core conclusion: ① from the perspective of investment clock, stock market valuation and time and space adjustment, the probability of A-Shares has entered the bottom of a cycle. ② Learning from history, the signal of rebound to reversal is that about three of the five leading indicators of fundamentals have stabilized. At present, one has appeared and continues to track. ③ Continue to focus on the main line of steady growth, in which the new infrastructure is more flexible, such as digital economy and low-carbon economy, and gradually pay attention to the consumption related to economic recovery.
rebound to reverse what conditions do you need
Since the beginning of this year, A-Shares have continued to decline for four months. In late April, the Shanghai Composite Index fell below 3000 points and finally closed above 3000 points with the help of warmer policies. Investors still have doubts about how long the current rise can last and whether it will reach a new low in the future. Based on the historical analysis, the characteristics of the bottom area of the market have appeared, and what conditions are needed for the market rebound to evolve into reversal in the future.
1, layout period from the end of policy to the end of performance
It is difficult to predict the rise and fall of the short-term market, and the location analysis of the large cycle is relatively easy. For example, it is difficult to predict the weather of a day, but it is relatively easy to analyze the location of the season. From the perspective of a round of economic cycle and bull bear cycle, that is, the time dimension of 3-4 years, from the analysis of the operation law of macroeconomic cycle and the valuation level of stock market, the characteristics of the bottom area of the market have appeared.
macro background: the stock market often stops falling in the late recession macroeconomic cycle is the general background of stock market operation. In different stages of the economic cycle, the stock market will have a cycle of bull and bear. In Xun Yugen’s strategy: less is more, with the help of the improved investment clock analysis, the rotation order of major assets is debt bull stock bull commodity bull cash bull. In stagflation and early recession, the stock market tends to fall. It will take about three and a half years for the investment clock to complete a circle. We also pointed out in many early reports such as looking forward to 22 years: our three special judgments – 20211219 that A-Shares will be similar to US stocks, and there will be a decline in about 3-4 years. When the investment clock enters the late recession, the stock market index begins to stabilize and bottom, and is expected to rise gradually. The sign of the late recession is the shift of macro policy to easing. At this time, although the fundamentals are still downward, the policy is gradually overweight, and investors begin to regain confidence in the economic recovery. See Table 1 for the verification data of past history, and the overall back test interval is 04 / 12-21 / 06.
For the 22-year market, we made qualitative judgments as early as “Qu Zequan, waste is straight – China’s capital market outlook 202220211211” and “outlook 22: our three special judgments-20211219”: “2022 is a rest in the bull”, “if the stock fund index returns to the historical average next year, the increase of the fund index from now to the end of next year will be about – 6%”. These cautious inferences are based on the deduction of the economic cycle and the law of bull and bear in the stock market. Of course, we did not expect the market to fall so violently at the beginning of the year. This sharp decline stems from the resonance of many factors such as the rise of interest rates by the Federal Reserve, the conflict between Russia and Ukraine and the rebound of the Chinese epidemic, but the core logic behind it is the economic cycle.
In March of 20 years, the real GDP growth hit the bottom and rebounded, and the inflation was still low. 20 / 03-20 / 12 was the recovery period of the investment clock; Inflation began to rise in 21 years, but the annualized growth rate of real GDP in the second quarter picked up compared with that in the first quarter, and the first half of 21 years was in an overheated period as a whole; Subsequently, economic growth fell, inflation rose to a high point, and the investment clock entered a stagflation period in the second half of 21 years; Since the end of the 21st century, the economic downturn has entered the late stage, and inflation has begun to decline, which belongs to the early stage of recession in the investment clock. The reason behind the continuous adjustment of the stock market since the second half of 21 years is that the investment clock has entered the stagflation and early recession. At present, the investment clock is entering the late stage of recession. The central economic work conference in December last year marked a positive policy shift. The meeting of the Political Bureau of the CPC Central Committee on April 29 further clarified that the policy is being overweight. According to the rotation law of major assets of the investment clock, the stock market is expected to stabilize.
market environment: the adjustment time and space is significant, and the valuation is already at the bottom from the absolute valuation point of view, at the low point of 04 / 26, all A-share PE (TTM) was 15.2 times, which was close to the mean value – 1 times standard deviation (14.5 times) since 2013, and Pb (LF) was 1.50 times, which was lower than the mean value – 1 times standard deviation (1.59 times) since 2013. From the comparison of major categories of assets, the relative valuation shows that at the low point of 04 / 26, the A-share risk premium rate (1 / all A-share pe-10-year treasury bond yield) is 3.75%, which is higher than the average value + 1 standard deviation (3.42%) since 2013, that is, the stock market is significantly more attractive than the bond market, and the stock bond yield ratio (CSI 300 dividend rate / 10-year Treasury bond yield) is 0.85, which is higher than the average value + 1 standard deviation (0.82) since 2013, which also reflects that the stock market is significantly more attractive than the bond market. From the perspective of individual stocks, the proportion of A-share companies that broke the net assets (the proportion of companies whose share price fell below the net assets of all listed companies) rose to 10.8% on April 26, 2005, October November 2008, the end of 18, the beginning of 19 and February May 20, respectively. Compared with the valuation level at the bottom of the historical bear market, the A-share market has experienced five bull bear cycles since 2005. Looking back on the valuation lows at the bottom of previous markets, the regional valuations at the bottom of previous markets are different: the PE of all A-shares is about 12-18 times, with an average of 14.6 times and 15.2 times this time; Pb is about 1.4-1.9 times, with an average of 1.66 times and 1.60 times this time; The risk premium rate of A-Shares is about 2.3% – 4.9%, with an average of 3.84%, which is 3.75% this time; The stock debt return ratio is about 0.8-1.1, with an average of 0.94 and 0.85 this time; The net breaking rate of A-Shares is about 2% – 24%, with an average of 11.3%, and the lowest is 10.8%. Generally speaking, the valuation at the market low at the end of April is in the bottom area (see Table 2 for details).
From the time and space of index adjustment, the time and space of this round of adjustment of CSI 300 has been relatively obvious. Since 2005, CSI 300 has experienced four complete adjustment cycles. In addition to the adjustment under the background of the 2008 financial crisis, the previous decline lasted about 12 months, with a maximum decline of about 30% – 45%. The current round of CSI 300 decline has lasted for 14.4 months (21 / 02-22 / 04), with the largest decline of 37%. Compared with history, it is obvious in the time and space of this round of adjustment. The current round of adjustment of Wande quana is not as good as history in time, but it is more obvious in space. The current round of decline of Wande quana has lasted for 4.5 months (21 / 12-22 / 04), with the largest decline of 29%. Compared with the four rounds of adjustment cycles since 2005, except 2008, the previous decline lasted about 11 months, with the largest decline of about 30% – 50%.
the layout period from the end of market entry policy to the end of performance we pointed out in “looking at the bottom of policy, market and performance in the historical recovery – 20220406” that the process from the bottom of policy to the bottom of performance is a complex bottom building process. In this process, if the policy is strong, the market center will rise slowly. Similar to 2005, 16 and 19, the policy turned to the bottom of performance for the first time, and the range of Shanghai Composite Index rose or fell by 7.6%, 0.6% and 15.8%; If the policy is not strong enough and the market focus is slightly lower, similar to 2008 and 12, the policy turns to the bottom of performance for the first time, and the range of Shanghai composite index rises or falls by – 4.3% and – 13.3%. Since the beginning of the policy shift, it indicates that the market has entered the layout period. In the long run, the market has entered a considerable rising market after previous adjustments. In terms of the range, the rise in the later period is much greater than the slight adjustment in the layout period, and the adjustment range is actually very low compared with the later income (see the table below for details). This policy shift began in December last year, marking that the central economic work conference set the tone for comprehensive and stable growth. Then, on March 16, the golden stability conference held a special meeting to emphasize “actively introducing policies conducive to the market”. On April 26, the 11th meeting of the central financial and Economic Commission continued to emphasize comprehensively strengthening infrastructure construction and building a modern infrastructure system. On April 29, the Politburo meeting proposed to “strive to achieve the expected objectives of economic and social development throughout the year and maintain the economic operation within a reasonable range”, requiring “accelerating the implementation of the determined policies” and “stepping up the planning of incremental policy tools”. We expect to add more stable growth policies on the basis of accelerating the promotion of existing policies. It can be seen that the current policy bottom has been very clear. The market is in the middle stage from the policy bottom to the performance bottom, focusing on the long term and entering the layout period.
historical data show that after a large decline, the probability of obtaining positive returns in the future is high this round of decline, the largest decline of the CSI 300 index from the highest point reached 36.7%, and the largest decline of the general index of common stock funds from the highest point reached 30.1%. Looking back since 2002, A-Shares have experienced five complete ups and downs. We calculated in the lost time, look far away – 20220310 that when the CSI 300 fell 30% from five historical highs, the average returns of one-time investment holding for one year and two years reached – 3% and 29% respectively, and the average returns of monthly fixed investment holding for one year and two years reached – 0.3% and 26% respectively; When the common stock fund index dropped by 25% from the five historical highs, the average return of one-time investment holding for one year and two years reached – 2% and 31% respectively, and the average return of monthly fixed investment lasting for one year and two years reached 5% and 26% respectively. In addition, referring to the data of three-year rolling rate of return, it can be found that the current decline of fund net value and CSI 300 has been considerable. If we choose 2013 as the starting point, the current average three-year rolling annualized returns of CSI 300 index and common stock fund index are 5.6% and 12.5% respectively, while the latest three-year rolling returns of CSI 300 index and common stock fund index are 2.9% and 18.3% respectively. Assuming that the three-year rolling annualized returns of the two indexes return to the average at the end of this year, the CSI 300 index and the common stock fund index need to rise by 20% and 6% respectively compared with the current point at the end of this year, that is, the final rise and fall of the whole year is – 2% and – 18%.
2, rebound to reverse what conditions do you need
As analyzed above, from a round of economic cycle and stock market bull bear cycle, the market probability has entered the bottom area. From the historical experience, the bottom is very complex, ranging from 1 year (12-13 years) to half a year (the second half of 2005); There are many forms of space, including U-shaped (the second half of 2005), deep V-shaped (the end of October 2008), W-shaped (12-13 years, lower rear angle), and gentle shallow V-shaped (the end of January 16 and the beginning of January 19). Since the bottom of the market is very complex, the initial rebound will eventually be interpreted as a reversal. What conditions and signals are needed? Three years ago, we combed and analyzed it in “what signal does market reversal need? – 20190220”.
the signal of market reversal can refer to five indicators the market bottom will be formed between the bottom of policy and the bottom of performance. The stock market is the leading indicator of fundamentals. In order to better track the market reversal, we need to find the leading indicator of Fundamentals for verification. In “what signal does market reversal need? – 20190220”, according to the experience of several market bottoms in 2005, 08, 12 and 16, the emergence of market bottoms is accompanied by the stabilization of three of the five leading indicators. See the table below for details. The five indicators are: year-on-year social financing stock / year-on-year loan balance (reflecting monetary policy), cumulative year-on-year infrastructure investment (reflecting fiscal policy), PMI / PMI new orders (reflecting manufacturing industry), cumulative year-on-year sales area of commercial housing (early cycle industry), and cumulative year-on-year sales volume of automobile (early cycle industry). This logical framework explains that the bull market starting point in early 2019 is also effective. For example, when the stock index bottomed in early 19, the four leading indicators of year-on-year loan balance and social financing stock, cumulative year-on-year infrastructure investment, PMI new orders and cumulative year-on-year automobile sales bottomed out.
this time, one of the five indicators has stabilized, and the others still need to be tracked the year-on-year low of the stock of social finance in this round was 10.0% in October of 21. The financing policy was significantly strengthened in the first quarter of this year, and the stock of social finance rose to 10.6% year-on-year in March; The balance of loans in March was 11.4% year-on-year, unchanged from February. Since March, the epidemic has occurred in many places across the country, which has had a certain impact on production, consumption and investment. So far, the remaining four leading indicators have not stabilized. Specifically, first, since the end of last year, the cumulative year-on-year growth rate of infrastructure investment has continued to rise, from – 0.2% in November 21 to 10.5% in March this year. However, under the impact of the epidemic, the construction of short-term infrastructure projects is affected, which may lag the infrastructure investment. From the perspective of some high-frequency indicators of infrastructure, the year-on-year output of rebar in April and the year-on-year operation rate of petroleum asphalt unit in April are lower than that in March, and the cumulative year-on-year infrastructure investment in April may decline. Second, in April, PMI fell to 47.1%, and PMI new orders fell to 42.6%. Third, real estate fundamentals are still falling, and real estate sales have not stabilized. The cumulative year-on-year growth rate of commercial housing sales area in March was – 13.8%, which continued to decline compared with – 9.6% in February; From the high-frequency data of real estate sales in April, as of April 24,30, the year-on-year growth rate of commercial housing transaction area in large and medium-sized cities was – 49.6%, and the cumulative year-on-year decline of real estate sales in April may continue. Fourth, the cumulative car sales in March was 0.2% year-on-year, down significantly from 7.5% in February. Affected by the epidemic, car production and sales may continue to decline in April.
To sum up, among the five leading indicators, only social finance has stabilized, and whether other indicators can stabilize. In the future, we need to continue to track the effect of steady growth policies, China’s epidemic prevention and control, and overseas economic conditions. If the relevant leading indicators can stabilize and recover in May and June, it means that the data in April is the lowest point, then the low point in April supporting the stock market in turn is the lowest point, otherwise the possibility of U-shaped bottom and W-shaped bottom still exists.
the future is long. Don’t panic the most optimistic scenario is that if the low point of the stock market in April is the lowest point, it will take time for the market to recover, that is, the gentle shallow V-shape is difficult to appear the deep V-shape.
As we have analyzed in “three stages of bull market-20190303”, bull market is divided into gestation period, outbreak period and foam period. The initial period of market rise from the lowest point of bear market is the gestation period of bull market. The market form at this stage is “advance two retreat one”. For example, in 2005, the Shanghai Composite Index rose to 1224 on 200509/20 after reaching the bottom at 998 on 200506, up 226 points, with a maximum increase of 22.5%; Then it stepped back to 1067 points on October 28, 2005 (consolidated to 1074 points on February 6, 2005), down 157 points, with a maximum decrease of 12.8%, and retrenched the previous increase of 69% (down points 157 / up points 226). For another example, in 19 years, the Shanghai Composite Index rose to 3288 points on April 8, 2019 after reaching the bottom of 2440 points on January 4, 2019, with an increase of 847 points, with a maximum increase of 34.7%; Subsequently, the Shanghai Composite Index stepped back to the lowest 2646 points during the epidemic in March of 20 years, with a decline of 641 points, with a maximum decline of 19.5% during the period, and retrenched the previous increase of 76% (decline of 641 points / rise of 847 points). The big opportunity of market systematization, that is, the outbreak of bull market, needs a stronger fundamental background.
3, new infrastructure is more flexible
the meeting of the Political Bureau of the CPC Central Committee made it clear that the set goals will not be shaken, and infrastructure construction and consumption are the two main starting points 4 on April 29, the Politburo held a meeting to emphasize “firmly stabilize the economy and strive to achieve the expected goal of economic and social development for the whole year”, which made it clear that the economic growth target of about 5.5% will not waver, eliminating the market’s concerns about the expected goal and policy strength of steady growth. We expect to add more steady growth policies in the future. The meeting pointed out that “we should make every effort to expand China’s demand and play the key role of effective investment”, “comprehensively strengthen infrastructure construction and give full play to the traction and driving role of consumption on the economic cycle”. In the steady growth policy, infrastructure construction and consumption are expected to become the two main focuses. In terms of infrastructure, the meeting of the central finance and Economic Commission on April 26 pointed out the need to comprehensively strengthen infrastructure construction, covering many areas of new and old infrastructure. In terms of consumption, on April 25, the State Council issued the opinions on further releasing consumption potential and promoting the sustainable recovery of consumption, which made it clear that consumption has a lasting driving force for the economy, and put forward 20 key measures in five aspects to promote the development of consumption. In addition, in terms of real estate, the Politburo meeting supported all localities to improve real estate policies based on urban policies, support rigid and improved housing demand, and promote the healthy development of the real estate market. Since the beginning of the year, hundreds of cities have issued policies to relax the property market. In the past week, Meizhou and Jiangsu Lianyungang Port Co.Ltd(601008) have reduced the down payment ratio of house purchase; Wuxi changed the exemption period of second-hand housing value-added tax from 5 years to 2 years to reduce the transaction cost of second-hand housing; Yueyang has stabilized the property market through a number of measures such as deed tax preference, house purchase subsidy and land transfer fee installment.
standing at the moment, the new infrastructure is more flexible and pays more attention to consumption in the first half of this year, under the influence of the epidemic and other factors, GDP has obvious downward pressure, and steady growth is the largest positive energy. Therefore, the main direction of allocation in the first half of this year should focus on the main line of steady growth policy. Looking forward to the second half of the year, with the gradual implementation of policies, the economy will gradually rise, so the consumption fundamentals related to economic recovery may be stronger. Since December last year, we have taken bank real estate as the first echelon. The logic lies in the power of steady growth policy. Since the beginning of the year, bank real estate and old infrastructure have performed better, and the excess return of bank and real estate relative to Shanghai and Shenzhen 300 has been close to the average value of six times in the past 10 years. There is only limited room for banks to continue to win compared with historical infrastructure policies, and the development value of real estate may still be underestimated in the future.
First, policy: the 11th meeting of the central financial and Economic Commission clearly pointed out to comprehensively strengthen infrastructure construction. The general draft of the meeting clearly mentioned the green and low-carbon energy base and distributed power grid in the low-carbon economy, and the new generation supercomputing, cloud computing, artificial intelligence platform, broadband infrastructure network and other fields in the digital economy. The construction of relevant infrastructure is expected to accelerate. The meeting of the Political Bureau of the CPC Central Committee held on April 29 also expressed a more positive attitude towards the Internet platform, emphasizing “to promote the healthy development of the platform economy”, and the growth style is expected to benefit. Second, Fundamentals: from the performance of the first quarterly report, the net profit attributable to the parent of low-carbon economy industrial chain 22q1 was 76.5% year-on-year, and the net profit attributable to the parent of digital economy industrial chain 22q1 was 12.5% year-on-year, with a growth rate higher than 3.6% of all a shares. For details, see upstream squeezing the profits of the middle and lower reaches – Comments on the first quarterly report of 21 and 2220220501. Third, the market side: we compare the excess return trend of various industries through the RRG model. The first quadrant in the upper right corner of the RRG chart represents that the industry has been in the oversold area, while the third quadrant in the lower left corner represents that the industry has been in the oversold area. The subsequent excess return of the oversold industry will tend to converge, and the cost performance of the oversold industry will begin to highlight. At present, electronics, automobile, Dianxin, military industry, computer, mechanical equipment, household appliances, food and beverage and non bank finance have entered the oversold area. For details, see where the pendulum of the industry goes? – 20220419.
low carbon economy – Photovoltaic wind power: with the industrial technological progress and efficiency improvement, the cost of new photovoltaic power generation and wind power projects has been declining in recent years. At present, the conditions for affordable Internet access are available, which will be conducive to the promotion of clean energy such as wind power and photovoltaic. In addition, under the background of steady growth, photovoltaic wind power is also the focus of policy. The construction of large-scale wind power photovoltaic base in Gobi desert is accelerating. According to the prediction of new analysts of Haitong power, the new installed capacity of wind power in China is expected to be more than 71gw in 2022, with a year-on-year increase of about 50%. The new installed capacity of photovoltaic in China is expected to reach 80gw in 2022, with a year-on-year increase of more than 50%. From the first quarter results, the profit of wind power photovoltaic industry chain continued to increase, and the cumulative net profit of 22q1 photovoltaic wind power to the parent was 75.4% year-on-year, which continued to increase compared with 51.5% of 21q4. Related companies such as Longi Green Energy Technology Co.Ltd(601012) , Tongwei Co.Ltd(600438) , Ningbo Orient Wires & Cables Co.Ltd(603606) .
low carbon economy – energy storage and UHV: the construction of China scenery base projects has been started one after another, giving birth to the new demand for energy storage and UHV. During the 14th Five Year Plan period, new energy storage will also usher in an important period of strategic opportunities for development. The national development and Reform Commission and the national energy administration proposed that the installed capacity of new energy storage will reach more than 30GW in 2025, while the cumulative installed capacity of new energy storage in 21 years is only 4gw, and the energy storage field will continue to benefit. UHV is also an important driving force for the construction of new infrastructure. According to the China Energy News quoted by the international energy network, the investment plan of UHV of the State Grid during the 14th Five Year Plan period is 380 billion yuan, an increase of 35.7% compared with 280 billion yuan during the 13th five year plan period. From the performance of the first quarterly report, the growth rate of energy storage performance is relatively bright. The cumulative net profit attributable to the parent company of 22q1 energy storage is 58.3% year-on-year, which is significantly improved from – 77.6% of 21q4. Related companies such as Shenzhen Envicool Technology Co.Ltd(002837) .
digital economy-5g and broadband infrastructure network: network infrastructure is the foundation of the development of digital economy. To meet the requirements of digital, networked and intelligent development of economy and society, it is necessary to speed up the introduction of new technologies and promote the evolution and upgrading of network facilities. The construction speed of 5g infrastructure and gigabit optical network will be accelerated.
In the 5g field, according to the data of the Ministry of industry and information technology, as of 22 / 03, the number of 5g base stations in China has reached 1.559 million, and the continuous outdoor coverage of 5g has been basically completed. The construction of 5g small base stations to realize the coverage of subdivided scenes is expected to speed up. According to the sorting and calculation of Haitong macro, the infrastructure investment related to 5g base station will reach 176.3 billion yuan in 22 years. In terms of broadband basic network, the 14th five year plan for the development of digital economy proposes that the number of Gigabit broadband users should increase from 6.4 million in 20 years to 60 million in 25 years. Under the high attention of the policy, we can find that the number of Gigabit broadband users has increased rapidly in the past 21 years. According to the data of the Ministry of industry and information technology, as of March 22, the number of Gigabit broadband users in China has reached 45.96 million, a net increase of 11.4 million over the end of last year. From the performance of the first quarter report, the performance of 5g sector improved significantly, and the cumulative net profit attributable to the parent increased from 1.3% in 21q4 to 24.4% in 22q1. Related companies such as Fujian Star-Net Communication Co.Ltd(002396) , Zte Corporation(000063) .
digital economy – Data Center and cloud computing: since February this year, the “computing from the east to the west” project has been fully launched, requiring the development of data center clusters and the collaborative construction between data centers and networks, cloud computing and big data. In terms of cloud computing, at present, the deep integration of cloud computing, edge computing deployment and the optimization and evolution of information and communication network architecture is also actively promoted. China information and Communication Research Institute predicts that the scale of cloud computing market will exceed 100 billion yuan by the end of the 14th five year plan, and the annual compound growth rate will be as high as 36.8% in the period of 22-25 years. In addition, the data center is also the focus of the new infrastructure. According to the data of the national development and Reform Commission, 25 new projects have been started in the 10 national data center clusters in China since this year, and the scale of the data center has reached 540000 standard racks, driving the investment in all aspects to exceed 190 billion yuan. Among them, the investment in the western region has increased six times over the same period last year. According to the prediction of the number of data centers by the Chinese Academy of communications and communications for 22 years, we estimate that the investment in the field of data centers will reach 527.8 billion yuan in 2022, an increase of 26.1% over 21 years. According to the forecast of China information and Communication Research Institute quoted by the economic information daily, the investment in the data center industry may reach 1.4 trillion yuan in 22-24 years. From the performance of the first quarter report, the performance of the data center sector has improved, and the cumulative net profit attributable to the parent company has increased from – 5.5% in 21q4 to 7.6% in 22q1. Related companies such as Glodon Company Limited(002410) , Unisplendour Corporation Limited(000938) , Shanghai Athub Co.Ltd(603881) .
digital economy – Artificial Intelligence: in the “14th five year plan” for the development of digital economy, it is proposed to efficiently layout the artificial intelligence infrastructure and improve the industrial supply chain system of artificial intelligence. According to the sorting and calculation of Haitong macro, the infrastructure investment in the field of artificial intelligence will reach 120 billion yuan in 22 years. At present, China’s artificial intelligence is rapidly penetrating into various industries and is promoting the cross-border integration development between emerging industries, between emerging industries and traditional industries, as well as technology and society. The scale of China’s artificial intelligence market is growing rapidly. According to the prediction of China Electronics Society, the scale of China’s artificial intelligence industry will reach US $27.65 billion in 2022, an increase of 42.8% over 2021, higher than the growth rate of 33.6% of the global artificial intelligence industry in the same period. Related companies such as Hangzhou Hikvision Digital Technology Co.Ltd(002415) .
risk tip: inflation continues to rise sharply, and macro policies outside China are tightened.
