I. style: what style is better for macro fundamental scenes. Our core scenario assumption for the macro environment in 2022 is the stabilization and recovery of China’s credit and the tightening of overseas liquidity. We look back on the style performance in similar environments in history and find that: (1) in the rising stage of M2 social finance stock, small cap > large cap, growth > value; When the stock of social finance starts to rise, the market is larger than the small and medium-sized market, and the value is larger than the growth. (2) The impact of overseas liquidity on A-share style is mainly through funds going north: since September 2018, the style synergy between China and the United States has increased. Under the tightening trend of the Federal Reserve, considering that the financing cost of global transaction funds is linked to the real interest rate of the United States, the probability of significant fluctuations of the above funds is rising regardless of “true or false foreign capital”, and the sectors greatly affected are mainly concentrated in the growth sector. With the gradual rise of overseas interest rates, despite the large fluctuations, we believe that the global value style is more likely to win in 2022.
Second question: is profit growth g still important. The extreme of the “racetrack” investment and growth style in the past three years is obviously related to the market’s constant pursuit of high growth g. the “growth only theory” will face challenges in 2022: (1) historically, we can not accurately predict the profit growth g in advance, and it is easy to extrapolate the past growth rate, resulting in overestimation in the future and reflected in the stock price in advance, However, historically, it will be more difficult for individual stocks with high growth rate to continue to maintain the advantage of high growth rate in the future; (2) Historically, the high growth rate of a shares, individual stocks and sub sectors and their relative performance are not stable. In the short term, the high growth rate exceeding expectations but not expected and not priced is the source of stock price elasticity, not the performance growth rate itself; (3) In the long run, roe is the source for the company to create returns for shareholders in the secondary market rather than g, and the sector that leads the market for a long time is often the rise of growth back to ROE level; (4) From the perspective of investor preference cycle, the current profit growth rate G is not the only one. When the landscape spreads, investors tend to pay less attention to the current profit growth rate G: the pursuit of G in the past is “disintegrating”, and the fund positions will further spread in the future. Looking forward to 2022, the high growth investment strategy will face differentiation (continue to exceed expectations or return to ROE). It is noteworthy that in history, the median yield of active partial equity funds at this stage often lost to the CSI 800 index.
Three question style: the logic behind CSI 300 vs CSI 500. The relative performance of CSI 500 and CSI 300 in 2022 has become the focus of discussion. Some investors mistakenly think it is the style discussion of value stocks and small cap growth stocks. However, an interesting conclusion is: if considering the changes of constituent stocks, the CSI 300 actually becomes more and more “large market growth”, but investors think that the CSI 500 representing the growth of small and medium-sized markets begins to become more and more “small and medium-sized market value”. Therefore, in the current discussion, who is dominant between CSI 500 and CSI 300 is essentially the market value factor. In addition to the market value factor, CSI 300 is more inclined to grow, while CSI 500 is more inclined to value. Well, although the constituent stocks of the market value style will support the performance of CSI 300, it is obvious that CSI 500 depicts the changes of the old and new economies (small and medium-sized market value + small and medium-sized market growth), which is consistent with the main line of energy transformation. We also note that in terms of trading structure, the market growth has reversed the occupation of the market value in the allocation of public funds in 2021q3, and the valuation repair of the market value style is worth looking forward to.
2022 style Outlook: value returns in an all-round way, and small cap growth breeds new opportunities. Behind the relevance of historical statistics, we believe that style switching contains a deeper meaning. The underestimation is actually the cognitive bias against the decline of the importance of the old economy, and the repair of value also depends on the cognitive correction of the old economy: the total amount of the old economy has a short-term upward elasticity; And the shortage (inflation) caused by the mismatch between supply and demand caused by the inhibition of the old economy. In the medium and short term, the comprehensive efficiency of the new energy system is significantly lower than that of the traditional energy system (although it may have the attribute of long-term economic and social risk reduction). On the premise that the total scale of asset allocation of the whole society is constant in a certain period of time, the decline of efficiency will inevitably bring inflationary pressure. When demand stabilizes and picks up, the certainty of inflation will be stronger than the demand itself, and the two will jointly drive the return of value. Under the supply shock, learning from the experience of US stocks after 1975, there are also opportunities for small cap growth that is more suitable for environmental changes. Looking forward to 2022, we believe that: large market value > small and medium-sized market value (CSI 500) > small market growth (CSI 500) > large market growth (CSI 300) / medium market growth.
Risk tip: China’s liquidity is looser than expected; The implementation of steady growth policy is less than expected; Measurement error.
