Recently, the market has weakened. Since new year’s day, the CSI 300 and gem index have fallen by 4.3% and 6.1%. The promising start of the market has not appeared as scheduled. At present, investors are most concerned about whether the market exists in the spring of 22 years. Generally speaking, people’s doubts about the spring market are mainly due to two concerns: one is that it is difficult for policies to hedge the downward pressure of macro economy, and the other is that the micro capital is no longer abundant at the beginning of the year. Therefore, this report makes a detailed analysis of these two concerns.
1, policy concerns are not tenable
At the end and beginning of each year, investors are very concerned about and look forward to the spring market. Looking back on the performance of A-Shares at the end of the year and the beginning of the year since 2002, we can find that the spring market has changed year by year, but there will be differences in the start-up time and increase. However, the overall market performance has been weak since mid December, and the hot new energy, military industry and other sectors in the early stage have been significantly adjusted. After new year’s day, the long-awaited good start has not appeared, and the major indexes have performed poorly. Since the beginning of the year 22 (as of 22 / 01 / 14), the Shanghai stock index has fallen 3.3%, the CSI 300 has fallen 4.3%, the CSI 500 has fallen 3.8% and the gem index has fallen 6.1%. The reason behind this is that the market still has doubts about whether the policy can hedge the pressure of economic downturn, but we believe that the current steady growth policy is being intensively implemented. At the same time, drawing lessons from previous policy easing cycles, the market will perform well with the continuous overweight of policies.
steady growth policies have been implemented one after another. the central economic work conference defined the general tone of economic work with 25 words of “stability”. On January 4, Han Wenxiu, deputy director of the China finance office, issued a document in outlook, pointing out that “stabilizing the macro economy is not only an economic issue, but also a political issue”. Specific steady growth policies have been implemented one after another. According to the securities times, at the beginning of the new year, many major projects have started. As of January 10, at least 11 provinces and municipalities directly under the central government have organized and held major project commencement activities in 2022, involving more than 5000 major projects and a total investment scale of more than 3 trillion yuan. Our previous reports “which new projects were approved in the beginning of the year? – 20220114” and “where are the highlights of stable growth in infrastructure? – 20220113” sorted out that many new infrastructure projects have been implemented since the beginning of the year: 14 projects involving affordable housing in the field of people’s livelihood, nearly 1900 proposed projects related to photovoltaic and wind power in the field of low carbon, and 22 projects related to 5g in the field of science and technology, See Table 1 for details. Under the policy of “implementing policies for the city”, many local real estate policies have undergone marginal changes. According to the Securities Daily and daily economic news, the housing loan interest rate in Guangzhou has been reduced after new year’s day, and the housing loan lending cycle in hot cities such as Beijing and Hangzhou has been significantly shortened. In terms of monetary policy, the latest social finance data show that social finance increased by 2.4 trillion in December 21, an increase of 683.6 billion year-on-year. At the end of 2021, the stock of social financing scale increased by 10.3% year-on-year, continuing the upward trend. We believe that monetary policy is expected to be further relaxed in the future. In terms of fiscal policy, on January 10, the national Standing Committee stressed that the 1.2 trillion yuan of local government special bonds issued in the fourth quarter of last year should be allocated to specific projects as soon as possible, and the special bonds issued this year should be promptly issued. We expect that the 1.46 trillion yuan of new special bonds issued in advance can basically be issued in the first quarter.
learn from history, the market will eventually rise under the steady growth and loose policy. looking back on the global financial crisis in 2008, China has launched four rounds of counter cyclical policies to stabilize growth, starting at the end of 2008, the end of 11, the middle of 14 years and the end of 18 years respectively. On the whole, in the early stage of policy easing, such as the introduction of RRR reduction, the market was still tangled in the struggle between fundamentals and policies, and the performance of the main indexes was poor. In our previous report “strategy dessert 20: stock market performance in the RRR reduction cycle – 20211207”, we also mentioned that if the RRR reduction is used as an early policy signal for steady growth, the poor market performance in the RRR reduction cycle may be due to the intersection of negative factors of economic downturn and positive factors of loose policy during the period, resulting in market ups and downs, The probability of rise / average decline of CSI 300 index in one month after the last RRR reduction date is 60% / 2.4%, 80% / 5.9% in two months and 80% / 7.7% in three months. With the introduction of more powerful steady growth policies and the gradual emergence of policy effects, the market has performed well. Back to the moment, in fact, the one-year LPR interest rate adjustment on December 20 indicates that the steady growth policy is gradually strengthened. Based on historical experience, the market rate will probably perform well in the later stage.
2, micro capital was still abundant in the first quarter
This year, the new issuance of public funds did not usher in a “good start”. Since new year’s day, the scale of the newly established partial equity funds is only 27.4 billion yuan, with a daily average of only 3 billion yuan, a significant decrease from the daily average of 9.04 billion yuan in 2021. The issuance heat of public funds has plummeted, and many investors are worried about the tight micro capital of the stock market at the beginning of the year, so they are pessimistic about the spring market. So is this really the case? We try to answer this question in combination with the historical situation of capital inflow.
drawing on history, micro funds may still be abundant in the first quarter. drawing lessons from history, there is a certain seasonal effect in the net capital inflow of the stock market. The net capital inflow is more in the first and second quarters, but less in the third and fourth quarters. Since 2012, the average net capital inflow in the first quarter has been 305.1 billion yuan, second only to 343 billion yuan in the second quarter, higher than – 68.3 and 248.1 billion yuan in the third and fourth quarters; The monthly average of capital inflows in January, February and March were 74 billion yuan, 94.1 billion yuan and 137 billion yuan respectively, which were higher than the monthly average of 69 billion yuan since 12 years. From the perspective of fund issuance, since 2002, there has been a monthly effect on fund issuance, and the fund issuance heat at the beginning of the year is higher: since 2002, the average of the total scale of newly established partial equity funds in January and March is 41.6 billion yuan and 45 billion yuan respectively, higher than the monthly average since 2002 (39 billion yuan). In February, due to the Spring Festival holiday, the fund issuance heat is slightly lower. In addition, since 2019, the trend of residents\’ funds entering the market has been obvious, mainly through public funds to allocate rights and interests. If we start from the beginning of 19, we can find that the scale of newly established partial equity funds accounted for 30% in the first quarter, and the quarterly average of the total scale of newly established funds in Q1 reached 466.4 billion yuan, higher than 261.3 and 341.6 billion yuan in the second and fourth quarters, and only lower than 486.6 billion yuan in the third quarter. According to Chinese practice, the period from New Year’s day to the Spring Festival is the window period for the distribution of residents\’ incentive income (such as year-end awards and year-end dividends). At the same time, banks will strengthen the promotion of funds at the beginning of the year due to business needs such as “a good start”. At present, the new regulations on asset management have been officially implemented, and the principal guaranteed products in bank financial management have withdrawn from the historical stage; In addition, under the premise of “housing without speculation”, the investment demand for real estate decreased. Under this background, the income of residents was abundant at the beginning of the year, and many of them would flow into the equity market through purchase funds. Therefore, the micro capital of the stock market in the first quarter of 22 is still abundant, which is expected to support the market in spring.
In the year of 22 , the supply and demand of funds in the stock market were balanced, and the trend of asset allocation migrating to equity remains unchanged in the long run.
for the 22-year-old A shares, from the perspective of the whole year, after three-year rise in 19-21 years, A-Shares may usher in a periodic rest in 22 years, which is backed by the dual disturbance of high inflation and cyclical decline of profits. Therefore, in terms of capital, we can refer to the volatile market in the history of a shares. We expect that the annual inflow in 22 years may slow down significantly compared with that in 21 years. On the whole, the capital inflow and outflow items are unbalanced. See Table 3 for the specific calculation data. From the long-term perspective, we mentioned in the partial balance between supply and demand of funds in the stock market – A-share outlook series 6-20211231 in 2022 that the asset allocation structure of Chinese residents has obviously emphasized real estate over equity for a long time. Compared with the asset allocation of residents in various countries, the proportion of equity (stocks, funds, etc.) asset allocation of Chinese residents in 2019 was only 2%, far lower than 34% in the United States, 12% in Germany and 9% in Japan. In the long run, the asset allocation of Chinese residents is expected to transfer from the real estate market to the stock market. The core reasons are as follows: first, China’s leading industry is changing from real estate to science and technology services. Second, the average age of China’s population has increased from 31 years in 2000 to 38.8 years in 2020. The rigid demand allocation of residents to real estate will decline.
3, coping strategies: appropriate balance
The spring market will not be absent. as early as mid November, we proposed that the spring market at the end of the year and the beginning of the year is worth looking forward to. There are three specific reasons: first, from the review of the spring market at the end of the year and the beginning of the year, the spring Market usually occurs every year. The underlying reason is that the time window is often held at major meetings at the end of the year and the beginning of the year, and there is little disclosure of fundamental data of A-Shares from November to March, And the capital interest rate usually fell at the beginning of the year, and the risk appetite of investors was relatively higher at the beginning of the year. Second, since the 730 Politburo meeting, the strength of the steady growth policy is gradually increasing. At the central economic work conference in December last year, it was required that the economic work in 2022 should be stable and seek progress while maintaining stability. All regions and departments should shoulder the responsibility of stabilizing the macro economy, and all parties should actively launch policies conducive to economic stability, with appropriate policy force. Learning from history, with the strengthening of steady growth policy, the market will perform well. Third, the current roe is still in the recovery cycle. All A-share ROE (TTM) in this round bottomed out in 20q2 and began to recover in 20q3. So far, it has only lasted for five quarters. With the force of the wide credit policy, we expect the rise of roe to continue to 22q1.
balanced allocation of large finance and new and old infrastructure in the first quarter. we believe that with the steady growth policy, the market of A-share market in the first quarter is still expected, and the industry allocation can be appropriately balanced. Some investors believe that the current institutional allocation proportion of the new energy sector is relatively high, and the balanced allocation means that the funds allocated to the new energy sector will flow out significantly. It should be noted that the logic behind this is actually the stock market, ignoring the admission of incremental funds. We analyzed in the stock market under counter cyclical policy – 20211226 that in the early stage of policy easing, such as the introduction of RRR reduction, the market was still entangled in the struggle between fundamentals and policies. At this time, the market sentiment did not rise significantly. However, with the introduction of more powerful steady growth policies and the gradual emergence of policy effects, the market performed well, At this time, with the rise of market sentiment, incremental funds are expected to continue to enter. Looking forward to the first quarter, we think we can focus on the large finance and new and old infrastructure benefiting from the policy in terms of specific industry selection.
The first is the undervalued big finance. At present, the valuation of the large financial sector is low. At present (2022 / 01 / 14, the same below), PE (TTM) is 6.1 times for banks (23.7% since the beginning of 2013), 8.4 times for real estate (9.9%) and 19.5 times for securities (15.8%), Pb (LF) is 0.6 times (0.4%) for banks, 1.0 times (5.1%) for real estate and 1.7 times (30.0%) for securities, In addition, the fund positions are lower than those of the CSI 300. With the steady growth policy, the economic downward pressure is hedged and the worries about real estate debt subside, and banks and real estate are expected to usher in repair. At present, there have been positive changes in real estate policies, and credit risk concerns are expected to decline. According to the financial Associated Press, recently, the Guangdong provincial government is “matchmaking” to promote state-owned enterprises and central enterprises to collect the projects of M & A of out of danger real estate enterprises. Many large and medium-sized banks have also received regulatory requirements to provide financial support for M & A in the real estate industry. We believe that real estate is still expected to usher in the opportunity of valuation repair. Historically, there is a high probability of bank real estate repair in the restless market in spring. We believe that we should also pay attention to securities companies in big finance. The net profits of securities companies in 2019 and 2020 were 75% and 36% year-on-year respectively, corresponding to the largest increase of securities company index in the whole year of 56% and 55%, while the cumulative net profits of securities companies in the first three quarters of 21 years were 24% year-on-year, and the Shenwan securities company index fell by 4.2% in 21 years.
The second is the new and old infrastructure. As mentioned earlier, the current policy signal of steady growth has been very clear, and infrastructure construction is an important starting point for steady growth. The force of steady growth policy is expected to directly drive the growth of new and old infrastructure investment. Among them, “new infrastructure” is the best combination of stimulating effective demand in the short term and increasing effective supply in the long term. It is a major weapon for China’s economy to move towards high-quality development and innovative development. Specifically, new infrastructure mainly refers to hard technology industries such as new energy related sectors, which is the focus of current policies: nearly 1900 proposed projects related to photovoltaic and wind power have been released in various places since this year, which is not only conducive to the realization of China’s carbon peak and carbon neutralization goals, but also driving a large amount of social investment. The essential reason for the recent adjustment of new energy related sectors is that the market is worried that the valuation of high boom industries is too high. However, in the evolution of new energy vehicle industry based on smart phones – 20210906, we pointed out that this year’s new energy vehicle industry chain is similar to the smart phone industry chain in 2010, with high scenery and high valuation. In 2010, the penetration rate of smart phones exceeded 15%, and then began to accelerate its development, It continued to maintain a high boom. It was not until April 2011 that the smartphone industry chain digested the valuation with the overall adjustment of the market; In the 21 years, Shanxi Guoxin Energy Corporation Limited(600617) automobile sales reached 3.51 million, an increase of 165% over 20 years, and the penetration rate increased to 17.3% in the second half of 21 years. We believe that in the future, under the background of policy stimulus and increasing penetration, the high prosperity of the industry is still expected to continue, and it is difficult to appear in the first quarter due to changes in the market environment such as the need for phased digestion and valuation.
risk tip: enters stagflation. Inflation rose sharply and macro policies outside China tightened.
