Rotation of major assets: three-stage deduction. With the recovery after the crisis in China and the United States, we plan to sort out the rotation of cycle and growth from a top-down perspective. Since the post crisis recovery in 2020, we have revealed the “inflation syllogism” caused by the staggered recovery of China and the United States in our previous report “panorama of inflation trading”.
From the perspective of bulk, the rotation of assets can be divided into three stages: 1. Economic bottom recovery stage, 2020q2 economic bottom + wide Liquidity:
Bond / gold rotation in major categories, bottom of equity profit + rise in valuation; 2. From 2020q3 in the boom stage, the economy + wide liquidity, led by commodities / equity in the major categories, and the valuation of equity profit increased both; 3. In the stagflation stage, 2022q1 was opened, the economy was stable + tight liquidity, the bulk of the major categories outperformed, gold followed, bonds / equity were suppressed, and the valuation of equity earnings was under pressure. The characteristics of the current stagflation window “strong bulk + weak equity” are similar to those of 20122013, both of which are in the following stages: 1) the transition from easing to tightening after the crisis; 2) The third section of bulk crude oil leads, with stagflation like characteristics; 3) The valuation of equity profit is under pressure, and the growth style is restrained in the early stage.
Equity assets: two clues, the main board and growth, and the landing of US bonds and US stocks on a shares. From the perspective of global assets, its impact on A-Shares is mainly based on two paths: 1) path 1, foreign capital flow. Referring to the corresponding relationship between US bond interest rate and SSE 50, the two downward stages of A50 can correspond to the upward band of US bond interest rate, The transmission path is based on “the US interest rate – the narrowing of the interest rate gap between China and the United States – the outflow of foreign capital – the weakening of A50”. The essence is the A50 premium caused by the trend inflow of foreign capital in the past three years, and the reverse phagocytosis effect in the stage of US dollar return; 2) Path 2: Valuation discount. Referring to the corresponding relationship between NASDAQ and gem, the rhythm of the top building and down of gem is synchronized with that of NASDAQ. Its correlation is based on “US interest rate – valuation discount – pressure on Chinese and American technology stocks”, which is the traditional paradigm of the upward cycle of interest rate suppressing the valuation of long stocks.
But in the final analysis, the two paths lie behind the US bond interest rate: the high inflation pressure brought by crude oil led commodities forced the shift of monetary policy. In the last round of experience from 2012 to 2013, growth stocks were also strongly negatively correlated with crude oil prices. Looking ahead, the stabilization of growth stocks is based on the weakening of crude oil and bulk oil.
From top to bottom, the bulk depends on Growth: the acceleration period has passed, the top of the bulk has been repeated, and the growth has ushered in the bottom. At present, it is in the “stable growth in China + strong inflation in the United States”. The varieties will still show crude oil and Shenzhen Agricultural Products Group Co.Ltd(000061) copper, aluminum steel. The bulk commodities currently maintain a high shock: 1. There are differences in the U.S. economy: the leading economic level, PMI / consumer confidence indicators are weakening rapidly, and the interest rate difference between the long and short ends of the bond market is upside down, It is expected that with the strong interest rate hike and table contraction in the second and third quarters, concerns about the economic potential will begin to counter high inflation; 2. Quantitative view of U.S. debt from the perspective of gold copper ratio: depicting the U.S. debt interest rate by gold copper ratio to capture the U.S. economic cycle has fallen to the low level of the past 10 years, corresponding to the high point of the U.S. economic cycle in 2018 and 2014 and the U.S. debt interest rate of 3.0%, or suggesting that there is limited room for further upward inflation and interest rate. Therefore, if the US debt is in the peak high range, from the perspective of denominator discount at the interest rate end, the suppression of the valuation of growth assets is coming to an end, the growth track is at the bottom of the resonance between short cycle and long cycle, and the cost performance is constantly improving.
From bottom to top, the electronics industry will resume trading: take history as a mirror and bet on the focus of future growth assets: 1. The rise of growth assets in the metal sector: demand explosive energy metals (lithium cobalt nickel rare earth), specialized and new products with increasing market share (metal processing, superalloy, etc.), as well as copper highlighted by its own alpha under the steady-state cycle mode, all have strong growth attributes; 2. The valuation of the electronics sector is near the bottom of history: the overall valuation level of electronics with strong growth attributes is 25 times and the quantile is 6%. In the long run, hard technology has a very broad growth space. Emerging applications such as aiot, VR / AR and smart cars constitute a huge demand support, and the investment value of the industrial chain is still very clear. From bottom to top, we start with different electronic segments, deduce the investment opportunities in the current segments through the historical resumption of industry fundamentals and valuation, and some underestimated high-quality targets usher in good opportunities for layout again. The high prosperity directions that can be invested in the sector include power, simulation, equipment, materials and storage in the semiconductor field (the compound growth rate of China’s industry in the next three years is close to double digits), automotive electronics, VR / AR and folding screen in the consumer electronics field (the compound growth rate of the industry in the next three years is more than 20%), thin film capacitors and MLCC in the passive device field (the compound growth rate of the industry in the next three years is more than 10%), and the performance growth rate of leading companies is higher.
