After the decline in the beginning of the year, the A-share market has recently entered a low-level consolidation pattern – the index runs sideways, the sectors change one after another, the trading volume has not been effectively enlarged, the capital wait-and-see atmosphere is still strong, and investors are eager to establish the bottom of the market as soon as possible.
What are the characteristics of the bottom of a shares? Was the previous 3023 “bottom”? If the bottom is established, which sectors will lead the index counter attack? Around these issues, the agency recently launched discussions.
five features at the bottom of history
China International Capital Corporation Limited(601995) strategy team recently released a research report, combing the formation process of six phased bottoms of A-share market since 2008, and summarizing the important bottom characteristics of five dimensions: Fundamentals, policies, valuation, capital and behavior.
In terms of fundamental signals, when the market bottoms, it often leads the rebound of profit growth for about 1-2 quarters or basically at the same time. However, with the differentiation of profit cycles of various A-share industries in recent years, the rhythm of bottoming of various sectors is different. For example, 2012 and 2016 were the bottom of gem and traditional blue chip respectively. The former was related to the upward cycle of gem profits under the rise of Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) trend, while the latter occurred under the background of strong recovery of traditional industries and the decline of high growth rate of gem.
In terms of policy signals, there is often support from the macro and regulatory levels in the second half of the previous market adjustment process, especially in the final period. Whether policy measures help to resolve the core contradictions leading to market adjustment is the key to judge whether the market can reach the bottom in stages. For example, at the end of 2018, the policy level set the tone to support the development of private enterprises and introduced measures to support the financing of private small and medium-sized enterprises. After the credit risk problems were gradually resolved, the market gradually stabilized.
In terms of valuation signals, previous periodic bottoms often correspond to the downward trend of market valuation exceeding expectations. Although extremely low valuations cannot judge whether the market bottoms alone, they may correspond to the increase in the probability of obtaining high returns in the future.
In terms of capital signals, the bottom area of A-Shares is often accompanied by a significant increase in industrial capital holdings or a decrease in net holdings, as well as a significant cooling of market trading sentiment. The four phased bottoms in 2012, 2014, 2016 and 2018 showed that the proportion of phased industrial capital increase in the turnover of A-Shares exceeded 0.3%, and the amount of net reduction decreased significantly; The bottom period is often accompanied by a turnover level of less than 1.5%, or the turnover shrinks by more than 60% compared with the previous high.
In terms of behavioral signals, the make-up decline of strong sectors or strong stocks can be regarded as an important behavioral signal in the final stage of adjustment. The logic behind it is that at the end of the market adjustment, the funds with relatively flexible on-site allocation suffer relatively little damage in the early stage due to the holding of strong sectors and strong stocks. However, with the valuation differentiation of stocks and sectors to a certain extent, there is a demand for position adjustment of these funds, but there is almost no increase in funds outside the market. Finally, the position adjustment and stock exchange of on-site funds leads to a large decline in strong stocks in the early stage.
China International Capital Corporation Limited(601995) concluded that, on the whole, the key to the formation of phased bottom may be the reversal or expected improvement of the main factors causing the adjustment. Among them, effective policy signals and fundamental signals of improved profit expectations are important conditions for the formation of phased bottom, and signals at valuation, capital and behavior levels can play an auxiliary role in judgment.
has the market bottomed out
The metalworking teams of several securities companies expressed their views and analyzed the data characteristics of the current market from the perspectives of valuation, technical indicators and sector rotation. Some metalworking analysts said that the current market is similar to the fourth quarter of 2018. If the profits of subsequent enterprises are stable, the market may have little room for decline, and the long-term dimension should not be too pessimistic.
Gf Securities Co.Ltd(000776) Anning, chief of metalworking, said that from the emotional data, the current strength index of the moving average (the proportion of long and short moving average is poor) is at a low level, and the proportion of stocks above the 200 day moving average is at a low level, which is similar to that at the end of 2018; From the perspective of valuation, based on the consistent expected profit in 2022, multiplied by pe-ttm in 2018, the market value of CSI 500 index is lower than that at the end of 2018, and the valuation levels of CSI 300 and SSE 50 are almost the same as that at the end of 2018.
“Therefore, if the profits are stable, there is little room for the market to fall.” Anning Ning stressed, “but it should be pointed out that the calculation is based on the consistent expected profit in 2022. If the inflation exceeds the expectation, the profit may not meet the expectation.”
Yang Yong, chief financial officer of Anxin securities, believes that from the perspective of absolute and relative valuation, the pe-ttm on the day of the lowest point of the Shanghai composite index is about 11.7 times, corresponding to the 1% quantile in the past three years, that is to say, both the adjustment time and the adjustment range of the Shanghai composite index are relatively sufficient.
growth style is expected to lead the counter offensive
Lin rongxiong, chief strategist of Anxin securities, recently released a research report, which made a detailed analysis of the style evolution in the process of market bottom rebound. It said that in the bottom grinding stage of “from the bottom of policy to the bottom of market”, the performance of value reverse cycle (infrastructure, finance and real estate) and weak cycle (public power and pharmaceutical consumption) industries is often better than that of growth industries; However, after the bottom grinding stage, the risk appetite rebounded, the market generally returned to the growth style, and TMT, military industry and other high-risk preference sectors performed better.
“When the market enters the reversal stage, the industries that fell the most in the early stage do not necessarily get the most increase after the market bottomed out. On the contrary, the industries that performed in the previous rebound often continue to lead the increase after the market reversal.” Lin rongxiong reached a conclusion after looking back on history.
China Merchants Securities Co.Ltd(600999) strategy Zhang Xia is also optimistic about the performance of track stocks after the bottom is established. In its view, the essence of track investment is boom pursuit. Performance advantage, profit growth, policy orientation, industry pattern change, technology change, liquidity and valuation are important variables for track comparison. In addition, we also need to pay attention to transaction congestion, chip distribution, etc.
Through the comprehensive evaluation of various indicators, Zhang Xia believes that the current prosperity of CXO, energy storage and photovoltaic track is relatively good, the recent trading heat of semiconductor track is high and the sector liquidity is good, and the green electric track has the advantage of PEG. The above track assets deserve the attention of investors.
China International Capital Corporation Limited(601995) it is suggested to be patient in the market bottom grinding stage and pay attention to the potential turnaround of the market in the future: first, the situation in Russia and Ukraine is clear and the global inflationary pressure is relieved; Second, the “steady growth” policy continues to work, especially in real estate and other fields with more concerns at present; Third, the situation of local epidemic prevention and control in China has been further clarified; Fourth, the concept of shares is relatively clear.
