On April 25, the Shanghai stock index fell by more than 5% and fell to 3000 points, a new low since July 2020.
After hours, the Chinese reporter of securities companies interviewed a number of strategic and macro analysts of securities companies, and also collected the latest reports of some analysts. The reporter noted that some analysts believe that the current market is already at the bottom of the region and is not pessimistic about the future market. In the long run, the allocation at this time has a high cost performance.
“now, the market has been desperate, and it is time for funds to give up cheap chips at will. In operation, it is suggested that heavy positions wait and see, low positions gradually build positions, pay attention to oversold stocks and pick up cheap chips killed by mistake.” One analyst said
For the reasons for Monday’s sharp market decline, analysts believe that the recurrence of the Chinese epidemic is one of the important factors. The performance of some key companies (such as an inverter leader) was significantly lower than expected, which also caused the market to worry about the fundamentals of relevant industries. In addition, the possibility of the Federal Reserve’s table contraction cycle has opened, and the interest rate gap between China and the United States has been upside down. The pressure of capital outflow is also one of the reasons.
sharp decline due to multi factor disturbance
The reporter noted that securities companies generally believe that the sharp decline on the 25th came from the disturbance of various factors, especially the trend of China’s epidemic has become the focus of market attention in the near future.
Sinolink Securities Co.Ltd(600109) Macro Analyst Duan Xiaole believes that the market’s concerns about yesterday’s sharp decline come from three aspects:
1) the epidemic situation in China has been repeated, and the epidemic situation in various places has erupted in a divergent manner. At present, it was originally the peak season for construction. The closure of cities and logistics congestion have had a significant impact on the current economic activities, and the market’s concern about the economy in the second quarter has increased;
2) the epidemic situation in China has a great impact on the supply chain of some industries. Overseas orders have gradually shifted out of China to Southeast Asian countries with smooth supply chain such as Vietnam and India. The market is worried that China’s exports may be lower than expected;
3) in the current financial reporting season, the performance of some key companies (such as a leading inverter) was significantly lower than expected, causing the market to worry about the fundamentals of relevant industries.
Citic Securities Company Limited(600030) chief strategist Qin Peijing believes that judging from the structural characteristics of transaction congestion, the recent capital outflow mainly comes from hot money and retail investors. Judging from valuation, redemption and position, the position adjustment and position reduction of institutional funds are in the end, and the market sentiment has dropped to the low point since 2018. The dynamic P / E ratio of major indexes has also fallen below the 25% quantile since 2010, of which the major blue chip indexes are below the 10% quantile since 2018.
Qin Peijing believes that the long-term fundamentals of China’s economy will not change, and the medium and long-term allocation cost performance of the current index is prominent. It is expected that the steady growth target for the whole year will remain unchanged. With the weakening of the impact of the epidemic, the disclosure of quarterly reports, the three factors of interest rate increase of the US dollar as scheduled, and the three main lines of infrastructure, real estate and consumption are expected to usher in a synchronous recovery in May. The medium-term repair market is gradually approaching. It is suggested to continue to stick to the main line of steady growth and firmly layout the varieties with low valuation and expected low.
Zhang Chi, chief of open source securities strategy, believes that the overall weakening trend of market fundamentals has not changed, and the core of the rebound is liquidity driven. The key new variable that is not optimistic about the situation in April is the epidemic situation. ① The epidemic not only further weakened the expectation of economic fundamentals; ② The epidemic will also boost China’s CPI expectations and narrow the real interest rate gap between China and the United States. ③ The epidemic will increase the demand for funds in the service industry, leading to the flow of current funds to entities, thus squeezing the liquidity of the financial market.
Zhang Chi believes that looking forward to May. (1) once the Russian and Ukrainian debt situation continues to rise, the key will be to ease the volatility of the overseas market as scheduled: (1) once the Russian and Ukrainian debt situation continues to rise, the yield will continue to increase; (2) CPI will fall again; (3) The real interest rate difference between China and the United States is expected to expand again, and the RMB exchange rate will stabilize again; (4) China’s monetary policy returns to “focus on me” – the market will return to the rebound logic of March, driven by liquidity, and the style will still be growth.
China International Capital Corporation Limited(601995) point of view: the market correction on Monday is the continuation of last week. There are more comprehensive internal and external factors, but it may be mainly internal factors. The tightening trend of major overseas central banks continues, and the geographical conflict is still deadlocked. The major overseas stock indexes rebounded after March 16. The overall range has fluctuated since the end of March and has not reached a new low. However, China’s A-shares and Hong Kong stocks have significantly corrected after a slight rebound. A-shares have reached a new low since the beginning of the year, which may be more affected by China’s factors. With the increasing fluctuation of RMB exchange rate, the market has paid more attention to the RMB exchange rate and potential capital flow in the near future, but the growth expectation is the more critical factor.
Wu Kaida of Debang securities and others believe that there are two reasons behind the double killing of stocks and remittances on Monday:
First, under the repeated epidemic situation, the resumption of work and production is slow. Since mid March, there have been more than 10 provinces and cities with more than 10 new + asymptomatic cases in China, and economic activities are bound to be affected under the impact of the epidemic. High frequency data show that economic activity is relatively sluggish. On April 24, the quantile of congestion delay index in the top 10 cities of 2021gdp was only 24% of that in the past three years, the quantile of passenger traffic volume in the top 10 cities was 12%, and the number of flight plans was the lowest. The performance of some listed companies in the first quarter fell. The pressure at the outlet end gradually appears. In March, PMI’s new export orders were 47.2% (the previous value was 49%), imports turned negative year-on-year, and the high level of OECD comprehensive leading indicators fell.
Secondly, the probability of the Fed’s table reduction cycle is about to open, and the interest rate gap between China and the United States is upside down, so there is a certain outflow pressure on funds. According to the data of the Central Clearing Company and the Shanghai clearing house, the bonds held by overseas institutions decreased by 80.4 billion yuan month on month in March. In addition, the total net outflow of funds going north has exceeded 48 billion yuan since March.
A-Shares will meet the counter attack
Caitong Securities Co.Ltd(601108) chief strategist Li meicen believes that looking forward to the next 1-2 quarters, the market will be getting better and better. We should cherish the “cheap time” in the current bottom area, and A-Shares are expected to meet the counter offensive moment of “Normandy landing” and “infinite scenery in dangerous peaks”
Li meicen said that at present, it is in a stage of high exchange rate expectation pressure, stock market stock game and pessimistic liquidity. Coupled with the repeated epidemic and other factors, the Shanghai composite index is close to the previous low again, and investors are more pessimistic. This week is a key decision-making week, and the uncertainty of investors’ attention is becoming clear: ① the Politburo meeting in April set the tone for the economy and epidemic prevention and control in the second quarter to stabilize investors’ expectations. ② After the disclosure of the first quarterly report, investors are expected to turn to the interim report. ③ On May 3 and 4, the Fed’s interest rate meeting asked whether the pace of raising and shrinking interest rates throughout the year would be “more hawkish” or whether the price was basically price in.
First, in terms of economic fundamentals, the comparative advantage of China’s economy will return. At present, China’s fundamentals are hovering at the bottom and Europe and the United States are at the peak. If China’s epidemic improves in the second half of the year, the supply chain recovers, and overseas crosses the recovery peak, China’s economy will run upward, while overseas will run downward, and our comparative advantage is expected to return.
Second, corporate profits are expected to gradually stabilize and recover.
From the perspective of the past 20 years, the downward cycle of A-share earnings is 6-8 quarters. In the second and third quarters of this year or at the end of A-share performance, it will gradually improve in the fourth quarter.
Third, at the liquidity level, the market liquidity in the first half of the year was poor for two reasons: 1) the Federal Reserve raised interest rates and funds returned to the United States; 2) The market decline since the beginning of the year has put pressure on the issuance of public funds, and some absolute income products have also reduced their positions. In the case of less incremental funds, the market showed the trend of stock game in the whole first half of the year. Looking back, if the Fed does not make a more “Eagle” statement in the follow-up, with the prominent comparative advantages of China’s economy, overseas funds may return to emerging markets again, especially the Chinese market with significant medium and long-term allocation value.
Wang Delun, chief economist of Xingzheng asset management, believes that the Politburo meeting at the end of April is about to be held, and the measures to stabilize growth are expected to be further clarified. At the same time, the trend of China’s epidemic situation has improved, which also provides favorable conditions for adding weight to steady growth. The market is full of expectations for the Fed’s interest rate hike in May. After the FOMC meeting is completed, the superposition and resumption of work and production will be promoted in an orderly manner, and the growth sector is expected to usher in phased breathing opportunities.
In terms of industry, Wang Delun is optimistic: ① benefiting from the stimulation of steady growth signal, it is expected to usher in undervalued sectors such as finance, cycle, real estate, construction and building materials that are expected to repair the valuation market; ② New infrastructure directions with more definite policy and data effects, such as digital economy, power grid transformation, wind power, photovoltaic, etc.: from the perspective of the local two sessions, the new infrastructure is one of the main starting points for all localities to promote economic growth, which is in line with the long-term concepts of “double carbon” and “high-quality development”; ③ Consumer sectors related to post epidemic recovery; ④ High end manufacturing sectors with oversold rebound: such as new energy vehicles, semiconductors, military industry, etc., as well as growth sectors with low to high penetration, such as smart cars.
Founder Securities Co.Ltd(601901) Zhao Wei said that the bottom is falling out, and the market is born in disbelief. Although this truth is simple to say, it is very difficult to do it in despair and stick to a belief. Now, the market has been desperate, and the funds are free to give up cheap chips. It’s time for people to abandon themselves. In terms of operation, it is suggested that those with heavy positions should wait and see, and those with low positions should gradually build positions, pay attention to oversold stocks, pick up cheap chips killed by mistake, avoid delisting risk stocks, and continue to pay attention to the “three low” stocks with low, low and undervalued value.
Western Securities Co.Ltd(002673) Yi Bin believes that, on the whole, the current market valuation adjustment is close to the historical limit level. From the price comparison relationship between stocks and bonds, the difference between the current implied yield of A-Shares and the yield of 10-year Treasury bonds has also reached a new high since the financial crisis in 2008, indicating that the investment value of equity assets is prominent. With the promotion of the epidemic policy and the landing of the Fed’s interest rate hike boots in May, the market is expected to usher in a rebound window in the future.
“buy in the second quarter, harvest in the third quarter”
China Securities Co.Ltd(601066) chief strategist Chen Guo said that looking for hope in despair, Q2 bargain hunting layout, Q3 waiting for harvest.
Chen Guo said that the environment faced by the A-share market is a consensus with unfavorable profitability, liquidity and risk appetite. But on the one hand, the reduction of market position is a favorable factor. On the other hand, we can only believe in probability events and see what the market has not seen today. The probability is that the second quarter is the bottom of the profit, and the probability is that the Fed’s efforts to increase interest rates and shrink the table are the largest in the second quarter (May and June). In the follow-up, China’s demand for steady growth continues to rise, the possible marginal improvement of the liquidity environment is a high probability, and the marginal improvement of epidemic expectation and risk preference is also a high probability. Buy in the second quarter, harvest in the third quarter, is a high probability.
“I once thought that there was a good opportunity for the market when the covid-19 epidemic was the most serious in 2020. Today, the epidemic in Shanghai and other places also has different emotions. I think that from a medium-term strategic perspective, today’s Omicron is in line with the law of human cognition, and the continuous reduction of covid-19 toxicity marks that mankind is in sight of entering the post epidemic era. No matter what the path, we can see that life will return to normal.” Chen Guo said.
In terms of low-level layout, Chen Guo believes that the first most probable event is that the epidemic situation will always improve. Omikron is difficult to control, but Shenzhen has cleared it, Jilin has also controlled it and began to return to work, and Shanghai will always do it. After Shanghai has done so, even if other places spread again, the market’s expectation and mood for the epidemic will be better than now. Therefore, the direction of damage and repair of the epidemic is worth considering. When the stock is pessimistic, we should make layout and have opportunities to make money.
In addition, Chen Guo believes that another high probability event is steady growth and will be overweight. “Especially after the epidemic is controlled, whether it is the first priority or not is an important matter. The greater the efforts to increase steady growth, the greater the elasticity of economic recovery in the third quarter. The structure of steady growth is not clear, but monetary policy as a supporting is certain. Every dark cloud has Phnom Penh. When today’s devaluation really comes, it is conducive to tomorrow’s export on the one hand and the opening of loose space on the other.”
Chen Guo also said: “since the end of last year, we have been strategically conservative. Now we are strategically neutral and not radical, but we are not blindly retreating and bargain hunting. Tactically, the most appropriate stage is not positional warfare, but mobile warfare, which turns small victories into big victories. At the same time, I believe that the probability conditions will continue to improve, and the day when we turn to strategic counter offensive will not be too far away.”
Sealand Securities Co.Ltd(000750) Hu guopeng and others believe that the market ushered in a cathartic sharp decline on April 25, but with the substantial adjustment of the market, the indexes gradually entered the value range and should not be overly pessimistic.
First, after Monday’s decline, the valuation quantiles of major indexes have been in a relatively cheap position. Among them, the Shanghai stock index and gem index are located at about 20% of the valuation quantiles in recent 10 years, and all a are located at about 30% of the valuation quantiles in recent 10 years.
Second, after effectively controlling the epidemic, stick to economic construction as the center, and steady growth is still the focus of policy. The implementation of stronger macro policies to hedge the impact of the epidemic and make the economy return to more than 5% in the second quarter is the basis for achieving the annual target of 5.5%.
Third, from the perspective of overseas disturbance factors, the strongest tightening expectation of the Federal Reserve is from May to June. It is almost certain to raise interest rates by 50bp in May. The market tends to set prices in advance. The actual rate increase range and frequency of the Federal Reserve in the second half of the year will probably be lower than the most extreme expectation at present.
Hu guopeng and others suggested that bargain hunting layout, structurally optimistic about consumption, and focus on three segments. First, food and beverage, catering and tourism, hotels, automobiles, household appliances and other industries that have been fully adjusted and benefited from the marginal improvement of the epidemic situation; Second, agriculture, forestry, animal husbandry and fishery benefiting from the rise in product prices and inflation; Third, medicine and biology with low valuation.
