In fiscal year 2021, the earnings of Hang Seng and MSCI China indexes were lower than market expectations except for the financial sector
The performance of US stocks in the fourth quarter of 2021 exceeded market expectations
Pay attention to the potential callback risk of the US stock market and its spillover effect on the Hong Kong stock market
Offshore China Stock Market: as of April 6, 98.8% of the constituent stocks of Hang Seng Index and 90.1% of the constituent stocks of MSCI China Index (calculated by weight) have announced the results of fiscal year 2021. 1) The revenue of constituent stocks of Hang Seng index was 1.7% higher than expected, and the net profit was 2.6% higher than expected. However, except for the financial sector, the revenue of index constituent stocks was 1.9% higher than expected, but the net profit was 5.1% lower than expected. The revenue of MSCI China Index constituent stocks was 0.9% higher than the market expectation, and the net profit was 4.0% lower than the expectation. Except for the financial sector, the revenue of index constituent stocks was 0.6% higher than the market expectation, and the net profit was 9.8% lower than the expectation. 2) The market generally lowered the net profit of Hang Seng Index and MSCI China Index in 2022 / 2023, with the only exception of the energy sector. We saw the biggest decline in profits in the optional consumption, communication services and real estate sectors. We believe that this is due to the persistence of multiple macro headwinds, including the outbreak of Omicron epidemic in first tier cities, the liquidity crisis of real estate enterprises, the previous regulatory measures for the new economic sector, the surge in commodity prices and the disturbance of the global supply chain. 3) Looking ahead, the market unanimously predicted the revenue growth of Hang Seng Index in 2022 and 2023 to be 9.2% and 9.2% respectively; The net profit growth in 2022 and 2023 is consistently predicted to be 2.2% and 16.7% respectively. The market unanimously predicted the revenue growth of MSCI China Index in 2022 and 2023 to be 11.7% and 11.0% respectively; The net profit growth of MSCI China Index in 2022 and 2023 is unanimously predicted to be 13.5% and 18.7% respectively.
US stock market: 1) according to FactSet’s data, in the fourth quarter of 2021, the actual revenue of 78% of S & P 500 Index constituent stocks was higher than expected; Overall, the actual revenue announced by listed companies was 2.9% higher than the market expectation. The actual EPS of 76% of the S & P 500 Index constituent stocks was higher than expected; Overall, the actual earnings announced by listed companies were 7.8% higher than market expectations. 2) In the fourth quarter of 2021, the revenue of the constituent stocks of the S & P 500 index increased by 16.2% and the profit increased by 31.2%; In 2021, the annual revenue increased by 16.5% and the profit increased by 47.7%. 3) Looking to the future, the market expects the revenue to increase by 10.7% and the profit to increase by 4.8% in the first quarter of 2022; It is expected that the annual revenue will increase by 9.0% and the profit will increase by 9.3% in 2022.
Our view: the valuation of Hang Seng / MSCI China / CSI 300 index is 10.3 times / 11.1 times / 12.5 times forward-looking P / E ratio respectively (the median level in the past three years is 11.2 times / 13.0 times / 13.8 times). The market may fluctuate at the bottom for a period of time, with increased volatility. We are concerned about the pressure of high inflation in the United States and the risk of accelerating the pace of interest rate hikes in the coming months. If the US stock market callback, it will have a spillover effect on the China concept stock market and Hong Kong stock market. Main risks: 1) global epidemic; 2) The situation in Russia and Ukraine has further deteriorated, and the sanctions measures of western countries have exceeded expectations; 3) The accelerated pace of the Fed’s interest rate hike may lead to a correction in US stocks, which is difficult for the Hong Kong stock market to survive; 4) China’s economic recovery is weak, but the policy strength is less than expected; 5) China US relations continued to be tense and even deteriorated. Main catalysts: 1) cross border audit and supervision cooperation negotiation is expected to make progress; 2) China’s economic recovery is better than expected; 3) The epidemic situation in China and Hong Kong has reached an inflection point.
