A shares continued to fluctuate and fall. Since March, the three major stock indexes have all fallen by more than 10%, and the valuation has accordingly fallen to a relatively low historical level.
As of March 15, the price earnings ratio of the Shanghai composite index was 11.6 times, which was at the 10% quantile level in recent five years. In the longer term, it was lower than the valuation level of the Shanghai composite index at 1664 points in 2008 (13.5 times). The overall P / E ratios of SSE 50 and SSE 180 are 9.5 times and 9.4 times respectively, which are also in the historical low quartile.
Many insiders believe that compared with the large bottom in history, the current market valuation is at a relatively low level in history. Compared with other major markets, the relative valuation is also attractive. It has begun to show more configuration value and high cost performance.
So at the current point in time, how should investors layout?
Some people in the industry believe that although the short-term adjustment is fierce, the risk appetite itself is repaired by the periodic mean value, so the rebound will not be too far away. After the boom and growth, the market may still rebound in a stable direction.
valuation is lower than that at 1664 in 2008
On March 15, the A-share market fell sharply in volume, of which the Shanghai index fell below 3100 points, and both the Shanghai index and the Shenzhen composite index fell by more than 4%. Nearly 4500 stocks in the two cities fell, and about 130 stocks fell by the limit. In terms of capital, the transaction volume of the two cities exceeded 1.1 trillion yuan, and the north capital sold a net 16.024 billion yuan again.
Throughout March, the A-share market has been shrouded in panic. As of March 15, the Shanghai composite index had fallen 11.51%, the Shenzhen composite index had fallen 14.26% and the gem index had fallen 13.07%.
Liu Chenming, chief analyst of Tianfeng Securities Co.Ltd(601162) strategy and assistant to the director, told the first financial reporter that the rapid decline of A-share and Hong Kong stock markets since March reflected investors’ multiple concerns about the future market, including the recurrence of the epidemic in China, the uncertainty of economic prospects and the effectiveness of stabilizing growth, and the uncertainty of the situation in Ukraine Antitrust overweight, Sino US financial friction, large-scale withdrawal of foreign capital, etc. This naturally includes unstable factors that may affect the future market, but only for now, it is more emotional panic. The market risk appetite drops rapidly and shows the phenomenon of indiscriminate selling.
“From the historical experience, in the stage where sentiment dominates the market logic, the short-term capital structure is often fragile, the index will panic overshoot, and the market performance will be decoupled from the fundamentals.” Huaxia Fund said.
Despite the panic, many market participants believe that the current index has strong support from the perspective of the whole market. Compared with the large bottom in history, the current market valuation is attractive.
As of March 15, the price earnings ratio of the Shanghai composite index was 11.6 times, which was at the 10% quantile level in recent five years. In the longer term, it was lower than the valuation level of the Shanghai composite index at 1664 points in 2008 (13.5 times).
In terms of the blue chip index, the overall P / E ratios of SSE 50 and SSE 180 are 9.5 times and 9.4 times respectively, which are in the 30% quantile and 10% quantile in recent five years, both lower than the level of SSE index at 1664 points in 2008. In terms of industry, the P / E ratio of finance, information and communication industries in SSE 180 has reached the lowest in history, of which the P / E ratio of financial industry is only 5.9 times.
“The blue chip sector not only has a low valuation, but also maintains a certain growth. The market expects the net profit attributable to the parent company of SSE 50 and SSE 180 to increase by 12.3% and 13% year-on-year in 2022, corresponding to the expected P / E ratio of only 8.5 and 8.3 times at the end of 2022, which has a high investment cost performance.” Insiders said.
In terms of breakdown, the profit growth of SSE 180 financial sector is stable, and it is expected to maintain a growth rate of 10.7% in 2022, corresponding to only 5.3 times the P / E ratio at the end of the year. Among manufacturing companies, Wanhua Chemical Group Co.Ltd(600309) P / E ratio is less than 10 times, and the net profit growth in 2021 is as high as 145% China State Construction Engineering Corporation Limited(601668) P / E ratio is only 4.3 times; The net profit of the shipping sector in Cosco Shipping Holdings Co.Ltd(601919) 2021 increased by 8 times, and the P / E ratio was only 2.7 times.
Compared with other market indexes in the world, the overall P / E ratio of Shanghai Stock Exchange 50 and Shanghai Stock Exchange 180 is significantly lower than that of major developed market indexes such as American S & P 500 (20.5 times), European stoxx50 (14.5 times) and Japanese Nikkei 225 (14.5 times).
China International Capital Corporation Limited(601995) believes that the absolute valuation of China’s market valuation is at a relatively low level in history, and the relative valuation is also attractive compared with other major markets.
Orient Securities Company Limited(600958) chief economist Shao Yu also said that from the historical average level, the current valuation of A-Shares has been in the lower quartile. In fact, it has begun to show more allocation value and high cost performance.
“If China’s economic fundamentals and liquidity match accordingly, as long as risk appetite picks up and some short-term risk events disappear, we are still optimistic about China’s steady growth and market valuation repair.” Shao Yu’s logic is that, on the one hand, some capital outflows from A-Shares are related to geographical conflicts. China may make corresponding liquidity supplement and Optimization in combination with economic needs and market considerations; On the other hand, China’s economic fundamentals have stabilized and the medium-term direction has not changed. In the process of transformation from real estate to scientific and technological innovation, the growth rate of emerging industries is obvious, and the new and old infrastructure plays a role at the same time to stabilize the economy and stabilize the supply of liquidity.
What are the signals of stabilization
So, what is the stabilization signal of A-Shares and how should investors invest in the layout under the current undervalued level?
“There are three factors that determine the stabilization of risk assets, especially the stock market. If they are available, stabilization will be more obvious.” Shao Yu told the first financial reporter that first, the economic fundamentals should be stable, especially the combination of macro data and micro data, which can show stable signals, especially some leading micro indicators; Second, liquidity should be moderately loose, including the signals of reducing reserve requirements and interest rates; Third, the risk appetite should rise. If the geographical conflict is lifted and the epidemic situation is restored, it may improve the risk appetite.
People believe that the most important factor in the process of repairing the situation in China is the repeated or unclear trend of the fund in the short term. From the perspective of trading, there are many stop loss orders in the near future, including the panic decline of some funds for bottom reading in the early stage. The index will probably shrink before stabilizing. If the external environment cooperates and flattens after shrinking, an obvious stabilizing signal will be formed.
\u3000\u3000 “After fully reflecting the risk factors, the market may have some room for correction in the short term. On the one hand, the recent sharp decline combined with the downward movement of the interest rate center, the cost performance of equity assets has rebounded, and the allocation funds on the left side are expected to return partially; on the other hand, although the conflict between Russia and Ukraine has not been implemented, the resulting supply chain risk has been alleviated recently, and the high oil price has dropped , the probability of the Fed raising interest rates by 50bp in March decreased, which contributed to the short-term market repair.
”Liu Chenming said.
In the medium term, Liu Chenming believes that in addition to noise, the core logic of A-Shares still lies in the strength and effectiveness of steady growth, that is, the release rhythm of policy tools and the repair of terminal demand. On the one hand, although the economic data from January to February exceeded expectations, the market had some concerns about sustainability under the haze of the rebound of the epidemic and the recovery of the unemployment rate; On the other hand, the downturn in social finance, credit and other data in February also made the market lack confidence in the economic outlook.
“However, it should be noted that the policy side has repeatedly ordered that steady growth should be taken as the most urgent task this year, and the determination to maintain growth should not be underestimated. Historical experience shows that all previous steady growth (for example, the social finance data of 16 and 19 years are days in January, lower than expected in February and days in March) The restoration of social finance and confidence in the process is not achieved overnight, but after the event, the policy tools are sufficient. In addition, there is a certain time lag between the bottom of the policy and the bottom of corporate profits, and the restoration of market confidence also needs a process. ” Liu Chenming said.
It seems that when Liu Chenming meets the conditions of “A-share + underground price ratio” to further rise in the second half of the year, it is necessary to see the conditions of “A-share + underground price ratio” rise in the second half of the year.
For the short-term market, how should investors layout? “At present, the level of risk appetite has shrunk to a similar range in 2011, lower than that in 2016 and 2018.” Huaxia Fund stakeholders believe that although the short-term adjustment is fierce, the risk appetite itself is periodically repaired by the mean value, so the rebound will not be too far away. Structurally, the growth boom direction will still be the leading direction of the subsequent rebound, and continue to be optimistic about new energy vehicles, semiconductors, photovoltaic, non-ferrous metals, medicine and other sectors.
Liu Chenming believes that after the emotional freezing point, the market may focus on the first quarterly report (lithium battery, lithium battery equipment, automotive electronics, photovoltaic module and inverter, military industry, CXO, cycle) and the direction of steady growth (nuclear power, 5g + industrial Internet, UHV, water conservancy and pipe gallery)
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