Review:
Since the beginning of 2022, we have continued to emphasize the importance of “steady growth”, focusing on the opportunities of bank and real estate chain. In a series of report topics such as “it’s the turn of big finance” on January 3, “retreat or attack, rely on big finance” on January 16, and “big finance, continue to cut” on February 6, it is emphasized that paying attention to the “big finance” market is the winner and loser of 2022 investment. Big finance seems to be defensive, but in fact it is the best attack. Pay attention to big finance (bank and real estate chain).
On February 27, the “grinding, forbearance and consumption” market entered four phases of superposition, including the verification period of economic data, the policy expectation period of China’s two sessions, the landing period of the Federal Reserve’s interest rate meeting, the fermentation period of Russia Ukraine conflict, the game of stock funds, and the market grinding, forbearance, consumption and tossing.
After the meeting of the “Finance Committee”, confidence was injected into the market, and the market also got rid of the rapid decline in the early stage. The current structure is particularly important. Investors are once again at the crossroads, choosing growth or “big finance”? The market expectation repeats again and faces the choice again. This time, the recurrence comes from the recurrence of internal epidemic, economic recovery, external fed and China us. The repetition of internal and external expectations makes investors tangle, game and toss between big finance and growth. The market presents the characteristics of stock funds coming and going, index ups and downs, and value growth ups and downs.
Internally, when the impact of the epidemic is gradually alleviated, the return to the growth target of 5.5% is a relatively certain option, and the real estate chain is facing two-way mitigation of supply and demand. The inflection point of external global liquidity and interest rate has been formed, and the Fed has become more and more hawkish. Accelerating the process of raising interest rates and shrinking the table has put great pressure on the market for overvalued varieties and the return of foreign capital. From the perspective of policy and certainty and market defense, at the crossroads, the “big finance” direction of high dividends (banks, real estate, utilities and coal) and steady growth (banks and real estate chain) should be added. Growth stocks played a good “guerrilla war”, adjusted their position chips during the respite period of the first quarterly report, turned small victories into big victories, and paid attention to photovoltaic, wind power, intelligent driving, Internet, digital economy, etc.
Staring at the target of 5.5%, the only shaped hand returns to the main line of steady growth. Internal expectations need that “tangible hand” to adjust and reverse everyone’s expectations. After the epidemic gradually subsides, confidence in consumption and the economy gradually recovers. In the short term, due to the spread of the epidemic in Shenzhen, Shanghai and other places to a certain extent, consumption has been seriously damaged, and investors are pessimistic about economic expectations. Subsequently, with the gradual mitigation of the impact of the epidemic, the demand side and supply side policies of real estate have been gradually improved, and the fundamental data are expected to improve. Secondly, after the “two sessions”, manufacturing enterprises reduced taxes and fees by more than 200 billion, which helped to alleviate the cash flow situation of midstream manufacturing enterprises. Third, recently, Shenzhen, Hangzhou and other places have successively introduced policies and measures to benefit enterprises and relieve the pressure on enterprise operation and cost. On the whole, the goal of stable internal growth and GDP growth of about 5.5% is relatively certain. For this goal, although the short-term economy is affected by the epidemic, more measures to stabilize the economy may be introduced in the future, which is worthy of investors’ attention and a good opportunity to increase positions and allocation of relevant sectors of investors after January and February.
From the perspective of investment strategy, high dividends can be attacked and retreated, which is the current preferred item. We have made a detailed analysis in the report “high dividends can be attacked and defended” on February 8 and “which current high dividend targets deserve attention” on February 10.
1) aggressive: “big finance” benefits from the steady growth policy. Whether it is “braking downhill” (09q2, 10q4 and 12q4 economic stabilization in stages) or “stepping on the accelerator” (continuous double drop stimulation from 2014 to 2015), there are excess returns on the CSI dividend index at the stage of steady growth policy. Most of the constituent stocks of the CSI dividend index are distributed in industries significantly affected by the economic cycle, such as banking, mining, real estate and chemical industry. The positive correlation between the excess return and the profit level of A-Shares is significant. The CSI dividend index can achieve excess return in the period of economic bottom recovery and recovery. Even if the economy only stabilizes in stages, there will often be 1-2 quarters of excess returns.
2) retreat can be defended: the feature of “large market value + undervalued value” is defensive when the risk falls. When the market risk appetite decreases, the CSI dividend index is relatively defensive. At this time, investors seek anti falling stocks, which is conducive to the blue chip style. We use the implied ERP to measure the change of market risk appetite. Whether it is the decline of risk appetite caused by the short-term sharp decline (such as the financial crisis in 2008 and the money shortage twice in 13 years), or the continuous decline of medium-term risk appetite (such as 15-18 years), the dividend index of China Securities has relatively outperformed wandequan a. Looking back on the year when the currency closed and the valuation contracted, the profit and valuation of the dividend index were relatively stable, outperforming the 300 and 500 indexes.
Following the Federal Reserve’s hand, the increasingly hawk, the inflection point of global liquidity and interest rate, has been formed, and the overvaluation is “squeezing bubbles”.
1) the inflection point of overseas liquidity has been formed, and the follow-up attitude of the Federal Reserve is the main source of market volatility. Although the Federal Reserve raised interest rates by 25bp on March 17, in the past few days, officials of the Federal Reserve have been more and more hawkish, and the yield of US bonds has been higher and higher. The attitude of the Federal Reserve to raise and shrink interest rates in the second quarter is resetting market expectations. Such expectations are the main source of increasing market volatility. We published an in-depth topic on March 15. Under the framework of the global liquidity clock, we traced back to the Enlightenment of four rounds of global capital flows in 20072022 and the impact of water release and collection by the Federal Reserve on the market.
2) from mid and late April to may, the attitude of the Federal Reserve may have another impact on the market. 1) The minutes of the interest rate meeting will be released later to explain in more detail the Fed’s attitude towards shrinking the table. 2) Interest Conference on May 3-4. Dot matrix the forecast of interest rate in 2022 is raised from about 1% in December 2021 to nearly 2%, and the forecast of interest rate in 2023 is raised from 1.6% in December 2021 to 2.8%. The expected upward speed of interest rate is a little too fast, which is not good news for the capital market, especially for high valuation varieties.
3) in the 2022 US mid-term election, inflation is not only an economic issue, but also a political issue in the game between the two parties. Earlier, when Powell attended the hearing, a congressman asked “so you’re going to do what it takes to protect property?” (maintain price stability at all costs), Powell replied “yes”. Ten years ago, when the European debt crisis was more serious in 2012 and the euro was facing a crisis of confidence, Draghi, then president of the European Central Bank, used “whatever verittakes” to defend the euro. When using such words at the central bank level, we can see the Fed’s firm attitude towards fighting inflation.
4) in addition to inflation and supply problems, the spiral of wage stickiness may be the “culprit” restricting the Fed. Since the “Russia Ukraine conflict” on February 24, commodities and Shenzhen Agricultural Products Group Co.Ltd(000061) have continued to rise, the duration of high inflation has intensified, and market concerns have intensified. In addition, the outbreak of the United States “helicopter money”, the U.S. job market supply shortage is more serious. In the process of the Fed’s interest rate increase and reduction in 2015, it was a good data that the new non-agricultural employment could reach about 200000. Recently, we saw that the new population of non-agricultural employment in the United States in February was as high as 678000.
In addition to the impact of price and other factors on inflation, if employment wages continue to rise and form a spiral of inflation expectations, for the Federal Reserve and Powell, the subsequent process of raising interest rates and shrinking the table may have to be accelerated and frequency increased under the guidance of “at all costs”.
5) the current round of global water release is quite different from that after the 2008 financial crisis, and the fluctuation and differentiation of the capital market will be greater. Since the covid-19 pneumonia epidemic in 2020, the Federal Reserve has released a lot of water, and the funds flowing to the capital market, especially the stock market, are more obvious and more in proportion than QE after the 2008 financial crisis. The main reasons are: ① the rate of return of the real economy is lower than that of the capital market; ② the real investment and construction are also seriously affected by the epidemic; ③ the global supply chain system is blocked, slowing down the pace of economic and trade exchanges and investment of multinational enterprises; ④ the phenomenon of “helicopter throwing money” and serious residents waiting for work at home. After the corresponding contraction tables, interest rates and liquidity contraction policies are launched, the capital market and stock market will probably suffer greater volatility and greater differentiation. The overvalued sector will squeeze bubbles. The global capital market and investment framework system may need to assess the impact of interest rate upward on asset pricing. This new change may break the old consensus that we have adapted to in the past few years, and the “new consensus” is being established.
Investment suggestion: increase the “big finance” direction of high dividends (banks, real estate, utilities and coal) and steady growth (banks and real estate chain). Growth stocks played a good “guerrilla war”. In the respite period of the first quarterly report, they rebounded based on the decline and turned small victories into big victories, such as photovoltaic, wind power, intelligent driving, Internet, digital economy, etc.
What is big finance? Since the publication of “it’s the turn of big finance” on January 3, the market has been in doubt about what big finance includes and what it is, and believes that “big finance” is just a bank. This understanding is one-sided and incomplete. When we use the concept of “big finance”, we give the meaning of big finance from two dimensions.
First, from the perspective of economic growth, big finance includes the direction of wide credit and wide currency represented by bank finance and the direction of steady growth represented by the real estate chain.
Second, from the perspective of investment strategy, most of the major financial targets have the characteristics of high dividends. If we take the CSI dividend index as the representative of high dividends, we find that banks and real estate account for nearly one-third of our A-share high dividend varieties, and the industries with high dividends are banks, coal, steel, real estate, etc. As of March 27, the dividend index has also achieved a positive return of 3.78% in the main indexes since 2022.
1) the macro economy is picking up from the bottom and is still in the window period of monetary easing and credit easing as a whole. The banking sector with low valuation, high dividend attribute and pro cyclical attribute is expected to be favored. At the same time, the recovery and improvement of the real estate chain will contribute to the further recovery of the quality of bank assets. We can focus on large banks with undervalued “stagflation” and high dividend yield, and urban commercial banks and rural commercial banks with good performance growth in Chengdu Chongqing economic circle, Yangtze River Delta economic circle and other places.
2) know from a little. On March 26, China Shenhua Energy Company Limited(601088) issued an annual announcement. In 2021, the revenue was 335.22 billion (+ 43.7%), the net profit attributable to the parent company was 50.27 billion (+ 28.3%), and the cash dividend per share was 2.54 yuan, with a dividend rate of 100.4%, which exceeded the expectation. In the direction of China Shenhua Energy Company Limited(601088) high dividend and high dividend, such as coal, steel, public utilities, etc.
3) the relaxation of real estate supply side has formed strong expectations and is gradually landing. On the demand side, due to the ongoing implementation of urban policies, the data is expected to improve after the impact of the epidemic is weakened, and real estate enterprises can be allocated preferentially. In the follow-up, especially in the quarter of the annual report, the accrual and impairment of the post real estate chain cycle gradually subside, and after the sales data gradually improve, the varieties of home furnishings, consumer building materials, household appliances and other products in the post real estate cycle can be gradually added.
“Growth stocks” fight guerrilla warfare well and accumulate small victories into big victories. On the one hand, combined with the better direction of the first quarterly report, photovoltaic, wind power and new energy in growth stocks are closely related. On the other hand, the financial Commission issued a timely voice to actively support qualified enterprises to list abroad and strive to keep the channels for overseas listing unblocked. Zhonggai shares and Internet economy related are expected to usher in a warm wind. However, due to the rapid and deep decline in the early stage, the current growth stock opportunity is more suitable for “guerrilla warfare”, and a small victory is a big victory. Focus on Hong Kong stocks, car chips and digital economy related to zhonggai Internet, photovoltaic, wind power, new energy chain, intelligent driving, etc.
Risk tip: the conflict between Russia and Ukraine escalated, overseas interest rate hikes exceeded expectations, and the epidemic spread exceeded expectations.
