since 2005, A-Shares have experienced seven historical bottoms, almost every time in the environment of liquidity contraction, downward earnings and external liquidity pressure. Referring to historical experience, when the excess liquidity turns positive, the growth rate of new social finance accelerates and improves, the valuation drops to a historical low, the margin of external liquidity improves, the transaction downturn, the turnover rate decreases significantly, and the K line is a w combination, it is mostly the signal of the bottom of the market. At present, A-Shares have gradually seen multiple bottom signals. In the future, with the accelerated improvement of new social finance, the easing of external negative factors, and the significant decline of turnover rate and transaction amount, A-Shares are expected to usher in the starting point of a new round of upward cycle
core views
over the past 20 years, A-Shares have experienced seven historical bottoms in this report, we call the inflection point of a decline of more than 20% in the previous period and an increase of more than 30% in the later period as the historical bottom. Since 2005, there have been seven historical bottoms of a shares. The historical bottom basically appears in the context of killing both fundamentals and liquidity, accompanied by overseas risk events or external liquidity pressure.
five signals at the historical bottom. Signal 1: the combination of excess liquidity and new social finance growth rate turned positive and rebounded excess liquidity turns positive, and the accelerated improvement of new social finance is often the most critical signal for the bottom of A-Shares signal 2: the valuation level has dropped to an all-time low. Signal 3: marginal improvement in the external liquidity environment there are seven historical bottoms in history, of which six times the adjusted level of 10-year Treasury bond yield of the United States is below – 1, which is the so-called “opportunity period” signal 4: low turnover, obvious decline in turnover rate and volume reduction turnover rate has been greatly reduced, and substantial reduction is an important condition for reaching the bottom signal 5: Classic K-line combination K line has a combination similar to “W”.
industry performance after the market bottomed out in terms of major industry indexes, in the three-month time dimension, information technology, materials (cycle) and optional consumption have the highest probability of obtaining excess returns. In the six-month time dimension, information technology, materials (cycle) and optional consumption also have the highest probability of obtaining excess returns. In terms of primary industries, the best performing ones are the cyclical ones, represented by nonferrous metals, building materials and chemical industry. The main reason is that the economy and investment have entered the upward cycle; One is growth, represented by power equipment, new energy, electronics, computers and military industry, mainly due to the improvement of risk appetite and liquidity; The last category is agriculture, forestry, animal husbandry and fishery.
reasons for this round of market adjustment the main reason for the current round of market decline is the deterioration of economic expectations and the decline of profit growth; In terms of internal liquidity, China’s capital inflow slowed down, and absolute income products were forced to reduce their positions; In terms of external liquidity, the Fed’s monetary policy is tight, and the interest rate accelerates upward into a dangerous area; Geopolitics reduced risk appetite and accelerated the outflow of foreign capital.
this round of market bottomed out, five big bottom signals and the starting point of the new upward cycle. Signal 1: the growth rate of new social finance has become positive, but wait for the improvement of medium and long-term social finance growth and deceleration to establish an economic inflection point in the context of the steady growth of the government and enterprise departments after the two sessions, the growth rate of new medium and long-term social finance is expected to rise further in the future signal 2: as of the phased low point on March 15, 22, the valuation level of wind all a non-financial petroleum and petrochemical decreased to 24.8 times. Considering the profit change, the valuation decreased to 22 times at the end of April. It is consistent with the average level of the past seven bottoms. The valuation has bottomed out signal 3: in the future, with the easing of the situation in Russia and Ukraine and the regulatory communication between China and the United States, the derivative financial risks will be gradually reduced. Signal 4: waiting for the US interest rate and US dollar index to peak and fall signal 5: waiting turnover rate and transaction amount continued to fall periodically, the second bottom of A-Shares did not reach a new low, and a shape similar to w appeared At present, the “a signal” of the above-mentioned stocks will meet the “a signal” at the same time
after the bottom of this round of a shares, it is suggested to focus on two directions: first, focusing on the traditional infrastructure with steady growth and the improvement of real estate investment, upstream resource products may benefit more from this round of steady growth, including nonferrous metals, building materials, petroleum and Petrochemical; Second, focus on the steady growth of new infrastructure, such as photovoltaic, wind power, energy storage and hydrogen energy; Digital infrastructure, such as IDC, big data cloud computing, etc
risk warning: policy support is not as expected; Federal Reserve policy tightening Russia Ukraine situation and deterioration of China US relations
\u3000\u3000 0 7
a shares have fallen sharply seven times since 2004 and a brief analysis of the reasons
1. Seven historical bottoms of A-Shares in the past 20 years
Over the past 20 years, the wind all a index, which includes all a shares, has shown a continuous upward trend. Among them, there have been many significant adjustments or long-term adjustments. This point that bottoms out after substantial adjustment is called the “historical bottom”. In this report, we call the inflection point of a decline of more than 20% and a rise of more than 30% in the past as the historical bottom. This large-scale bottom can be grasped, which is very important for investment. From the high point on December 12, 2021 to March 15, 2022, the decline of wind all a index has reached 19.2%. To the intraday low on March 16, the maximum retreat is 21.2%. Then the market bottoms out, which can be regarded as the historical bottom.
Therefore, we must analyze how the bottom of history is refined?
Historically, since 2005, there have been seven times in line with the previous 20% fall into the bear market and the subsequent rebound of more than 30%. There are seven reversal levels. The v-days are July 18, 2005, November 4, 2008, April 16, 2010, November 1, 2012, September 15, 2015, January 28, 2016 and January 2, 2019.
If we can significantly increase the stock position in this position, the yield will be very high in the next six months.
2. A-share crash paradigm – deterioration of liquidity + downward profit trend + external impact
The historical level of sharp falls and bear markets almost all appear in similar environments, including tight liquidity, declining profits and external or endogenous financial risks.
● began to decline in April 2004:
internal causes: the economy overheated in 2004, the credit policy was tightened, and the profit growth rate decreased
Internal cause landmark event: on April 25, 2004, the central bank raised the standard of 50bp and started tightening. Since then, the profit growth rate has decreased all the way and turned to negative growth in the fourth quarter of 2004
external cause: the Federal Reserve starts the interest rate hike cycle
Landmark events of external causes: on June 30, 2004, the Federal Reserve raised interest rates for the first time, five times in 2004 and eight times in 2005
● began to decline in January 2008:
internal causes: the economy overheated in 2007, the monetary policy was tightened, and the profit growth rate decreased
Internal cause landmark event: the people’s Bank of China has raised interest rates six times since March 2007
external cause: US subprime mortgage crisis
External cause landmark event: Bear Stearns closed down on March 16, 2008
● began to decline in April 2010:
internal cause: monetary policy was tightened in the first quarter of 2010, and the profit growth rate decreased
Landmark events of internal causes: from January to May 2010, the people’s Bank of China and the central bank raised the standard for three consecutive times;
external cause: outbreak of European debt crisis
The landmark event of the European debt crisis: Greece has 8.5 billion euros of 10-year Treasury bonds that will expire on May 19, 2010. On April 23, 2010, Greece officially applied to the EU and IMF for assistance, and the Greek sovereign debt crisis broke out.
● began to decline in April 2011:
internal causes: inflation increased in 2011, monetary policy tightened continuously, and profit growth decreased
Landmark event: since October 2010, the central bank has raised the reserve requirement for 9 consecutive times and raised interest rates for 5 times
external causes: the European debt crisis continues to play in depth
● began to decline in June 2015:
internal cause: deleveraging of stock market, downward profit growth
Landmark events due to internal causes: on June 12, 2015, the regulatory authorities required securities companies to conduct self-examination of external securities interfaces, and reiterated that securities companies should not facilitate OTC capital allocation activities and illegal securities business of any institution or individual through online securities trading interfaces
external cause: the Federal Reserve has entered the interest rate increase cycle, and the depreciation of RMB exchange rate has triggered capital outflow
External cause landmark event: 811 foreign exchange reform, one-time sharp depreciation of exchange rate
● began to decline in January 2016:
internal causes: deleveraging of stock market, superposition of trading mechanism, downward profit growth
Landmark event: the implementation of circuit breaker system
external cause: external liquidity pressure, RMB exchange rate continues to depreciate
Landmark event: the US dollar index exceeded 100
● began to decline in January 2018:
internal cause: financial deleveraging, profit growth rate down
external cause: the Federal Reserve enters the late stage of the interest rate hike cycle
Landmark event: in March 2018, the Federal Reserve continued to raise interest rates
A shares fell sharply at the level of 20%, which is basically a double kill between fundamentals and liquidity. At the same time, it is often accompanied by overseas risk events or external liquidity pressure. Otherwise, A-Shares are basically very resilient.
In terms of China’s liquidity, during the past seven sharp declines, we have seen the phenomenon that the growth rate of excess liquidity accelerated downward to negative, and the growth rate of social finance accelerated downward to negative; In terms of profitability, the past seven sharp declines, regardless of the starting point of profitability, the final profit growth rate fell to negative growth.
\u3000\u3000 02
five fold signal at historical bottom
signal 1: the combination of excess liquidity and new social finance growth rate turned positive and rebounded
Since liquidity and earnings play a crucial role, fundamentally, we need to see the improvement of liquidity and earnings expectations before A-Shares can really see the bottom.
We have discussed in many reports since 2018 that for a shares, China’s credit cycle law of about three and a half years (40 months) has the greatest impact on the medium-term of a shares, so A-Shares also show the cycle operation law of about three and a half years in the process of credit cycle law, we use the index system of “excess liquidity – growth rate of new social finance – profit growth rate of industrial enterprises”
Among them, excess liquidity is measured by the year-on-year change of inter-bank excess reserve scale. The growth rate of new social finance is calculated as the change range of new social finance rolling for 6 months compared with the same period last year. Under this system. Excess liquidity measures the change range of the absolute volume of inter-bank liquidity; The growth rate of new social finance measures the change range of liquidity obtained by the real economy. The liquidity of stock market is the result of excess liquidity and new social finance. When the excess liquidity is improved, synchronized or slightly lagged behind, the growth rate of new social finance will accelerate the improvement. The liquidity of the stock market will also improve marginally.
On the other hand, when the growth rate of new social finance accelerates and improves, it means that the financing obtained by the real economy increases, which will also lead to the corresponding increase of investment and consumption demand. The income and profit of enterprises will also be improved accordingly, so the growth rate of new social finance is 3 ~ 6 months ahead of that of industrial enterprises the positive growth rate of new social finance means that the growth rate of corporate profits will also improve and accelerate the upward trend.
Seven large bottoms after 2005. In September 2005, December 2018, September 2015 and January 2019, the growth rate of new social finance became positive, and the interval was about 40 months. The bottom of SSE 50 Index in September 2012 occurred three months after the new social finance growth rate became positive in June 2012. In January 2016, the growth rate of new social finance accelerated and improved, and the market bottomed out.
In July 2010, excess liquidity became positive, and then the growth rate of new social finance also became positive in stages therefore, the correction of excess liquidity, the accelerated improvement of new social finance, and the improvement of investors’ liquidity expectations and profit expectations are often the most critical signals for the bottom of A-Shares
In addition, in terms of the interest rate of ten-year Treasury bonds, the yield of ten-year Treasury bonds was below the historical average when A-Shares bottomed out. The past experience was that it broke down by 3.5% from top to bottom. However, with the downward movement of China’s risk-free interest rate center, this threshold needs to be reduced accordingly.
signal 2: the valuation level has dropped to an all-time low
For individual stocks, the level of valuation is not the basis for trading. Those with high valuation can be higher and those with low valuation can be lower. Trading based on the level of valuation is to seek fish from trees and carve a boat for a sword. However, for the overall valuation of a shares, although there is no reference value for short-term investment, the valuation level can play a role in the long term. In terms of extension, the lower the overall valuation level, the higher the expected medium and long-term return in the future.
In addition, the valuation level is also a measure of sentiment. We can think about it this way – in the process of decline, the valuation represents the degree of pessimistic expectations for various variables judging whether the current valuation level still has room to decline, we can compare it with the situation in the pessimistic situation to see whether there is excessive panic mispricing
In the process of analyzing the valuation level, there are many caliber and indexes that can be analyzed. However, for the sample indexes containing a certain number of stocks, such as Shanghai and Shenzhen 300, Shanghai Stock Exchange 50, gem index, etc., there are restrictions on the number of index constituent stocks, and the samples will be adjusted regularly. Therefore, the historical comparison of the valuation level of these indexes has a great relationship with the changes of the samples, so it is compared with the historical comparison, The errors caused by sample changes will become less meaningful. Therefore, in the valuation analysis, we try our best to consider the caliber of all a shares.
However, historically, the scale of financial and petroleum and petrochemical profits is large, but the valuation level is systematically decreasing. For our analysis of the systematic disturbance caused by the valuation level of a shares. The valuation level continues to decline, which also has a certain disturbance to our analysis, therefore, in the end, we believe that A-share except finance, petroleum and petrochemical is a better caliber to measure the real overall valuation level of A-share
For the seven bottoms in history, the corresponding valuation levels were 20 times in 2005 and 2012 respectively. The two market declines were mainly due to the serious economic downturn and negative profit growth caused by the tightening monetary policy in the early stage, while the external shock was mainly the tightening of the external monetary environment, 20 times can be regarded as the most undervalued value of A-Shares due to the deterioration of liquidity and fundamentals under the weak external influence
Second only to the global subprime crisis in November of 1930, which was twice as big as that in April of 2008. A shares are hard to see again.
In December 2018, the valuation reached 18.2 times, and the trade friction between the two major economies of China and the United States resulted in a major change that has not been seen in a century.
The valuation in July 2010 was 28.4 times, and the profit growth in 2010 was acceptable. It was only approved in the first quarter, and the liquidity has not deteriorated significantly. However, the Greek debt crisis has little impact on China, and the valuation at the bottom of A-Shares is 28.4 times.
In September 2015 and January 2016, the two valuations reached 35.6 times and 37.8 times, on the one hand, because the valuation starting point at the time of decline was too high, and on the other hand, because the monetary policy in September 2015 and January 2016 was still in the loose window. In addition, many official measures to stabilize the market provided important support for the market. In 2015, the Federal Reserve stopped raising interest rates only once after raising interest rates in December, and the tightening range was limited. Therefore, the market stabilized at about 35 times.
signal 3: marginal improvement in external liquidity environment
Since the end of the Bretton Woods system in the 1970s, the US dollar has become the world’s main reserve currency and trading currency. Therefore, the liquidity of the US dollar can also represent the global liquidity. After China’s reform and opening up, the global capital flow began to have an indirect impact on a shares. With the continuous opening of China’s financial market, the impact of global capital flow on A-Shares is also deepening. Therefore, US dollar liquidity has a direct or indirect impact on a shares.
There are many standards on how to measure the liquidity of the US dollar. It is generally believed that the US dollar index and the yield of us 10-year Treasury bonds are more important indicators. As a relative comparison index of exchange rate, the US dollar index mainly depends on the price comparison relationship of US dollar, euro, British pound, Japanese yen and other currencies. Its marginal change has certain indicative significance for us dollar liquidity. However, in the actual process, we pay more attention to the yield of 10-year Treasury bonds of the United States. The higher the yield of 10-year Treasury bonds of the United States, the tighter the liquidity of the corresponding dollar, and vice versa.
The ten-year Treasury bond yield of the United States has shown a downward trend since 1982. In order to consider its marginal change trend, we make an adjustment to it by subtracting the average level of the past two years from the absolute value of a certain time node and dividing it by the standard deviation of the past two years. The 10-year Treasury bond yield of the United States and the adjusted 10-year Treasury bond yield of the United States are shown in the figure below.
The adjusted ten-year Treasury bond yield fluctuates around 0, and the main operating range is [- 1,1]. The upward trend means the upward trend relative to the average level in the past period, and the opposite is the downward trend; When the adjusted ten-year Treasury yield exceeds 1%, it indicates that the interest rate has risen for some time, rising range is large, and it enters the area with high risk, which is called “danger zone” when the adjusted yield of us 10-year Treasury bonds exceeds – 1%, it indicates that the interest rate has fallen for some time, has fallen by a large margin, the monetary environment is relatively loose, and we enter the area with greater opportunities, which is called the “opportunity area” when the adjusted yield of us 10-year Treasury bonds is between – 1 ~ 1%, then the interest rate fluctuates within the normal range, which we call the “neutral zone”
Our previous in-depth report “what does A50, bitcoin, US debt and oil price combination mean – watching policy Tianxia (18)” describes that the US dollar is the global reserve currency, and the US bond yield can also measure the degree of global monetary easing. When the US Federal Reserve is loose, the US economy is weak, and the US bond yield is relatively low, then the US dollar will flow into other countries or US stock markets the US economy recovers, inflation rises, the Federal Reserve tightens the money. When the US bond yields rise, other assets are valued very high or even bubbles. is relatively high, and the value of US debt investment is raised, so the funds will return to the US or US dollar bonds. The withdrawal of funds will cause the assets that have soared in the past to fall sharply while the risk appetite of global investors is interlinked, the collapse of one market may lead to the decline of risk appetite in other markets.
Since 1982, the adjusted U.S. bond yield will break through 1 every three to four years and enter the dangerous area. Almost every time, it will lead to a sharp decline in the stock market or currency of a country.
The classic decline was black Monday in October 1987, the Asian financial crisis in 1997, the burst of the Internet bubble in 2000, the sub prime mortgage crisis in 2008, the 2010 European debt crisis, and the global capital market movement in 2018.
Looking back at the relationship between the 10-year Treasury bond yield of the United States and a shares, 7 historical bottoms, of which 6 times the adjusted level of the 10-year Treasury bond yield of the United States is below – 1, which is the so-called or “opportunity period” only when the bottom is reached in 2018, US stocks are still at a high level, but at least they have fallen back from the danger zone to the neutral zone.
signal 4: low turnover, obvious decline in turnover rate and reduction
In the process of continuous market adjustment, investors’ mood will continue to change, which is divided into four stages:
Stage 1: lucky at the initial stage of adjustment, investors tend to have a ” fluke mentality that should no longer fall after falling so much”. Cause the market to continue to fall, investors face the decline, not only do not panic, but also continue to increase the strength of bottom reading. Therefore, in the early stage of the decline process, the market transaction will be more active. Rebound will occur frequently. Investors who hold stocks will also think that the decline is almost the same, so they are willing to reduce their positions. In this process, the market is sensitive to both good and bad.
Stage 2: anxiety with the continuous decline of the market, especially the positions of funds or stocks held have changed from floating profit to floating loss. At this time, investors began to show obvious anxiety and impatience . At this time, investors holding stocks or funds begin to consider reducing their positions, but at the same time, with the rebound of the market, they will soon buy back the chips thrown out and conduct relatively frequent transactions. At this stage, the market will be very sensitive to bad news, and a disturbance will cause a large number of investors to sell stocks. The failure of frequent transactions makes bottom hunters less and less. The market began to shift from anxiety to the third stage – panic .
Stage 3: panic with the passage of time, the decline continued and the loss of investment was increasing. Due to the failure of previous transactions to make profits, began to doubt its own operation, began to fear the continued loss and began to imagine the serious consequences of the continued decline of net worth therefore, in the late stage of the decline, there are fewer and fewer bottom hunters, and selling regardless of cost occurs frequently. Market decline and volatility will be significantly amplified. The amplification of the decline exacerbated the pessimism and accelerated the arrival of the bottom.
Stage 4: despair and with the further decline of the market, investors began to fall into two categories. Class I investors finally made up their mind to admit compensation and go out without shares at this time, selling stocks and redeeming the fund will create a sense of “relief” another type of investors decided to carry it to the end and not carry out more operations. Instead of looking at funds or stock accounts, I chose “lie flat”. Investors who continue to copy the bottom have not made more profits because of copying the bottom. Therefore, as time goes on, fewer and fewer investors copy the bottom. The investors who lie flat no longer pay attention to the profit and loss of the account. Investors, whether holding shares or currency, choose not to trade. The general mentality of investors is that they no longer have hope of making money – which is reflected in despair . At this stage, both good and bad news in the market are no longer sensitive, which is reflected in the fact that good news will no longer rebound sharply and bad news will no longer fall sharply. Market volume continued to shrink to a limit.
therefore, historically, the turnover rate has decreased significantly, and a substantial reduction is a necessary condition for reaching the bottom
Historically, the turnover rate of the seven bottoms was 0.91% at the lowest, 3% at the highest and 1.5% on average. The core reason for the high bottom turnover rate in 2015 and 2016 has a lot to do with the stability maintenance force joining the transaction after the rapid decline of the market at that time. The trading behavior of stability maintenance force in history has certain rules, so it basically does not contain emotion in addition, the average turnover rate on the day of five large and low occurrences is about 1.1%
The transaction volume of the stock market will be significantly reduced. In addition to the turnover rate, the reduction rate (calculated by the change range of the daily average transaction amount on the trading day and the past year) can also be used as an important indicator. On average, the shrinkage rate of seven historical bottoms is – 52%
If we consider the average level of 20 days before the big bottom, the turnover rate is about 2%, and the average shrinkage rate is about – 34%
At present, the turnover rate of A-Shares is 2.7% and the contraction level is positive 4.6%. Therefore, despite the large decline in the current market, the turnover rate and turnover are still at a high level. Although we think there is little room for decline in the future, we still need to go through a contraction adjustment process to return to the upward cycle.
Combination: k いい signal line
Although we believe that the K-line portfolio is not helpful for the investment of A-Shares and is more an ex post analysis, the market sentiment behind the K-line portfolio over a period of time can also be used as a signal of the bottom or top of the market. We draw the K-line combination before and after the above 7 bottoms in the figure below.
We will find that these seven K-line combinations have common characteristics. Except for the one in July 2010, which can be understood as a V-shaped rebound, the other six times have a combination similar to W. The appearance of this w portfolio is very in line with the mentality and mood of investors. When there are improvement signals in all aspects, especially important meetings and important speeches to boost market sentiment, investors begin to copy the bottom, and the market begins to rebound, there will be the first bottom; However, at this time, there may be no substantive signal of improvement in liquidity and fundamentals. However, due to the sharp decline in the market in the early stage, the panic of investors has not been eliminated. Some investors who choose to copy the bottom will choose to close their positions as soon as there is a disturbance after the market rebounds for a period of time. Investors who had not reduced their positions before also saw a window to reduce their positions by taking advantage of this rebound. Therefore, investors who participated in the rebound in the early stage understand the profits. Coupled with the resonance of investors who chose to reduce their positions after the rebound, there will be a second bottom. This is the second bottom of W.
therefore, as the saying goes, “a single bottom is not a bottom, and a double bottom wins the world” and another very important feature of this w bottom is that the closing price of the second bottom is higher than that of the first bottom, which is more perfect.
In addition to the w bottom, another important feature of the bottom area is the frequent occurrence of four kinds of K lines – the shadow cross, the cross star, the shadow male line and the low opening male line.
I think the combination of these technologies is too complex, but we will fall into the bottom of the analysis.
summary: five fold signal at the historical bottom
We summarized the five signals of the historical bottom with a decline of more than 20% in the early stage and a subsequent rebound of more than 30% from 2005 to 2019.
Signal 1: liquidity and profit expectation inflection point the combination of excess liquidity and new social finance growth rate turned positive and rebounded. The transition from excess liquidity to positive and the accelerated improvement of new social finance are often the most critical signals for the bottom of a shares. If A-Shares want to enter the upward cycle, the improvement of profit expectation and liquidity expectation are indispensable.
Signal 2: valuation level has dropped to an all-time low taking the all a non-financial petroleum and petrochemical industry as the statistical caliber, under the environment of weak external influence, the static valuation at the bottom is about 20 times only due to the tightening of China’s monetary policy and the rapid deterioration of profits. However, if there is a global external impact with great impact on China, the valuation level at the historical bottom will be less than 20 times.
Signal 3: external liquidity environment has improved marginally US dollar liquidity has a great impact on global and emerging capital markets. When the adjusted US bond yield is higher than 1, it will often lead to risks. On the contrary, it will bring investment opportunities. For a shares, there are seven historical bottoms in history, six of which are below – 1 after the adjustment of the yield of 10-year Treasury bonds in the United States, which is the so-called or “opportunity period”. The only time it was not below – 1, at least it was out of danger.
Signal 4: transaction is in the doldrums, turnover rate drops significantly, and volume is reduced investors usually experience a process of “fluke anxiety panic despair” in the process of large-scale decline, and finally the market trading activity will decline significantly. The turnover rate is greatly reduced, and the significant reduction is an important condition for reaching the bottom. The average turnover rate of the seven historical bottoms was 1.5%, and the average shrinkage rate was – 52%.
Signal 5: classic K-line combination, K-line has a combination similar to “W”. The double bottom is a more solid bottom.
\u3000\u3000 03
seven bottoms, how does the market copy the bottom
1. Analysis of industry performance after bottoming out
Everyone likes to ask “what to buy after the rebound”. Then, there are seven large bottoms in history. Are there any laws to follow after each rebound? We can simply count the historical situation. Although it is different every time, we can use the statistics of historical data and analysis to analyze the logic of investors’ thinking and layout of rebound ideas every time they see the bottom, which can also provide some ideas for the choice of market after rebound in the future however, it does not mean that this bottoming rebound will be interpreted according to the laws of the past. Therefore, doesn’t need to tangle with “it’s different this time” and start refuting history is just a mirror. If you can do a good job of investment by repeating history, then investment will become too simple, which is impossible.
We count the rise of the industry index in three and six months after the end of the year, calculate the excess return with the wind all a index, and take the average ranking of excess return over the years and the probability of obtaining excess return as the evaluation criteria.
In terms of major indexes, three-month time dimension, information technology, materials (cycle) and optional consumption have the highest probability of obtaining excess returns
In terms of major indexes, in the six-month time dimension, information technology, materials (cycle) and optional consumption have the highest probability of obtaining excess returns.
The core of this result is that the large-scale bottom is accompanied by the economic stabilization and recovery, and the economic stabilization and recovery needs the recovery of social finance. When social finance recovers, it often means that the real estate cycle enters the upward cycle and the infrastructure investment develops, therefore, from the Perspective of attack, we are more willing to buy the optional consumption and cycle benefiting from the recovery of real estate and infrastructure investment
The information technology sector performed better. The possible reason is that in the early stage of the market rebound, it is also a time of relatively abundant liquidity, and the improvement of economic expectations will also bring marginal improvement of profits for each information technology sector. The relevant targets of information technology sector benefit more from the improvement of liquidity and risk appetite, so they reflect stronger flexibility.
2. Performance of the first level industry after seven bottoms
From the perspective of three months after the bottom, the industries with better performance are power equipment and new energy, agriculture, forestry, animal husbandry and fishery, building materials, computer, electronics, national defense and military industry, basic chemical industry and non-ferrous metals. These industries can be divided into three categories:
● growth category: power equipment, computer, electronics and military industry. These industries tend to grow and benefit from the improvement of liquidity and risk appetite;
● cyclical: building materials, basic chemicals and non-ferrous metals. These industries are more cyclical and benefit from the economic improvement brought by stable growth;
● agriculture, forestry, animal husbandry and fishery belong to a separate category, which benefits from the upward pig cycle after the improvement of demand.
The industries with poor performance are steel, transportation, public utilities, banking, architectural decoration, petroleum and petrochemical. The typical characteristics of these industries are undervalued and highly defensive. They often resist the decline in the stage of low market risk preference and have higher excess income before the bottom. However, once the market bottoms out and enters the trend of attack, people’s interest in these undervalued sectors will decline.
In contrast, it is also a cycle. Investors obviously divide cycle stocks into two categories, building materials, chemical industry and nonferrous metals belong to offensive cycle varieties, while steel, architectural decoration and petrochemical are regarded as defensive cycle varieties.
Judging from the six-month dimension, the conclusion is similar. However, with the extension of the time dimension and the further improvement of the economy, the performance of durable consumer goods such as household appliances and cars began to improve significantly
3, the top ten secondary sub industries after the seven bottoms
In the three-month dimension, from the perspective of secondary sub industries, the secondary industries with the highest winning rate and the highest average ranking are shown in the table below:
In the six-month dimension, from the perspective of secondary sub industries, the secondary industries with the highest winning rate and the highest average ranking are shown in the table below:
\u3000\u3000 04
reasons for this round of market adjustment and five big bottom signals
1. Analysis on the causes of this round of market decline – resonance of internal and external factors
(1) the economic expectation turns worse and the profit growth rate drops
In the first quarter of last year, China’s economic growth peaked, corporate profits peaked, and the growth rate of new social finance and excess liquidity turned negative. Since February 2021, the CSI 300 index has opened a downward channel. At this time, because the absolute growth rate of profits has not deteriorated significantly, investors are looking for structural opportunities in some small and medium-sized styles, new energy and cycle sectors. Therefore, the wind all a index is still fluctuating upward.
After the beginning of the year, the downward trend of the economy did not seem to have eased significantly, the market’s expectations for the economy were not significantly repaired, but the incremental funds were further reduced. The concerns about profitability and the slowdown of incremental funds made the market enter the downward cycle as a whole.
The announcement of the growth rate of social finance in January and February, from the perspective of medium and long-term social finance, although the government financing and the financing of relevant government departments have been significantly improved, it shows that the government has begun to make efforts to stabilize growth. However, the weak financing related to real estate has not greatly boosted the expected improvement of the economy the marginal relaxation of real estate policy has not produced much pulling effect on the stabilization of real estate sales. As real estate investment, sales and real estate related industrial chains still make a great contribution to China’s economy. Therefore, although infrastructure related financing has stabilized and rebounded, the weakness of the real estate chain is difficult to improve people’s expectations for the overall economy.
The actual economic data released from January to February were much higher than expected, and the investment growth rate rebounded to 12.2%. The consumption and industrial production data were higher than expected. However, there were many mismatches with other data released by the National Bureau of statistics, and there were also great differences with the economic data perceived by investors. However, the market did not improve much because of the improvement of apparent data, but began to worry about whether the actual steady growth action will converge significantly after the significant improvement of data, resulting in more pessimistic economic expectations. Previously, the market expected that the central bank would reduce the interest rate when it renewed the MLF on March 15. Due to the higher than expected economic data, the central bank chose to stand still, which further strengthened everyone’s judgment. After that, the financial stability Commission of the State Council held a meeting to reverse this expectation.
Since March, the epidemic situation in China has intensified significantly. From the point like occurrence of the epidemic in China in the past, it can be accurately prevented and controlled to the large-scale outbreak after March, which can not be traced. As a result, many cities have been forced to take more stringent prevention and control measures, further aggravating their worries about the economy. After the epidemic is under control, the strength of steady growth needs to be further rebounded.
(2) internal liquidity: the central bank relaxed and restrained, China’s capital inflow slowed down, and absolute income products were forced to reduce their positions
Since the beginning of the year, the issuance scale of public funds has gradually decreased. From the frequent explosion of funds last year to the obvious increase of issuance failures. After the continuous decline of fund net value in the past year, the scale of Chinese residents flowing into the market through funds has slowed down significantly.
In the past two years, with the recovery of the equity market, products of absolute return nature have been very popular, and the scale of products of absolute return nature represented by private placement and fund products of fixed income + nature has expanded rapidly. The scale of “fixed income +” funds has expanded rapidly in the past two years, mainly including partial debt hybrid funds, hybrid bond secondary funds and flexible allocation funds with positions of no more than 50%. Considering that the mixed bond secondary fund can only increase its investment income by investing in convertible bonds, it will not be taken into account here for the time being. By the end of 2021, the total scale of the above three types of “fixed income +” funds was about 2.24 trillion yuan.
From the situation of stocks held by the “fixed income +” fund, the average position of the “fixed income +” fund was about 18% at the end of 2021, and the total scale of stocks held was 394.73 billion yuan. Among them, the average positions of flexible allocation funds, partial debt hybrid funds and hybrid bond secondary funds were 20.6%, 19.7% and 13.4% respectively.
Another type of absolute return product is private equity funds, and the scale has basically not changed much from 2016 to 2020. After July 2020, the scale expanded rapidly. By January 2021, the scale expanded by 6.3 trillion in less than two years, an increase of 3.7 trillion compared with the end of June 2020.
Since 2022, affected by the adjustment of A-share market, the investment income of various “fixed income +” funds has retreated significantly. As of March 16, 2022, the median investment income of “fixed income +” fund fell by 3.38%, and the maximum pullback during the year reached 4.04%. Among them, the pullback range of flexible allocation fund and mixed bond secondary fund was relatively larger.
In terms of private equity funds, quantitative private placement has been brilliant and the scale has expanded rapidly in the past two years. Since September last year, the net value of private equity funds has also continued to withdraw since the peak of CSI 500.
Different from the general relative return products, when the absolute return products continue to fall in the market and the net value continues to fall, it may trigger a certain strong leveling or stop loss mechanism, while the holders of absolute return products generally have a lower risk preference. Therefore, the continuous decline of the market will lead to the downward positive feedback of absolute return funds – market decline, Absolute income products were further redeemed or reduced positions, which further caused the decline of the market.
(3) external liquidity the Fed’s monetary policy is tight, interest rates accelerate upward, enter the dangerous area, geopolitics reduce risk appetite, and foreign capital outflow accelerates
In addition, after the beginning of the year, northbound capital (lujutong) gradually began to show an outflow trend, and the outflow accelerated after March. During the year, the outflow scale of northbound capital reached 43.7 billion. Although this scale is not large compared with the volume of a shares, due to the fragile current market sentiment, China’s incremental capital is relatively limited. Therefore, the outflow of funds going north and the amplification of emotional influence have led to the motivation of Chinese funds to follow the reduction of positions.
The inflow of funds going north was relatively flat before March, but it began to accelerate significantly after March. After March 2, it flowed out 67.2 billion. The core reason is closely related to the conflict between Russia and Ukraine. Due to the sanctions on Russia’s financial market during the Russian Ukrainian conflict, Russian stocks listed abroad were prohibited from investment, and the share price plummeted. During the conflict between Russia and Ukraine, the market worried that China would also encounter similar Russian sanctions.
Among them, Chinese companies with a higher proportion of foreign investment listed in the United States and the Hong Kong stock market, the United States also began to introduce some measures. For example, in the early morning of March 11, the CSRC released a message, and the head of relevant departments of the CSRC responded to the fact that the SEC identified five listed companies in the United States as “relevant issuers” with delisting risk in accordance with the foreign company Accountability Act. Therefore, in the context of the conflict between Russia and Ukraine, the probability of new disputes between China and the United States may rise significantly, which has become the core reason for foreign capital to flee the China concept stock and Hong Kong stock market. Of course, it is difficult for A-Shares to be alone and also suffered a sell-off. However, with the recent meeting of the national financial stability Commission and the China US dollar Summit on March 18, this concern will be alleviated periodically.
Overseas funds do not flow out of Chinese companies alone, but also from the stock markets of India, Southeast Asia and other countries. The reason is closely related to the tightening of US monetary policy this year. This year, the Federal Reserve plans to quickly raise the benchmark interest rate and is likely to shrink the table. Therefore, the yield of us 10-year Treasury bonds accelerates to rise, and the US dollar index continues to fluctuate upward, indicating that global liquidity flows back to the United States. Global liquidity is facing challenges, so it is difficult for China, as an open capital market, to be alone.
Concerns about external conflicts, coupled with tight global liquidity, accelerated the outflow of funds from a shares.
2. Five signals at the bottom of this round of market
(1) the growth rate of new social finance, especially the growth rate of medium and long-term social finance, accelerated and improved
From January to February, the growth rate of new social finance has been marginally improved, and the growth rate of new social finance has become positive. However, the positive range is very weak. At the same time, structurally, the medium and long-term growth rate of social finance has not yet become positive. The medium and long-term financing growth rate of residents has been significantly negative, and the medium and long-term social financing growth rate of enterprises and government departments has been positive. Since then, it has produced a very confusing and uncertain impression.
First, social finance has indeed improved, but the medium and long-term growth rate of social finance has not become positive;
The large negative growth of residents’ social finance shows that the real estate sales have not improved significantly. If there is no real estate recovery, can China’s economy recover as scheduled?
Social finance improved significantly in January, but the new social finance returned to negative growth in February. What is the trend of social finance?
In this way, we need more data to prove that the total amount and structure of social finance are indeed continuously improving. However, we have reason to believe that after the two sessions, the growth rate of new medium and long-term social finance is expected to rise further under the background of steady growth of the government and enterprise departments.
On March 16, the financial stability and Development Commission of the State Council held a special meeting to study the current economic situation and capital market problems. With regard to macroeconomic operation, we must implement the decision and deployment of the Party Central Committee, earnestly invigorate the economy in the first quarter, actively respond to monetary policies, and maintain a moderate growth in new loans. With regard to real estate enterprises, we should timely study and put forward effective risk prevention and resolution solutions, and put forward supporting measures for the transformation to a new development model
Since March, the epidemic has spread all over the country, which may affect the financing demand to a certain extent. The data in March may continue to improve, but the improvement range should not be too large. After the economic data of the first quarter are released in April, if it is found that the GDP growth rate is lower than expected, we believe that the newly increased social and financial growth rate will continue to accelerate the improvement after April therefore, the release of data in March and April – from mid April to mid May will confirm the further improvement of social finance data , which will gradually strengthen the key driving force at the bottom.
The valuation has fallen further to the lowest level in history
As of the phased low point on March 15, 2022, the valuation level of Wande quana non-financial petroleum and Petrochemical has dropped to 24.8 times. It is consistent with the average level of the past seven bottoms. The profit growth rate of the fourth quarter of 2021 and the first quarter of 2022 is estimated to be 28.5% and 8.8% respectively. If the index continues at this position until April 30, because the PE (TTM) caliber will replace the profits of Q1 and Q4 in 2021 and 2020 with the profits of Q4 in 2021 and Q1 in 2022. The valuation level of wind all a non-financial petroleum and petrochemical will drop to 22 times after the annual report and the first quarter report are published on April 30, 202. This is very close to the undervalued level in July 2005, the end of November 2012 and 2018, and close to the valuation level at the historical bottom under the background of weak external shocks.
If compared with 2005 and 2012, the similarity is that the profit is still in the downward channel, the liquidity has begun to improve marginally, and the 22 times valuation level is only about 10% higher than that in 2005 and 2012; Compared with 2018, there is no obvious conflict between China and the United States. Under the background of no key deterioration of China US relations in the future, it is difficult for A-Shares to return to the level of 2018.
Therefore, from the perspective of valuation level, from the low point on March 15, 2022 to April 30, the corresponding all a non-financial petroleum and petrochemical is 22 times, which is very close to the pessimistic expectation in 2005 and 2012. Since there is no major global financial crisis, Sino US conflict and other key external shocks, theoretically, the A-share point on March 15, 2022 is already a pessimistic pricing.
(3) the Federal Reserve raised interest rates and reduced the table, and the US interest rate and US dollar index peaked and fell
On March 16, the Federal Reserve raised interest rates by 25bp, opening this round of interest rate increase cycle. At present, the market’s expected probability of the Federal Reserve raising interest rates seven times this year has increased to 86.9%. Therefore, since this year, the US dollar index and US bond yield have been rising, and the expectation of raising interest rates seven times has been continuously included in the expectation of US dollar and US bond yield.
However, whether the Fed can really raise interest rates seven times this year depends on the inflation level and economic situation in the United States. If the CPI data peak and fall with the increase of the inflation base, or the economic data in the United States are obviously lower than expected, the number of interest rate increases this year may be reduced. If the Fed makes any dovish statement at an interest rate meeting and reduces the market’s expectation of the number of subsequent interest rate increases this year, the US bond yield and US dollar index, which have been fully included in the expectation of seven interest rate increases, may peak and fall.
According to the standard of our calculation, if the adjusted ten-year Treasury yield will fall below 1, get out of the danger zone, or even quickly fall below – 1, the probability of seeing the bottom will increase significantly at present, the risk threshold corresponding to the yield of us 10-year Treasury bonds is about 1.65%, which is the level at the beginning of this year
(4) the situation in Russia and Ukraine eased and derivative financial risks were relieved
The situation in Russia and Ukraine has deteriorated. On the one hand, the sanctions imposed by European and American countries on Russia have increased the possibility of Russian debt default, which may lead to chain financial risks, especially under the background of the Fed’s interest rate hike, this risk transmission may be faster. In addition, the sharp fluctuation of bulk prices has also led to the deterioration of liquidity, which may lead to new risks.
For China, the situation in Russia and Ukraine has triggered new risks for Chinese listed companies overseas. The easing of the situation in Russia and Ukraine will help to reduce concerns about Chinese listed companies overseas.
The Financial Stability Board held a meeting on March 16. The meeting said, “with regard to China concept shares, the regulatory authorities of China and the United States have maintained good communication, made positive progress, and are committed to forming specific cooperation plans. The Chinese government continues to support all kinds of enterprises to list abroad.”
In the future, with the easing of the situation in Russia and Ukraine and the regulatory communication between China and the United States, the derivative financial risks will be gradually reduced.
(5) turnover rate and transaction amount decreased significantly
On March 18, the turnover was 998.5 billion, the corresponding shrinkage rate was – 5.4%, and the turnover rate was 2.7%. Referring to the historical average turnover rate, the corresponding turnover was 550 billion, and referring to the historical average shrinkage rate was 507.1 billion. In other words, if the transaction amount of this round is reduced to 500 ~ 550 billion, it is a very solid bottom signal.
Of course, it does not mean that the volume must be reduced to this level. For example, when the bottom rebounded on September 15, 2015, the turnover rate was 3%.
(6) if the secondary bottom does not reach a new low, a shape similar to w appears
(omitted)
3. Standing in front of the starting point of the new uplink cycle
We have described the cycle operation law of A-Shares in several reports. Every three to three and a half years, the growth rate of new social finance turns positive, and A-Shares will enter the upward cycle within one quarter. The duration of the upward cycle is about 2 to 2.5 years. With the decline of Social Finance growth and the deterioration of profits, A-Shares enter the downward cycle, with a decline time of about half a year to one year this is the operation law of A-Shares for three to three and a half years
The starting point of the last round of upward cycle was January 2019. CSI 300, CSI 500 and CSI 1000 peaked successively in February 2021, September 2021 and December 2021. The adjustment time of CSI 300 index has reached one year and one month, and the adjustment time of CSI 500 has reached half a year.
The wind all a index began to decline in December 2021, with a maximum decline of more than 20% for three months.
we believe that when A-Shares have started to trigger the bottom signal again, it should be the starting point of another three-and-a-half-year upward cycle from the perspective of credit cycle. At present, A-Shares are already the bottom area and are in the process of bottoming. Perhaps March 15 is the lowest point (the lowest point cannot be predicted). However, if the bottom signal described above can be met at the same time, the bottom of A-Shares will be more solid, and A-Shares will usher in a more certain upward “perfect storm”, and the time window will be between mid April and mid May
4. Attack direction after reversal – from steady growth to upstream
according to the above, A-Shares will generally be arranged in two directions after the market bottoms out and the risk appetite improves. Some investors focus on the attack areas of improving economic expectations and steady growth, including building materials with price elasticity, nonferrous metals and chemical industry; In addition, some investors are more likely to choose electronics, computers and military industry after bottoming out in the past seven times around the upward trend of science and technology after the improvement of liquidity. In addition, almost every agriculture, forestry, animal husbandry and fishery has obtained excess returns
2022 will welcome the 20th National Congress with outstanding achievements, and steady growth has become an important task of the national economy. Therefore, 2022 is likely to become a year of steady growth. Similarly (2007 / 2012 / 2017), the government work report of the two sessions this year set the GDP growth target of about 5.5% in 2022, which will rise significantly compared with the second half of 2021. In the current situation, what can be determined is that the government expenditure has increased significantly. On the one hand, the steady growth force has led to the deterministic recovery of “real estate + infrastructure” investment. The growth rate of social finance is expected to rise significantly in the future, and the price of bulk commodities is expected to remain strong. Due to the existence of cost pressure, this round of steady growth is overweight, and the profits are more concentrated upstream, including petroleum and petrochemical, industrial metals, steel and cement Coal, etc. will have a stronger profit trend, and investors are advised to focus on it. In addition, the marginal relaxation of real estate policy will continue, the growth rate of social finance will continue to rise, and the undervalued combination of Bank + real estate will still be catalyzed by policy.
On the one hand, the government will increase the demand for new energy storage in the upstream – on the other hand, the demand for wind energy will increase. At the same time, the demand for digital infrastructure will also increase, forming demand support for IDC, big data cloud computing and other fields.
On the whole, at present, the trend of “demand from steady growth, profits to the upstream” is very obvious. We suggest investors to layout all upstream links that benefit from the power of steady growth policy. There will be even better performance in the coming quarterly report season
\u3000\u3000 05
summary: how to refine the historical bottom of A-Shares
Over the past 20 years, A-Shares have experienced seven historical bottoms. In this report, we call the inflection point of a decline of more than 20% and a rise of more than 30% in the past as the historical bottom. Historically, since 2005, there have been seven v-days in line with the previous 20% decline into the bear market and the subsequent rebound of more than 30%. The historical level of sharp falls and bear markets almost all appear in a similar environment, with tight liquidity, declining profits and possible associated financial risks. A shares fell sharply at the level of 20%, which is basically a double kill between fundamentals and liquidity. At the same time, it is often accompanied by overseas risk events or external liquidity pressure.
We summarized the five signals of the historical bottom with a decline of more than 20% in the early stage and a subsequent rebound of more than 30% from 2005 to 2019.
● signal 1: liquidity and profit expectation inflection point the combination of excess liquidity and new social finance growth rate turned positive and rebounded. The transition from excess liquidity to positive and the accelerated improvement of new social finance are often the most critical signals for the bottom of a shares. If A-Shares want to enter the upward cycle, the improvement of profit expectation and liquidity expectation are indispensable.
● signal 2: valuation level has dropped to a record low taking the all a non-financial petroleum and petrochemical industry as the statistical caliber, under the environment of weak external influence, the static valuation at the bottom is about 20 times only due to the tightening of China’s monetary policy and the rapid deterioration of profits. However, if there is a global external impact with great impact on China, the valuation level at the historical bottom will be less than 20 times.
● signal 3: external liquidity environment is marginally improved US dollar liquidity has a great impact on global and emerging capital markets. When the adjusted US bond yield is higher than 1, it will often lead to risks. On the contrary, it brings investment opportunities. For a shares, there are seven historical bottoms in history, six of which are below – 1 after the adjustment of the yield of 10-year Treasury bonds in the United States, which is the so-called “opportunity period”. The only time it was not below – 1, at least it was out of danger.
● signal 4: turnover is low, turnover rate is significantly reduced and volume is reduced investors usually experience a process of “fluke anxiety panic despair” in the process of large-scale decline, and finally the market trading activity will decline significantly. The turnover rate is greatly reduced, and the significant reduction is an important condition for reaching the bottom. The average turnover rate of the seven historical bottoms was 1.5%, and the average shrinkage rate was – 52%.
● signal 5: classic K-line combination, K-line combination similar to “W”. The double bottom is a more solid bottom.
after the market bottomed out, in terms of major indexes, information technology, materials (cycle) and optional consumption have the highest probability of obtaining excess returns in the three-month time dimension. In the six-month time dimension, information technology, materials (cycle) and optional consumption have the highest probability of obtaining excess returns first level industries, from the perspective of three months after the bottom, the industries with better performance are power equipment and new energy, agriculture, forestry, animal husbandry and fishery, building materials, computer, electronics, national defense and military industry, basic chemical industry and non-ferrous metals. These industries can be divided into three categories:
● power equipment, computer, electronics, military industry and other industries tend to grow, and the comparative benefits are due to the improvement of liquidity and risk appetite;
● building materials, basic chemicals and non-ferrous metals, which are relatively cyclical and benefit from the economic improvement brought by steady growth;
● agriculture, forestry, animal husbandry and fishery belong to a separate category, which benefits from the upward pig cycle after the improvement of demand.
The main reason for the current round of market decline is the deterioration of economic expectations and the decline of profit growth. In terms of internal liquidity, the central bank relaxed and restrained, China’s capital inflow slowed down, and absolute income products were forced to reduce their positions. In terms of external liquidity, the Fed’s monetary policy is tight, interest rates accelerate upward, enter the dangerous area, geopolitics reduce risk appetite, and foreign capital outflow accelerates.
Five signals of the current market bottom:
● signal 1: after the two sessions, under the background of steady growth, the growth rate of new medium and long-term social finance is expected to rise further in the future.
● signal 2: the valuation has reached the lowest level in history, and there is limited room for further decline. As of the periodic low point on March 15, 2022, the valuation level of wind all a non-financial petroleum and petrochemical industry has dropped to 24.8 times, which is consistent with the average level of the past seven bottoms.
● signal 3: the Fed raises interest rates and shrinks the table. In the future, if the Fed makes any dovish statement at an interest rate meeting and reduces the market’s expectation of the number of subsequent interest rate increases this year, the US bond yield and US dollar index that have been fully included in the expectation of seven interest rate increases may peak and fall.
● signal 4: in the future, with the easing of the situation in Russia and Ukraine and the regulatory communication between China and the United States, the derivative financial risks will be gradually reduced.
● signal 5: the turnover rate and transaction amount have shrunk significantly. If the Fed raises interest rates and shrinks the table in the future, the US interest rate and US dollar index will peak and fall. At present, the turnover rate and transaction amount have shrunk significantly. If the second bottom does not reach a new low in the future, there will be a shape similar to W.
we believe that at present, A-Shares have begun to trigger the bottom signal again. From the perspective of credit cycle, it should be the starting point of another three-and-a-half-year upward cycle. At present, A-Shares are already the bottom area. They are in the process of bottoming, and may have bottomed out. However, if the bottom signal described above can be met at the same time, the bottom of A-Shares will be more solid, and A-Shares will usher in a more certain upward “perfect storm”, and the time window will be between mid April and mid May
according to the above, A-Shares will generally be arranged in two directions after the market bottoms out and the risk appetite improves. Some investors focus on the attack areas of improving economic expectations and steady growth, including building materials with price elasticity, nonferrous metals and chemical industry; In addition, some investors are more likely to choose electronics, computers and military industry after bottoming out in the past seven times around the upward trend of science and technology after the improvement of liquidity. In addition, almost every agriculture, forestry, animal husbandry and fishery has obtained excess returns
2022 will welcome the 20th National Congress with outstanding achievements, and steady growth has become an important task of the national economy. Therefore, 2022 is likely to become a year of steady growth. Similarly (2007 / 2012 / 2017), the government work report of the two sessions this year set the GDP growth target of about 5.5% in 2022, which will rise significantly compared with the second half of 2021.
In the current situation, what can be determined is that the government expenditure has increased significantly. On the one hand, the steady growth force has led to the deterministic recovery of “real estate + infrastructure” investment. The growth rate of social finance is expected to rise significantly in the future, and the price of bulk commodities is expected to remain strong. Due to the existence of cost pressure, this round of steady growth is overweight, and the profits are more concentrated upstream, including petroleum and petrochemical, industrial metals, steel and cement Coal, etc. will have a stronger profit trend, and investors are advised to focus on it. In addition, the marginal relaxation of real estate policy will continue, the growth rate of social finance will continue to rise, and the undervalued combination of Bank + real estate will still be catalyzed by policy.
On the one hand, the government will increase the demand for new energy storage in the upstream – on the other hand, the demand for wind energy will increase. At the same time, the demand for digital infrastructure will also increase, forming demand support for IDC, big data cloud computing and other fields.
On the whole, at present, the trend of “demand from steady growth, profits to the upstream” is very obvious. We suggest investors to layout all upstream links that benefit from the power of steady growth policy. There will be even better performance in the coming quarterly report season
