Key investment points
Overview of asset allocation of major categories. Under the new normal, the unilateral rise of house prices is difficult to reproduce, and the aging population also increases the allocation demand. The scale of China’s asset allocation will further expand: 1) in terms of asset allocation of residents, by 2019, the total assets of Chinese residents had reached 574.96 trillion yuan, an increase of 12.43 PCT year-on-year; 2) In terms of asset allocation of financial institutions, by 2019, the total assets of Chinese financial institutions had reached 440.63 trillion yuan, about 20 times higher than that in 2000.
Market mainstream asset allocation model. 1) Mean variance model: it is considered that investors can use the mean to measure the expected return and the variance to measure the risk, so as to achieve the balance between risk and return, but they can not include the information outside the sample into the decision-making, and the parameters are highly sensitive; 2) Black Litterman model: it is optimized based on the original mean variance model and Bayes probability statistics. It not only reduces the sensitivity of model parameters, but also introduces subjective views and uncertainty in the calculation of expected return. However, because too many parameters depend on investors’ judgment, the effect of the model depends on investors; 3) Risk parity model: its main idea is that under any market environment, the portfolio can allocate assets through risk parity strategy to obtain high risk adjustment and weak operational risk; 4) Merrill Lynch Investment clock model: it is a dynamic asset allocation model, which combines asset rotation with macroeconomic cycle, and constructs different asset allocation schemes by identifying inflection points in economic operation cycle. However, with the acceleration of plate rotation, the economic cycle becomes more and more insignificant. Under the background of accelerating the global economic cycle, the theoretical framework of Merrill Lynch clock can help us better identify the macroeconomic stage and provide better direction and ideas for our asset allocation. Therefore, in this paper, we choose Merrill Lynch clock as the model of asset allocation.
Investment suggestion: we believe that in 2022, China’s economy will face triple pressure from demand side contraction, weakening expectation and supply impact, and the downward pressure on the economy will continue to increase. According to the Merrill Lynch clock model, China’s asset allocation will change from the “stagflation like” stage of Merrill Lynch clock to the “recession” stage next year. Therefore, the proposed allocation order is: bonds > stocks > commodities. In the long run, the two main lines of “carbon neutrality” and “common prosperity” will help the new pattern of industrial development. Suggestions: 1) relevant industrial chains of “carbon neutralization”. New energy, energy storage, energy conservation and environmental protection are still in the outbreak stage of the industrial chain, but the differentiation is expected to further intensify; 2) Scientific and technological innovation. After the epidemic, the game between big countries intensified, and China urgently needs to break the dilemma of “neck sticking” of high-end technology. There are certain opportunities for national defense and military industry, digital economy and high-end manufacturing; 3) Emerging consumer sector. With the improvement of consumption margin, the consumption sector is expected to continue to pick up in the first half of next year, and the food, beverage and home appliance industries may usher in a structural market; 4) Epidemic damaged plate. It is expected that in 2022, with the further improvement of vaccination rates in developing countries such as Africa, Mexico and Brazil, the global epidemic is expected to be further controlled. There is a valuation and repair power in the epidemic damaged plate, which can be paid attention to: aviation, airports, tourism, hotels, cinemas, etc.
Risk tips: hyperinflation, unexpected economic decline, repeated epidemic risk, unexpected monetary policy and other risks. Large category asset allocation is a medium and long-term strategy, which requires investors to strictly evaluate the term of funds. Funds with short or closing pressure are not suitable for long-term asset allocation. Please note to investors! In addition, this report is for investors’ reference only. The selection of investment direction and target requires investors to comprehensively consider the valuation and various factors other than valuation for prudent analysis and decision-making.
