What is a procyclical sector?

The market is cyclical. When the market is good, it rises, and when the market is sluggish, it falls. The market keeps switching between rising and falling. This is the cyclicality of the market. For some sectors, in the market economy,

When the economy is booming, the revenue of the entire industry will also improve to a certain extent. When the market economy is declining, these sectors will also be affected by the market. As the market goes down, these sectors are procyclical sectors.

Which industries belong to the procyclical sector?

The procyclical sector mainly includes finance, real estate, building materials, infrastructure and other industries.

The financial industry includes banks, securities firms, and insurance.

When the economy is booming, more companies will lend money to banks, which will improve the performance of banks. For securities companies, if the market economy is good and the market rises, more people will open accounts to invest, and the performance of securities companies will be better.

The same is true for insurance. When the economy is booming, the country will expand investment in infrastructure, and the real estate market will prosper. At the same time, it will drive the rise of surrounding building materials industries. These industries are greatly affected by the economic environment and advance and retreat with the market economy, so they are smooth.

cyclical industries.

From a valuation perspective, the investment value of procyclical sectors is that compared with the relatively high valuations of the medical, technology, and consumer industries that have performed well in the past two years, the valuations of procyclical industries represented by traditional industries are relatively low.

Low, procyclical sectors may benefit from low risks and valuation repairs, and the low-risk preference characteristics are expected to continue to exert force.

Especially for sectors such as banking, building materials, machinery, and home appliance industries.

From a profit perspective, based on historical circumstances, if the economy continues to recover and corporate profits improve, procyclical sectors will also have opportunities to rise.

The impact of the epidemic has obviously gradually weakened, and the domestic economy is developing in a good direction. It is very possible for procyclical industries to improve their profitability in the context of economic improvement.

From the perspective of industry allocation, capital allocation needs to spread risks as much as possible. However, when the valuations of popular sectors and procyclical sectors are clearly differentiated, most funds have a relatively high allocation ratio to popular sectors, which is at a historically high level.

level, while the allocation ratio of procyclical sectors is at a historically low level.

Specific statistics show that the fund’s allocation ratio to pharmaceutical and biological products has exceeded 21%.

The proportion is quite high, and the allocation ratio of each procyclical sector basically does not exceed 3%. The contrast is very obvious. If you want to allocate funds, it is necessary to invest some funds in the procyclical sector, because these sectors

The safety margin is higher.