The industry differentiation is obvious in 2021, led by the power equipment industry.
At the end of 2021, the overall performance of the A-share market was relatively good. The Shanghai stock index and Wande’s all a-year line closed positive for three consecutive years, but the structure differentiation was obvious during the period. The CSI 1000 index and CSI 500 index representing the small cap style increased by 20.52% and 15.58% respectively, with the best performance, while the large cap indexes such as CSI 100 and Shanghai 50 decreased by 10.55% and 10.06% in the same period, with the worst performance.
From the perspective of industry performance, there is still great differentiation among industries in 2021. Taking Shenwan industry as an example, the power equipment industry with the best performance increased by 47.86% in the whole year, and the household appliance industry decreased by 19.54% in the same period, with the worst performance. The annual maximum income difference of the industry is 67.40%, which is near the median annual income difference in the past 10 years. From the performance of A-share market over the years, the industry differentiation is obvious in most years, which provides potential space for Industry rotation / industry allocation strategy.
In January, it was suggested to pay attention to basic chemical industry, coal, power equipment, national defense and military industry, computer, steel and other industries.
There are many factors that affect the rise and fall differentiation of the industry. In our report optimization of industry rotation model based on monetary credit cycle – Series II of research on industry rotation, we combined macro monetary credit cycle with medium and micro driving factors to optimize the industry rotation model. After optimization, the performance of the model has improved significantly in each year of history. In 2021, The industry long portfolio increased by 25.93%, the industry equal weight portfolio increased by 13.33% in the same period, and the relative income of the industry model was 12.59%.
Judging by the yield of 10-year Treasury bonds, the year-on-year growth rate of M2 and the year-on-year growth rate of social finance, the current macro environment is in the stage of wide currency and tight credit. Comprehensive judgment is made in combination with different dimensions of information such as industry valuation, fundamentals, analyst expectations, capital flow and micro transaction structure. The model suggests that the industries to be focused in January 2022 include: basic chemical industry Coal, power equipment, national defense and military industry, computer, steel, etc.
Risk tips:
The quantitative model is calculated based on historical data, and there may be failure risk in the future.
