditional comparative advantage, the unsustainable factor driven growth model, and the narrowing of the space for the improvement of labor productivity and total factor productivity, which will make China’s economic growth center face the possibility of further decline. In this regard, we must have a clear understanding and hope to have a comprehensive response.
From a dialectical point of view, China has successfully leapt to the second largest economy in the world, and its per capita GDP ranks among the upper middle-income countries. The fruits of economic development over the years have also made the subsequent low hanging fruits count.
Turning the economy from high to medium growth is a compulsory course for every economy moving towards high income.
The capital market at this stage, after experiencing the “adult ceremony”, will exude the charm of more mature markets and be more friendly to investment. For example, the volatility of the market may gradually converge, which can improve the experience of long-term investment. For another example, with the slowdown of economic growth, the long-term interest rate center will slowly decline, and equity assets will show better cost performance.
Looking forward to the next 3-5 years, the most important force affecting the capital market is still the transfer of large asset allocation.
First, the transfer of funds from real estate to equity assets under the background of “real estate without speculation”. According to the statistics of the central bank in 2019, real estate accounts for about 60% of residents’ asset allocation, while the proportion invested in stocks and funds is only 9%, and there is still much room for improvement; Second, overseas funds have increased the allocation of RMB assets, and this process is far from over.
Despite the structural bull market in the past few years, the A-share market is likely to be on the way to slow bull in the medium term, and finding the backbone driving slow bull is undoubtedly an important topic for investment.
The macro environment is changing, and matching the business with the environment is an important feature of excellent enterprises. In the process of change, if an organization can, driven by entrepreneurship, devote itself to meeting the unmet essential needs of customers in the most efficient way and adhere to creating value, the organization will have continuous competitiveness and build a dynamic moat, which is the backbone we hope to find in the A-share market in the future.
Therefore, the pursuit of long-term investment is unchanged, that is to “walk with excellent enterprises” and find and share the value created by excellent enterprises.
Looking forward to a longer-term future, Li Lu, a famous investor, takes the combination of modern science and technology and market economy as an important feature of human 3.0 civilization. From this perspective, China’s economy is still moving forward steadily and has great potential. Understanding the core of modern civilization, we need to adhere to “let the market play a decisive role in resource allocation”, stimulate the vitality of innovation, and protect the entrepreneurship as a scarce resource.
slow wealth, wisdom of long-term investment
According to the observation of scholars, in the long course of human struggle, the economy shows exponential compound interest growth, that is, hundreds of years after the industrial revolution. The “magic cube” is the combination of modern science and technology and free market economy. According to the analysis of Jeffrey West, a famous scholar at the Santa Fe Institute, due to the entropy increase described by the second law of thermodynamics, if there is no new impetus, the continuous growth will always face the restriction of “finite time singularity” and stagnate or even collapse. In order to maintain the sustained compound interest growth of economy, human society needs continuous innovation, “a major innovation will effectively reset the clock, change the conditions of system operation and growth,… Let the growth continue”.
Unfortunately, according to this theory, “to maintain sustained growth, the interval between continuous innovation must become shorter and shorter”, “we not only live on an accelerating treadmill, but also at some stage, we must jump to another treadmill accelerating at a faster speed”. Think about the thousands of years between the stone age, the bronze age and the iron age. We have been from mainframes, PCs to the Internet and then to the mobile Internet age, that is, these decades, and new things such as meta universe and blockchain are emerging. The lyrics of “once slow” are becoming the understanding of more and more people.
This is both an opportunity and a challenge for investment. We have to make more and more trade-offs and choices about which companies will be subverted, which companies “will not be changed by the world”, and which companies will change the world in the future. Each choice challenges the wisdom of investment, which is a big topic for investors in the capital market.
If the pace of economic change becomes faster and faster, slowing yourself down in time has become an important ability. In his works, Nobel economist Kahneman tells us many misunderstandings of fast thinking and tells us many benefits of slow thinking.
The same is true for long-term investment. We not only need to think slowly, but also need to slow down to witness greatness and wait for compound interest. Since its establishment, Bodao fund has been practicing the “slow rich road” investor service activities, hoping to get the participation and recognition of more and more customers and partners in the future.
In the long river of time, a year is just a moment. “Time passes like this, day and night”. Time is too fast. We don’t have to hurry. We can slow down and feel the freshness of the moment.
2022 has come. Let’s slow down, go up and make progress in stability with our original heart.
In this regard, I would like to share with you all. I wish you a happy new year, a tiger is alive, calm at present and open in the future.
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(China Fund News)
