Haitong Securities Company Limited(600837) strategy team's Research Report on May 22 pointed out that since the opening of the Shanghai Hong Kong stock connect in November 2014, the correlation between China and the United States stock markets has increased, but it is still weakly correlated, in which the A-share follow-up phenomenon is obvious. Since the end of April this year, after the sharp decline of US stocks, A-Shares have not followed the decline, which is due to the dislocation of economic cycles between China and the United States and the different valuation positions of stock markets. The bottom of the 3-4-year cycle of A-Shares has appeared, and positive factors are accumulating. At this stage, new infrastructure is better, such as digital economy and low-carbon economy. In the future, we will gradually pay attention to consumption
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[Haitong strategy] reverse between A-Shares and US shares (Xun Yugen, Zheng Zixun, Yu Peiyi)
core conclusion: ① since the opening of the Shanghai Hong Kong stock connect in November 2014, the correlation between China and the US stock markets has increased, but it is still weakly correlated, in which the phenomenon of A-share falling is obvious. ② Since the end of April this year, after the sharp decline of US stocks, A-Shares have not followed the decline, which is due to the dislocation of economic cycles between China and the United States and the different valuation positions of stock markets. ③ The bottom of the 3-4-year cycle of A-Shares has appeared, and positive factors are accumulating. At this stage, new infrastructure is better, such as digital economy and low-carbon economy. In the future, we will gradually pay attention to consumption.
reversal between A-Shares and US shares
Over the past two weeks, US stocks have fallen significantly. During the period from May 9 to May 20, the Dow Jones industrial index fell 5.0%, the S & P 500 fell 5.4% and the NASDAQ index fell 6.2%, while the overall performance of A-Shares was significantly stronger. In the past two weeks, the Shanghai and Shenzhen 300 rose 4.3% and the gem index rose 7.7%. So why is the recent performance of the Chinese and American stock markets significantly divided? This paper analyzes this.
1, phenomenon: Recently, A-Shares and US stocks began to reverse
Since the end of last year, affected by the conflict between Russia and Ukraine and the tightening of global liquidity, domestic and foreign markets have generally fallen from December last year to April this year. During this period, the S & P 500 fell by 14.6%, the NASDAQ index fell by 22.5%, the Shanghai and Shenzhen 300 fell by 27.0% and the gem index fell by 39.7%. Then in the last two weeks, the trend of China and the United States stock markets began to deviate significantly. During the period of 5 / 9-5 / 20, US stocks fell significantly, while A-Shares continued to rise.
historically, the overall correlation between A-Shares and US stocks is not high, but the decline of US stocks has a great impact on A-Shares the continued weakness of US stocks makes some investors worry that the subsequent performance of A-Shares will be dragged down. Compared with the historical trend of A-Shares and US stocks, it can be found that such concern is not unreasonable. We counted the correlation coefficient between the Shanghai Composite Index and the S & P 500 for three months. Since 1991, the average value of the correlation coefficient has been 0.17. After the split share structure reform of A-Shares in 2005, the average value of the correlation coefficient has increased to 0.30, while after the opening of the Shanghai Hong Kong stock connect in November 2014, the average value of the correlation coefficient has further increased to 0.40. It can be seen that there is a certain positive correlation between China and the United States stock indexes, but the overall correlation is not strong.
However, further observation of the trend of China US stock indexes since the opening of the Shanghai Hong Kong stock connect in November 2014 shows that A-Shares may not follow the rise of US stocks, but the trend of A-Shares is often dragged down when US stocks fall sharply. During the same period, the largest decline was caused by the US Federal Reserve's announcement of interest rate hike of 12-300% in Shanghai and Shenzhen, and the largest decline was caused by the US Federal Reserve's announcement of interest rate hike of 14-300% in Shanghai and Shenzhen's standard stock market; In 18 years, due to the disturbance of factors such as the Fed's interest rate hike and China US relations, US stocks fell significantly from January to February, October and December of 18 years, and A-Shares also fell in the same period; In addition, the epidemic broke out in the world from February to march of 20 years, and the conflict between Russia and Ukraine from December last year to April this year superimposed the Fed's interest rate hike. During these time intervals, the Chinese and American stock markets also fell synchronously. See Table 1 for specific data.
recently, A-Shares began to desensitize to the decline of US stocks however, judging from the recent situation, since late April, US stocks have experienced sharp declines of more than 3% in a single day. However, when US stocks fell sharply, the trend of A-Shares began to run counter: for example, on April 26, the S & P 500 fell by 3%, the NASDAQ index fell by 4%, while on April 27 the next day, the Shanghai and Shenzhen 300 rose by 3% and the gem index rose by 6%; On May 9, the S & P 500 fell 3% and the NASDAQ index fell 4%, while on May 10 the next day, the CSI 300 rose 1% and the gem index rose 2%; On May 18, the S & P 500 fell 4% and the NASDAQ fell 5%, while on May 19 the next day, the Shanghai and Shenzhen 300 rose 0.2% and the gem index rose 0.5%. Comparing the trend of Chinese and American stock markets since late April, it can be found that A-Shares have begun to desensitize to the decline of US stocks recently.
2, reason: different economic cycle and valuation position
So why can A-Shares remain resilient when U.S. stocks have fallen sharply recently? We believe that this is mainly due to the dislocation of economic cycles between China and the United States and the different positions of stock market valuations between China and the United States.
economic cycle: China is in the late stage of recession, while the United States is still in stagflation from the perspective of economic cycle, we analyzed in "what conditions do we need to rebound to reverse? - 20220504". Referring to the improved investment clock, China's economy began to decline from the middle of 21 years and inflation rose to a high point. Therefore, China's investment clock entered a stagflation period in the second half of 21 years; Since the end of the 21st century, China's economic downturn has entered the late stage, and inflation has begun to decline, which belongs to the early recession of the investment clock. The overall adjustment of A-Shares since the second half of the 21st year is precisely because China's investment clock has entered the stagflation + early recession period; At present, with the increasing weight of the steady growth policy, China's investment clock is entering the late recession. According to the rotation law of major categories of assets of the investment clock, the stock market tends to stabilize in the late recession.
Look at the United States. Under the impact of the epidemic, the recovery of the U.S. economy is later than that of China, so the rotation of the economic cycle is also slower. Referring to the year-on-year growth rate of U.S. quarterly GDP and the year-on-year growth rate of PCE in the current month, during 20q3-21q1, the U.S. economy as a whole was in the recovery period of rising economic growth and low inflation, and 21q2-q4, the U.S. economy as a whole was in the overheated period of rising economic growth and inflation. This year, the economic growth of the United States began to slow down, so the overall U.S. economy has been in the stagflation stage since this year. In recent months, the US inflation data has remained at a high level. In April, the US CPI fell only slightly to 8.3% year-on-year from 8.5% in March, which made the market worried that the Federal Reserve would raise interest rates sharply in response to inflation, thus causing the US economy to fall into recession too early and too quickly.
In particular, some economic and corporate earnings data recently disclosed by the United States are weak, which further exacerbates the market's concerns about the downward trend of the U.S. economy. For example, the US ism manufacturing PMI fell from 57.1 in March to 55.4 in April, a new low since September of 20 years; As of May 14 this year, the U.S. consumer confidence index had fallen to 59.1%, close to the lowest level in history since 1953; In addition, Wal Mart, the leading retailer in the United States, announced its financial results for the first quarter of fiscal year 2023 on May 17 local time. The data showed that its net profit in the first quarter decreased by 25% year-on-year, and Wal Mart closed down 11% on the same day, the largest one-day decline since 1987.
valuation level: the valuation of A-Shares has been low, while the valuation of us shares is still at a medium high level in addition to the macro environment, the valuation level is also one of the factors leading to the differentiation of the performance of the Chinese and American stock markets. First look at a shares. After continuous adjustment, the valuation has been at a historically low level. When A-Shares reached the low point of the year in April this year, the PE (TTM, the same below) of Wande all a was 15.2 times. Since A-Shares have experienced two complete bull and bear cycles since 2013, we calculated the historical quantile of a share valuation from 13 years. The data show that the PE of A-Shares is at the historical quantile of 26% from low to high in 13 years, close to the position of double the standard deviation of the average value in 13 years. Even if A-Shares have rebounded significantly recently, the PE that has won all a as of 2022 / 05 / 200000 is still only 16.5 times, which is still a distance from the average PE of 18.2 times in the past 13 years. At present, PE is still in the historical quantile of 31% from low to high in the past 13 years. If we take 2005 as the starting point, A-Shares have experienced four complete bull bear cycles so far. At present, A-share PE is only in the historical quantile of 27% from low to high in 2005.
Unlike a shares, the valuation of U.S. stocks has experienced a sharp correction. At present, the PE (static, the same below) of S & P 500 is still 19.0 times, which is still at the medium and high level in history. Due to the long bull bear cycle of US stocks, we chose 1954 as the starting point when valuation data were first available. So far, US stocks have experienced about four bull bear cycles. At present, S & P 500 PE is still in the historical quantile of 65% since 1954. In addition, due to the overall rise of the valuation center of US stocks after 1990, we take 1990 as the starting point. So far, US stocks have experienced about two complete bull and bear cycles. At present, S & P 500 PE is in the historical quantile of 42% since 1990. Therefore, on the whole, the current valuation of US stocks is at a moderately high level in history.
On the whole, the United States is still in the stagflation period of declining economic growth momentum and high inflation. At the same time, it is also facing the tightening pressure of the Federal Reserve in terms of policy, while China is already in the late recession of the policy underpinning economy. Therefore, the macro environment of A-Shares is better than that of us shares; In addition, in terms of market microstructure, the valuation of A-Shares has been at a low level, while the valuation of U.S. stocks is still at a medium high level. The difference in valuation position also explains to some extent why the recent trend of U.S. stocks and A-Shares has begun to "reverse".
3, A-Shares are accumulating positive factors
market has seen a big bottom once every 3-4 years 4 since late April, we have analyzed many reports and pointed out that the bottom area of the market has appeared. For details, see market adjustment process from fund performance - 20220424, what conditions are required for rebound to reversal? - 20220504, position analysis of various investors - 20220516, etc. Looking back on this round of A-share decline, the index level has started in February of 21 years. The CSI 300 and Shanghai Composite Index reached a high point on 21 / 2 / 18 and the gem index reached a high point on 21 / 7 / 22. The collective accelerated decline began on 21 / 12 / 13, which originated from two grey rhinos (the accelerated pace of interest rate hike in the United States and the sharp rebound of the epidemic in China) + a black swan (the conflict between Russia and Ukraine). The essence of this round of decline stems from the economic cycle. Historical data show that the stock market tends to fall in the early stage of stagflation + recession, and the bear market in 3-4 years is a necessary stage of the cycle. Based on historical research, at the end of last year, we put forward that the market is facing downward pressure this year. In the past three years, we have repeatedly analyzed and proposed that the form of A-Shares may be similar to that of U.S. stocks, rising for three years and falling for one year, "Qu Zequan, waste is straight - 2022 China's capital market outlook - 20211211" and "outlook 22 years: our three special judgments - 20211219". From the analysis of macroeconomic cycle and stock market bull bear cycle, the low point at the end of April is already the bottom area of the market: from the perspective of macroeconomic cycle, the investment clock enters the late recession, the stock market often stops falling, and China's steady growth policy continues to increase. In particular, the 429 meeting of the Political Bureau of the CPC Central Committee made it clear that the goal of steady growth remains unchanged, and the probability of this cycle has entered the backward period. From the perspective of bull bear cycle of the stock market, compared with the previous bear market declines, the decline of CSI 300 has lasted for 14.4 months (21 / 02-22 / 04), with the largest decline of 37%. The time and space is very significant. From the valuation, risk premium, stock bond yield ratio, net break rate and other indicators, compared with the past five historical bottoms, the current market has been in a large bottom area (see Table 3 for details).
positive factors are accumulating market now has a bottom area. Looking back on history, the bottom shape is complex and diverse, including U shape (the second half of 2005), deep V shape (the end of October 2008 and the beginning of January 19), W shape (12-13 years, with lower rear corner) and gentle shallow V shape (the end of January 16). When to confirm that the market moves from the bottom to the right (from rebound to reversal), we should closely follow five signals: 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 of automobile (early cycle industry). In the past five months when the index was at its lowest point, three of the corresponding five leading indicators stabilized or have rebounded. This time, the monetary and financial indicators in April have been on the right. The PMI in April fell sharply, which may be the lowest point. The sales of real estate and cars are also expected to stabilize gradually, and positive factors have accumulated.
First, steady growth policies are still increasing. Since the Politburo meeting on April 29 proposed "strive to achieve the expected objectives of annual economic and social development" and required "accelerate the implementation of the determined policies" and "pay close attention to the planning of incremental policy tools", the policies have been overweight and landing. On May 18, Li Keqiang, member of the Standing Committee of the Political Bureau of the CPC Central Committee and Premier of the State Council, presided over a symposium on stabilizing growth, stabilizing market players and ensuring employment in Yunnan, The meeting pointed out that "the policies that have been issued should be implemented in place as soon as possible, and the policies determined by the central economic work conference and the government work report should be basically implemented in the first half of the year; all regions and departments should enhance their sense of urgency, tap the potential of policies, and make sure that the new measures that are accurate can be used up and put out in May." The central bank has also "cut interest rates" twice recently. On May 15, the central bank announced that the lower limit of the interest rate of commercial personal housing loans for the first set of housing was adjusted to no less than the quoted interest rate in the loan market for the corresponding period by 20 basis points, but the interest rate of second house loans remained unchanged; On May 20, the central bank cut the five-year LRP interest rate by 15 BP to 4.45%. After two "interest rate cuts", the interest rate of the first house can be reduced by up to 35bp As far as the real estate policy is concerned, since the beginning of the year, hundreds of cities have issued policies to relax the real estate market. On May 20, Nanjing raised the provident fund loan limit for the second house from the current 300000 yuan / person and Shanghai Pudong Development Bank Co.Ltd(600000) yuan / household for both husband and wife to 500000 yuan / person and 1 million yuan / household for both husband and wife.
Second, the epidemic situation has been gradually controlled. The epidemic situation is one of the most important variables affecting the market since March this year, but at present, Jilin has achieved zero social aspects, and the epidemic situation in Shanghai is steadily improving. On May 16, Shanghai announced that from May 22, the ground public transport and rail transit would be able to gradually resume operation. From June 1 to mid and late June, the normalized management of epidemic prevention and control would be fully implemented to fully restore the normal production and living order of the whole city. High frequency data show that the economy has also begun to repair. For example, the traffic congestion index in the Yangtze River Delta began to repair significantly after May. According to the data of the passenger Federation, the year-on-year growth rate of passenger car wholesale sales in the second week of May has narrowed from the worst - 60% in April to the current - 22%, and the retail growth rate has narrowed from - 61% to - 29%.
4, now focus on new infrastructure and gradually pay attention to consumption
Compared with the judgment of the bottom of the market, investors pay more attention to the choice of style and industry. In the "industry rotation under the path of stable growth - learn from 09 and 20 years - 20220516", we pointed out that under the path of historical stable growth policy, the industry rotation in 2008 changed from infrastructure to consumption, and then to science and technology; 20 years, from new infrastructure to midstream manufacturing, and then to consumption. Under the steady growth policy, since December last year, we have taken bank real estate as the first tier. So far, the excess returns of financial real estate and traditional infrastructure have been obvious. In the future, the steady growth policy will continue to work. There is still room for undervalued banks and real estate, but compared with history, the space to outperform the index may be limited. Relatively speaking, combined with the policy, performance and market situation, the current new infrastructure is more flexible, and more attention will be paid to consumption in the future.
compared with the old infrastructure and big finance, the new infrastructure may be more flexible "three reasons to be optimistic about growth - 20220515" pointed out that there are three reasons to be optimistic about new infrastructure at present: first, policy support. The 11th meeting of the central financial and Economic Commission pointed out the need to comprehensively strengthen infrastructure construction, and explicitly mentioned green and low-carbon energy bases, distributed power grids, cloud computing, artificial intelligence platforms, broadband infrastructure networks and other fields. Under the background of steady growth this year, the growth rate of new infrastructure is faster, computers From January to March, fixed asset investment in communications and electronics increased by 27.8% year-on-year, higher than 10.5% of the traditional economy; Second, the fundamentals are better. The net profit attributable to the parent of 22q1 low-carbon economy industrial chain is 76.5% year-on-year, the digital economy is 12.5%, the growth rate of all A-Shares is 3.6%, and peg in many fine molecular fields is lower than 1 from the perspective of PEG; Third, from the perspective of the market, the current growth industry has significantly oversold, and the excess return is expected to be higher in the future. On the whole, photovoltaic wind power, energy storage and UHV in low-carbon economy deserve attention, while 5g and broadband basic networks, data centers and cloud computing in digital economy deserve attention.
low carbon economy: photovoltaic, wind power, energy storage and UHV : under the background of steady growth, photovoltaic wind power is also the focus of policy. In addition, on May 18, the European Commission announced the "EU renewable energy plan", which raised the 2030 renewable energy target from 40% to 45% and raised the 2030 photovoltaic grid connection target to 600gw (estimated installed capacity of about 750gw). According to the prediction of new analysts of Haitong power, the growth rate of new installed capacity of wind power and photovoltaic in China is expected to reach 50% in 2022. The construction of China's scenery base projects has been started one after another, giving birth to the new demand for energy storage and UHV. The national development and Reform Commission proposes 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 UHV is also an important driving force for the construction of new infrastructure. During the 14th Five Year Plan period, the investment in UHV of the State Grid is planned to be 380 billion yuan, an increase of 35.7% compared with 280 billion yuan during the 13th Five Year Plan period. From the first quarter results, the cumulative net profit attributable to the parent company of 22q1 photovoltaic wind power was 75.4% year-on-year, which continued to increase compared with 51.5% of 21q4; 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 Longi Green Energy Technology Co.Ltd(601012) , Tongwei Co.Ltd(600438) , Ja Solar Technology Co.Ltd(002459) , Trina Solar Co.Ltd(688599) , Ginlong Technologies Co.Ltd(300763) , Jiangsu Goodwe Power Supply Technology Co.Ltd(688390) , Ningbo Orient Wires & Cables Co.Ltd(603606) .
Digital Economy: 5g, cloud computing, data center, etc digital economy infrastructure construction is expected to speed up: in the 5g field, 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, we estimate that the length of new optical fiber and cable lines in 22 years is expected to exceed 4.4 million kilometers, an increase of 39% over 21 years. In terms of cloud computing, 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 reach 36.8% in the period of 22-25 years. In terms of data center, we estimate that the investment in the field of data center will reach 527.8 billion yuan in 2022, an increase of 26.1% over 21 years. In terms of artificial intelligence, 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. From the performance of the first quarter report, the performance of 5g sector has improved significantly, and the cumulative net profit attributable to the parent company has increased from 1.3% in 21q4 to 24.4% in 22q1; The performance of the data center has improved, and the cumulative net profit attributable to the parent company has increased from - 5.5% in 21q4 to 7.6% in 22q1. Relevant companies such as Fujian Star-Net Communication Co.Ltd(002396) , Zte Corporation(000063) , Glodon Company Limited(002410) , Unisplendour Corporation Limited(000938) , Shanghai Athub Co.Ltd(603881) , Hangzhou Hikvision Digital Technology Co.Ltd(002415) .
in the future, we will pay more attention to consumption consumption recovery is synchronous or slightly behind the economic recovery, because the two variables affecting residents' consumption - income and savings - are affected by the pace of economic recovery. In terms of income, income growth is basically determined by economic growth. In the economic recovery, the investment and production ends are repaired first, and then the macro economy stabilizes and picks up, the profits of micro enterprises rise, and the income of residents increases. From the economic recovery process after the impact of the financial crisis in 2008 and covid-19 epidemic in early 20, it can be seen that the slope and amplitude of the year-on-year growth rate of industrial added value in the current month are faster than the year-on-year growth rate of total retail sales of social consumers in the current month, and the growth rate of total retail sales of social consumers and GDP are more synchronous. In terms of savings, after the exogenous impact, the uncertainty of residents' future income increases, Preventive Savings tend to rise, and the marginal propensity to consume decreases. For example, under the impact of covid-19 epidemic in 20 years, the marginal propensity to consume of Chinese residents has decreased from about 70% 19 years ago to 66%, and only returned to 69% in 21 years, close to the level before the epidemic. Therefore, in terms of income and savings, the recovery of consumption will slightly lag behind the recovery of production. At present, China's epidemic situation has been in the downward channel. With the epidemic situation gradually controlled and the steady growth policy gradually implemented, the economy will gradually stabilize and recover. Superimposed on the pull of the Mid Autumn Festival and National Day holidays in the third and fourth quarters, the consumption fundamentals related to economic recovery may be stronger.
risk tip: inflation continues to rise sharply, and macro policies outside China are tightened.
