Since last Wednesday, the A-share market has stopped falling, stabilized and rebounded sharply. The Shanghai index has pulled back continuously from around 3000 points and stood at 3250 points as of Friday’s closing. The disk showed a general rising pattern, and about 95% of the stocks gained in the past three trading days.
From the historical market, the pattern of general rise or fall of individual stocks will not last too long. According to statistics made by some institutions, in 2021, the number of trading days in which more than 80% of the A-share market shares rose or fell at the same time was only 16, a record low.
In addition, from the experience of stopping the decline and stabilizing the index twice in the first half of 2020 and the first half of 2021, no matter the financial stocks in 2020 or the growth stocks in 2021, the index still needs a clear market main line to lead after it is out of the stage of severe fluctuation, so as to return to the “slow bull” pattern.
Which sectors are expected to become the main line of the market in the next stage? Research institutions have recently expressed their views on this topic.
keyword 1: undervalued
“steady growth” leads recovery
Finance, real estate and other undervalued weight sectors had a strong trend in January this year, but then they also fell down with the market shock. Under the tone of “steady growth” this year, the catalytic factors of some undervalued sectors are very clear. The gradual implementation of the “steady growth” policy is expected to continue to boost the composition of financial, infrastructure and other varieties, and the “undervalued strategy” is therefore favored by many investors.
China International Capital Corporation Limited(601995) chief strategist Wang Hanfeng made it clear that there may be relative returns on the main line of undervaluation of a shares. In its view, the supply risk caused by short-term geographical events and other factors may still continue to ferment, and the probability of overseas “stagflation” increases. The impact of these factors on market sentiment may still need to be digested.
“The growth of China’s reserves is expected to be relatively stable in the medium-term policy growth cycle, but the growth of China’s reserves is expected to be relatively stable in the medium-term policy growth cycle.” Wang Hanfeng thinks.
Of course, after this round of market adjustment, the valuation attraction of the undervalued sector itself is becoming more and more prominent. According to China International Capital Corporation Limited(601995) calculation, as of the closing on March 11, the overall Pb (price to book ratio) of A-share banking sector has decreased to 0.61 times (relative to the predicted value in 2022), and the valuation is the lowest level since 2016. In terms of individual stocks, Ping An Insurance (Group) Company Of China Ltd(601318) A-Shares fell below net assets for the first time in the history of last Tuesday, but then the influx of bottom reading funds drove Ping An Insurance (Group) Company Of China Ltd(601318) 3 shares to rise by more than 12%.
Guotai Junan Securities Co.Ltd(601211) strategy chief Chen Xianshun said that geopolitical tensions, tightening of overseas liquidity and real asset inflation will still restrict the improvement of investors’ choice range and risk appetite, and it will take a long time to rebuild market confidence. The opportunity of market investment in the next stage may lie in stocks with “low-risk characteristics”. Dividend strategy, high dividend strategy and undervalued strategy are expected to become the advantageous strategies for investors to obtain relative returns.
keyword 2: track stock
consider growth and cost performance
In the rebound in the last three trading days, the price elasticity of growth stocks has been reflected, and individual stocks in the field of new energy and semiconductors have gained significantly. However, from the perspective of stretching dimension, since the fourth quarter of last year, the overall decline of the growth sector represented by new energy, semiconductor and military industry is still very obvious. The cumulative decline of Shenwan power equipment, electronics and national defense military industry index is about 20%.
The advantage of undervalued sector comes from “valuation”, and the advantage of growth stocks naturally comes from “growth”. It will soon enter the intensive disclosure period of annual report and first quarter report. If the performance of the sector can be realized, it will naturally become the trigger factor driving the recovery of growth stocks.
It is worth noting that since this month, hundreds of listed companies have voluntarily disclosed the main operating data from January to February, providing useful forward-looking information for the upcoming quarterly report. Among them, the performance of many growth companies is bright and exceeds the institutional expectations, which confirms the high outlook of their industry, and the corresponding share price also goes out of the independent market.
For example, Jiangsu Zhongtian Technology Co.Ltd(600522) recently announced that benefiting from the rapid development of offshore wind power and new energy, the company realized a net profit of about 800 million yuan from January to February, an increase of about 300% year-on-year Tianfeng Securities Co.Ltd(601162) research report believes that this performance is much higher than expected, and the company’s marine business continues to grow efficiently under the background of “carbon neutrality”. Reflected in the share price, Jiangsu Zhongtian Technology Co.Ltd(600522) 3 at the beginning of the month, the share price hit a record high, and then continued to run at a high level, which was independent of the overall market trend.
From this point of view, although compared with the generally high growth of the industry sector in 2021, due to the disappearance of the base effect, the probability of high growth sector will be scarce this year. However, through relevant public data, it can still be found that the performance of many growth companies can be effectively or even exceed expectations.
In addition, it is worth mentioning that some track assets with “unattainable” valuation have returned significantly after the adjustment in the past few months. On the premise of no significant change in the prosperity, their “cost performance” is expected to gradually appear. For example, the semiconductor concept index released by wind, the latest pe-ttm (rolling price earnings ratio) fell to 52.49 times, only in the 16% quantile of the past five years. The valuation of wind new energy index is in the 44% quantile of the past five years, and the valuation of aerospace military industry index is in the 55% quantile.
keyword 3: risk point
alert to deterioration of fundamentals and “track collapse”
On the whole, both undervalued value sectors and high growth growth stocks have clear advantages and market triggers, but they must also have their own risk points to be vigilant. A few days ago, AI Xiongfeng, chief of Sinolink Securities Co.Ltd(600109) strategy, released a research report entitled “Tao and art of fundamental investment in the four sects”, which contains a detailed description of the risk points of value investment and track investment.
For the undervaluation strategy, AI Xiongfeng said that the essence of trading strategies such as “P / E ratio method” and “DCF model” is to buy listed companies whose market price is far lower than the intrinsic value. When the market corrects the wrong pricing, it is the time for investors to make profits.
AI Xiongfeng stressed that the most important thing for deep value investment is to avoid the “value trap”, which needs to return to fundamental research. The “value trap” mainly comes from three aspects of the deterioration of the company’s Fundamentals: the first is the decline of the industry as a whole, the second is the deterioration of the company’s competitive pattern, and the third is the failure of the company’s strategic decision-making.
For the hot track investment in the past two years, AI Xiongfeng believes that its essence is to focus on the high boom industry beta and pursue double-click, which is embodied in “selecting the best track and grasping the penetration”.
AI Xiongfeng stressed that track investment must be vigilant against “track collapse”. The “track collapse” is mostly due to the saturation of industry penetration and entering a mature period or a new iteration of technology. It is necessary to closely track the industrial trend to avoid entering the “fishtail” market.
keyword 4: general trend
a-share overall cost performance has been revealed
Aside from the specific style, in terms of the overall valuation level of the market, after this round of decline in the beginning of the year, the overall investment cost performance of A-Shares has appeared.
No matter what style of investors, the current time point may be a good opportunity for layout.
Citic Securities Company Limited(600030) chief strategist Qin Peijing said that the current valuation of A-Shares showed a serious deviation from the historical and global comparable valuation levels. In vertical comparison, the dynamic valuations of SSE 50 and CSI 300 are respectively in the 16% and 29% quantiles since 2010, which are close to the levels of February 2016 and December 2018, while the current China’s policy environment, credit cycle and external pressure are significantly better than these two periods.
In horizontal comparison, after the resonance of the global market, the index valuations of major economies, except US stocks, returned below the 50% quantile, and the UK FTSE 100 and Shanghai and Shenzhen 300 were the lowest quantile of 29%. A shares should enjoy a valuation premium under the background of low inflation and economic recovery in China. In addition, the RMB exchange rate remains stable, and the response of bond market and stock market to the stability of currency value and fundamental trend also deviates.
Zhongtai Securities Co.Ltd(600918) chief economist Li Xunlei also believes that at present, the valuation level of Shanghai and Shenzhen 300 has ranked in the last few in the stock indexes of major economies in the world, which does not match the medium and high growth level of China’s economy.
“The continuous decline of risk appetite is the main reason for the weak market performance in recent years, but the poor non-profit performance. Therefore, I always believe that only when the policy exceeds the expectation, can we change the situation of ‘weakening expectation’, so as to improve the risk appetite of the real economy and capital market, and give full play to the main role of private capital in promoting economic development and expanding direct financing.” Li Xunlei said.
