CSI 500: it not only has obvious valuation advantages, but also conforms to the direction of economic structure transformation
There are obvious differences between CSI 500 and CSI 300: (1) CSI 500 is the representative of small and medium-sized stocks, which has more valuation advantages than CSI 300 represented by large cap stocks / leading stocks. China Securities 500 trading pettm17 4X, obviously falling below the 22x level of the lower limit of double standard deviation in recent ten years, and the actual valuation quantile has fallen to the historical bottom level of 1.8%. (2) The CSI 500 is partial to the cycle and growth style, and is more in line with the switching direction of the kinetic energy of the “new economy”. The cycle and growth style account for 49.7% and 26% of the CSI 500 components respectively, and are mainly distributed in industries representing the “new economy”, including medicine and Biology (9.6%), electronics (7.2%), power equipment (6.7%), national defense and military industry (5.3%) and computer (4.3%), accounting for 33.1%, which is much higher than the “new economy” distribution ratio of about 20.8% in the CSI 300 components – which means that in the process of switching the old and new drivers of China’s economy, The structural characteristics of the CSI 500 are more in line with the high-quality development direction of the future economy and will benefit from the favor of more institutional funds.
Resume trading history and look for the driving factors dominated by CSI 500
Since 2005, the main time intervals of CSI 500 outperforming CSI 300 include: “December 2008 ~ November 2010”, “February 2013 ~ October 2014”, “January 2015 ~ June 2015” and “February 2021 ~ September 2021”. The “outperformance” of CSI 500 relative to CSI 300 often depends on the following factors: (1) China’s economy is better, the liquidity is generally loose, and the profitability and valuation benefit from high elasticity; (2) China’s economy is improving and technology iterations are superimposed. The cyclical style benefits from profit driven, while the growth style is driven by profit and valuation; (3) Profit contribution (2015 valuation); Profit contribution valuation contribution (2021). Otherwise, if the US interest rate increase cycle from 2016 to 2017 occurs, even if China’s economy recovers and enterprises make a large contribution to profits, it is difficult to hedge the valuation drag due to the high valuation of CSI 500 and the adjustment range of 47%, and finally lose the positive valuation contribution of Shanghai and Shenzhen 300 (PE, 5%).
It is expected that the CSI 500 will particularly benefit from the rebound in the second quarter
At the current time point, we judge that the configuration logic of CSI 500 has two directions: first, from 2022 to 2023, CSI 500 has more profit advantages, including: (1) benefiting from the actual PPI growth rate to maintain a high level; (2) If the subsequent steady growth policy takes effect, it will benefit from the “Pro cyclical logic”; (3) The dividend of the rapid development of the industry brought by the “switching” of China’s old and new kinetic energy. It is estimated that in 2022, CSI 500eps will increase by 41.72% year-on-year, and the two-year CAGR will be 29.7%, which has obvious profit advantages over CSI 300. Second, the current valuation of CSI 500 is more reasonable or even undervalued, and will obviously benefit from the valuation elasticity brought by the recovery of liquidity surplus. This means that the CSI 500 will have an obvious advantage in terms of valuation space and valuation elasticity.
Risk tips: 1. The performance is less than expected; 2. The driving force of liquidity improvement is “interrupted”; 3. The Fed’s monetary tightening is stronger than expected; 4. Historical experience has certain limitations.
