From a purely technical point of view, the market has been in the key stage of bull-bear conversion. In the current short-selling market, the differences of views are also increasing.
Is this round of market a rebound of bear market? Or the beginning of a bull market?
How to treat the operation logic of the market and what strategy to adopt?
I am here to talk about my personal understanding of the market for reference only.
First, the market has entered the starting point of a new bull market.
At present, the weekly market is 7 consecutive years, with an increase of more than 4%, which is the best weekly performance in the past three years. First of all, it is clear that the market has got rid of the bear market of unilateral decline of 20 18.
Historically, the bottom of the economy and the bottom of the stock market are out of sync. The capital market often bottoms out three to six months earlier than the real economy, and the stock price trend itself is an important leading indicator.
On June 5438+ 10, social financing and new credit exceeded expectations, and the bottom of social financing and credit expansion will increase the probability of macroeconomic bottom in the third quarter. Although the real economy is still facing downward pressure, the market has made more pessimistic assumptions. Regardless of the A-share market or overseas market, the valuation range of individual stocks deviates greatly, but as a whole market, the valuation range still has rules to follow, and its valuation will not rise to the sky because of good economy, nor will it fall without a bottom line because of poor performance, which is the inevitable result of the inherent laws of the market.
Last year, the market was suppressed by a series of unfavorable factors, such as financial deleveraging, Sino-US trade war, economic downturn, stock pledge explosion and RMB exchange rate against the US dollar breaking seven. After worrying about the deep-seated problems of China's economy, such as economic growth mode, excessive tax burden, high housing prices crowding out consumption and population problems, investors need to find more black swans at 20 19, which is probably quite difficult.
20 19 financial deleveraging is no longer the focus of current work. The removal of equity pledge risk, the clearing of goodwill impairment risk, the change of financial supervision thinking, the improvement of Sino-US trade negotiation situation and other factors have all brought about the repair of market risk appetite, including the downward interest rate of government bonds and corporate bonds reflecting the marginal decline of entity financing costs.
If it is difficult to find out the marginal factors worse than expected at the end of 20 18 this year, we think that A shares will bid farewell to the bottom of the market with great probability. There is no standard definition of the bull market itself, especially for the beginning of the bull market. For example, is crossing the annual line defined as the beginning of a bull market, or is it counted as the starting point of a bull market from the lowest point?
If the starting point of the bull market in 2006-07 is set at 998, and the starting point of the bull market in 2009 is set at 1664, then the current A-share market has entered a new round of bull market!
Second, how to understand the valuation pricing and driving factors of A shares?
To clarify the nature of the market, it is necessary to clarify the driving factors of stock pricing at different stages. Let's look at two sets of data first: The first set of data is that as of the latest trading day, the P/E ratio of the Shanghai and Shenzhen 300 constituent stocks is 1 1.5 times, which is at the bottom of the historical valuation in the past decade, and the horizontal comparison is in the valuation depression in the major capital markets around the world. The second set of data is the historical data of all stocks in the two cities according to the median price-earnings ratio. At present, the median price-earnings ratio of A shares is 29.32 times. The median price-earnings ratio can more clearly reflect the average valuation level of the overall market. From the data alone, the current average valuation level of A shares is not cheap. However, if we look at the data of the past 20 years, the median price-earnings ratio of A shares has exceeded 90%, much higher than 30 times. At present, the valuation level of 29.32 times is at the bottom of the 20-year historical valuation.
This data illustrates the reality that the median valuation of the A-share market seems to have never been particularly cheap. We think this is related to the dual differentiation of valuation and pricing system in A-share market.
Valuation of all A shares (median)
Source: wind information
Price-earnings ratio (TTM).
Source: wind information
At present, the total market value of Shanghai and Shenzhen stock markets is 30.5 1 trillion and 19.5 trillion respectively, totaling 50 trillion. Among them, the total market value of Shanghai and Shenzhen 300 constituent stocks is 33.49 trillion yuan. In other words, the total market value of the remaining 3,400 companies, which account for about 92% of listed companies, is only 16 trillion yuan, and the actual tradable market value may be less than 10 trillion yuan. There are four core factors in the framework of studying and analyzing the stock market: profit growth, risk-free interest rate, risk preference and system. For the Shanghai and Shenzhen 300 constituent stocks dominated by institutional investors, profit growth and risk-free interest rate may be the core factors, while for other non-weighted companies, individual investors still dominate the pricing power.
Compared with the real estate with a volume of 100 trillion in residents' asset allocation, the total market value is small and there is no short-selling mechanism. The incremental funds of individual investors determine the marginal pricing of stocks, giving them a high valuation tolerance. For companies with non-core weight, the influence of risk preference and system may far exceed profit in some stages and become the core driving factors in the stock price stage. In the past few years, especially 20 17, different pricing drivers eventually led to extreme market differentiation.
Third, how to treat the essence of this bull market?
Simply combing the pricing logic of A shares, for the core heavyweights, first of all, after the profit growth rate of 20 18 declines and is digested, 1 social integration bottoms out, which increases the probability that the profit growth rate will bottom out in the second half of the year. Secondly, after 20 19 global monetary policy turned loose, financial deleveraging came to an end, the real estate market cooled down, the pressure of RMB exchange rate depreciation subsided, the marginal easing space of central bank monetary policy opened, and the loan interest rate showed a marginal downward trend. It is expected that the downward trend of 20 19 risk-free interest rate will provide positive support for the market.
At the institutional level, with the acceleration of the opening up of the capital market, international mainstream indexes such as MSCI, FTSE and Dow Jones index have increased their allocation of A shares, and the inflow of A shares is expected to exceed 600 billion during the year. On the whole, except for the performance constraints of listed companies and the final results of Sino-US trade negotiations, it is expected that the risk appetite will be significantly improved compared with last year.
As the backbone of the index, core assets will be gradually repaired. For other companies, after the goodwill risk in the annual report was cleared, many factors restricting the stock price have improved marginally in the past three years. The valuation repair brought by the increase of investors' risk appetite is the core logic of the first stage of this bull market. Whether the short-term performance can be improved is not a necessary prerequisite for the stock price to rise. A few industries, such as animal husbandry, brokerage, photovoltaic and other sectors, have clear profit improvement expectations, which will bring greater flexibility to the valuation and repair stage of the overall market.
The biggest feature of the first stage of this bull market is that the valuation driven by risk preference has repaired the market, and the fundamentals of a few industries have improved and entered a fundamental bull market. The characteristics of the valuation repair market are that various industry sectors take turns to make up for the increase. As long as the industries at the bottom of historical valuation have opportunities for valuation improvement, we expect that the valuation repair space of the overall market is expected to reach 30% from the lowest point. If in the first stage of the market, the real interest rate is lowered simultaneously, the excessive repair power of the valuation may be unfavorable to the subsequent slow bull market. The main driving factor of this round of market is not fundamentals, and the fluctuation caused by the change of risk appetite will increase obviously, including the downward pressure on the economy, the results of Sino-US trade negotiations, whether MSCI expands the proportion of A shares, and the first quarterly report of listed companies, which will cause great disturbance to the market. After incremental funds entered the market, favorable policies were exhausted, market differences were reduced, and * * * knowledge was formed, the first-stage valuation repair basically came to an end. Investors can make comprehensive judgments based on trading volume, financial data, favorable policies and market sentiment. After the completion of the first phase of the valuation repair market, the trend of individual stocks in the industry will return to performance and fundamentals, and the differentiation of individual stocks industry is bound to be reflected again.
In the medium term, we believe that the first step of the bull market will complete the comprehensive repair of the valuation system, which is reflected in the valuation of cattle. In the second step, with the economic cycle bottoming out, economic transformation and performance improvement, global capital will enter China, which will be given to China enterprises that have been at the top of the world industrial chain for a long time, and the A-share market is expected to enter Fuxing Bull.
Four. capital proposals
For different types of investors, we think their strategies should focus on:
1, investors with heavy positions should pay attention to this rare opportunity. Before the valuation repair market comes to an end, they should cash out the stocks with defective fundamentals and seriously deviated from the fundamentals, and recognize the nature of the driving factors of the stage market.
2. For investors with strong independent trading ability, they can focus on industries benefiting from policies such as semiconductors, information technology, financial IT, and 5G, as well as industries with clear inflection points such as brokerage, animal husbandry, and photovoltaic, and grasp the main rising market.
3. For investors with relatively low positions or preparing to enter the market, it is suggested to give priority to industries whose valuations are still at the bottom of historical valuations, but at the same time, we should also avoid risks such as fundamental defects of individual stocks and shareholder reduction, actively increase the allocation of index funds or optimize products with high positions. Equity products that focus on core assets will continue to receive excess returns.
Author: Chen Da? 02606 1 10 10020? Chief investment consultant of GF Securities
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