Step into the greedy moment! 3000 points on the front line, it is time to increase warehouse consumption, medicine and the Internet!
Editorial Department of Red Weekly | Zhang Ju
Editor’s note
At present, the valuation of A shares and Hong Kong shares has reached the lowest range in 10 years. The Shanghai Stock Exchange Index fell again this week to 3,000 points. All kinds of negative information in the market are fully reflected in the stock price. But with the disclosure of the third quarterly report, investors can see that many industries have been in a state of marginal improvement, such as pharmaceuticals, liquor and resource stocks. From the perspective of valuation, trading volume, risk premium ratio and other characteristics, the market is already at the bottom area, and more and more companies are joining the ranks of large repurchases and large shareholders’ holdings, and a new round of market may have quietly hit the road .
In an interview with “Red Weekly”, Zou Xi, deputy general manager of Rongtong Fund, pointed out that in the second and third quarters, the A-share market may be forming a long-term important bottom in the next 2-3 years. It is expected that when the market starts up again, growth stocks will hardly have a systematic rebound from May to July, and value stocks will become the main driving force for the market to rise, but there will still be structural opportunities in the growth direction. The market will continue to follow the direction of “steady domestic growth + overseas inflation prevention”, and medium and long-term investment opportunities will emerge.
Zhu Jianming, deputy general manager of the equity investment department of Baoying Fund, also emphasized that from the perspective of historical performance, when the macro environment is weak, the industry boom is declining, or the earnings of listed companies are volatile, leading stocks in various industries have shown better resistance to macroeconomics. In terms of the ability of cycles and industry fluctuations, the Mao Index significantly outperformed, and the value stocks represented by the Mao Index showed significant resilience.
Valuation, sentiment, policy, and performance are superimposed
A shares entered the bottom range for the second time during the year
There are multiple features that show that the market is already in bottom territory. For example, the volatility has dropped significantly, the equity market risk premium is at a high level (the higher the price, the better), and the valuation is at a low level.
Taking the Shanghai Index as an example, the Shanghai Index fell again to 2934 points on Monday, less than 100 points from the intraday low of the Shanghai Index on April 27 this year of 2863.65 points. Comparing with the closing on Monday and the point on April 27, the valuation of the Shanghai index is less than 1.5% from the low of the year. At present, the rolling price-earnings ratio of the Shanghai index is only 11.25 times, and the price-book ratio is only 1.23 times. If you compare the other major indexes, the Shanghai Composite 50, the CSI 300, and the ChiNext Index, they have all fallen below the position on April 27. From the point of view of the index on October 10, only the CSI 500 still has a safe distance to speak of. From the perspective of valuation, compared with the 19.82 times valuation in 2016, which has experienced a circuit breaker, the 16.3 times valuation of A shares is significantly lower than this value.
Of course, in order to confirm the bottom more, it also needs to include multiple factors such as emotional bottom, policy bottom, and profit bottom to verify.
Among them, the sentiment bottom may come earlier than the valuation bottom, which is intuitively reflected in the trading volume. The “trillion trading volume”, which is considered to be a sign of active market activity, has not been seen for several consecutive trading days. The single-day turnover of September 21 trading days was less than 1 trillion yuan, of which 19 trading days were less than 800 billion yuan, and the last 10 trading days were even lower than 700 billion yuan. The two cities directly created an annual volume of 560.841 billion yuan.
Comparing the last few full years, the 2020 annual land volume record is 490.6 billion yuan on May 25, and the 2021 land volume record is 654 billion yuan on April 14. Judging from the trend after that, the market has basically come out of a wave of rebound. “There are multiple objective factors for the sluggish trading volume before the National Day. At present, the unfavorable factors are gradually being resolved. The much-anticipated conference is about to be held, and all institutions are required to submit transcripts at the end of the year. Unlike previous years when the market was good, the fourth quarter was different from reducing transactions to preserve the fruits of victory. This year, it may be necessary to use the fourth quarter to adjust positions to reduce the annual drawdown.” An investor who did not want to be named admitted frankly. The gratifying sign is that the Shanghai Stock Exchange Index recovered 3,000 points on Wednesday, and the turnover between the two cities exceeded 800 billion yuan. The enthusiasm for doing more has initially emerged.
Look at the policy again. In the third quarter, relevant policies at home and abroad continued, especially the global liquidity withdrawal caused by the Fed raising interest rates by 75 basis points, which also seriously hurt A shares.
But the negatives are all positives. As far as the domestic market is concerned, after the economic downturn in the second quarter, relevant policies came out in a row. In May and August, the National Standing Committee continued to introduce a package of measures to stabilize the economy, providing multi-dimensional policy tool support to promote the economy. Stabilized for the better. In addition, the People’s Bank of China announced on September 28 that it would set up a special re-loan for equipment renovation to support manufacturing investment. It is expected that with policy support, infrastructure and manufacturing investment will continue to play the role of “pushers” for stable economic growth. The recent bottoming out of pharmaceutical stocks is also rumored to be related to some favorable policies that may be introduced.
Zou Xi emphasized: “The state of economic operation in July-August has proved that after the severe epidemic is brought under control, the market expectation of strong economic recovery is unreliable. Therefore, the policy mix has returned to exploring the stable development mechanism of the real estate market. A pattern of counter-cyclical adjustments in investment.”
Driven by many favorable policies, the PMI index returned to 50.1 in September, the year-on-year growth rate of power generation rebounded to 9.9% in August, the year-on-year growth rate of social consumption rebounded to 5.4% in August, and the growth rate of investment declined in August The trend was initially suppressed, at 5.8%, and signs of macroeconomic warming were gradually emerging.
However, Zhang Yidong, deputy director of the Industrial Securities Research Institute , pointed out in the latest roadshow that the entire market lacks confidence, and A-shares are still in a long-term bottom area, and currently need to wait for peace. Waiting means waiting for China’s fundamentals to improve, and the policy bottom may need to be substantively consolidated.
Look at the performance again. On the whole, due to the obvious decline in the economy in the early stage of the second quarter, the economy began to gradually stabilize in the third quarter. Specific to listed companies, most of the companies that have disclosed their third quarterly reports this week have achieved high profit growth. According to the incomplete statistics of the editorial department, more than 170 companies have disclosed their performance forecasts for the first three quarters.
In an interview with “Red Weekly”, Zhao Yi, the star fund manager of Quanguo Fund , pointed out that under the circumstance that the word “stable” is in the first place and domestic liquidity is relatively loose, the probability of systemic risks is relatively low at present. It is only superimposed that the liquidity in the United States is tightened and the overall domestic economy and policy expectations are uncertain, and the market may still fluctuate.
New shares break, old shares break net, new base issuance is not smooth
Attractive risk premium
A second chance to get on the bus is coming
Compare current index valuations with historical bottoms. As of Thursday, the PE of the Shanghai Stock Exchange 50 and the CSI 300 were 9.1 times and 11.1 times, respectively, and the price-to-book ratio was 1.2 times and 1.33 times, respectively. From the historically important bottom area of A-shares, at 1664 points of the Shanghai index in 2008, 1849 points of the Shanghai index in 2013 and 2440 points of the Shanghai index in 2018, the price-earnings ratio of the Shanghai 50 index was 12.72 times, 7.76 times and 8.33 times respectively, and the price-earnings ratio of the CSI 300 index was 12.72 times, 7.76 times and 8.33 times respectively. They are 12.58 times, 8.54 times and 10.33 times respectively; the price-to-book ratios of the Shanghai 50 Index are 2.02 times, 0.63 times and 0.95 times, respectively, and the price-to-book ratios of the CSI 300 Index are 1.96 times, 0.67 times and 1.09 times, respectively. It can be seen that the current valuation level of blue-chip stocks is close to the low valuation state of the historical bottom of A-shares, and it is not advisable to continue to be bearish at a low level.
Zhu Jianming’s analysis: “Comparing the circuit breaker data at the end of 2008 and 2016, it can be observed that the market bottom has three characteristics: First, the market bottom usually goes through a round of irrational killing valuations, such as the all-A valuation at the end of October 2008 13.5 times Around, down 76% from the high point in 2007. At the beginning of 2016, the all-A valuation fell to about 18 times, down 43% from the bull market high. Bottom), as of now, this round of downturn has dropped by 35% from the high point in 2021, and the all-A valuation level is about 16 times, which is close to the bottom of the fuse in 2016; second, the mood is depressed, and the trading volume is rapidly declining. After the adjustment began, the trading volume of the two cities dropped significantly. In terms of the weekly average turnover rate, the average daily turnover rate in the last week of September dropped to 0.54%; Stocks, the average decline in one year is more than 70%, the TMT half-year adjustment from 2015 to 2016 is more than 40%, and the popular track represented by new energy has been adjusted violently in this bull market. In the past two months, the new energy index fell by more than 20% If we count from the high point in the fourth quarter of last year, some leading companies have fallen by 30%-70% in the past year, and the market has become more and more blunt about the relevant benefits, and the pessimism is strong.”
Looking at the risk premium ratio of the current market, Wind shows that the current latest value of A shares is 3.4, while the value on the first day of the market launch on April 29 was 3.38. If you compare the value at the end of 2018, it is also in the range of 3.5~4.0, which to some extent means that the market attractiveness is rising rapidly. In this regard, the chief strategist of asset management of a securities firm in Shanghai pointed out that in the context of steady growth, it is expected to gradually move from the early stage of credit expansion to the continuous optimization of credit structure and the bottoming out of corporate profit growth. During the transition period of the fourth quarter, Asset prices may react in advance, and the current market-wide risk premium is very attractive.
Let’s look at the secondary market or a new stock breakout indicator that can’t fall. Throughout September, a total of 50 new shares were issued, and 20 were broken on the first day, with a break rate of 40%, of which the break rate of registered new shares was nearly 48%. Wind shows that after Wanrun Xinneng and Inshore Protein performed a more exaggerated break, so far this month, there have been three new shares of Xinzhi Bio, C Bide, and C Harbin. Although there are many reasons for the break of new shares, from the historical experience, the large-scale break of new shares is often one of the important signs of the bottom of the broader market.
At the same time as new stocks break, the increase in the phenomenon of old stocks breaking the net also confirms that the current bottom range is true. As of October 12, according to the statistics of the closing price that has not been restored, among the 4,952 listed companies in All A, 415 companies whose latest closing price has fallen below their net assets, including many banks.
If we look back at historical data, A shares have experienced several peak periods of breaking net in recent years. When the Shanghai index broke 3,000 points this year (April 25), the number of net breaking stocks was 469; There are more than 500 net stocks. After each break through the net peak, the market gradually got rid of the bottom area and ushered in a rise.
Finally, from an institutional point of view, the situation of equity-based public offerings can also explain the current market range to a certain extent. Wind shows that there were only 71 newly established funds in the whole market in September, and the issuance share was only about 87.597 billion. In the previous two months, newly established funds in the secondary market have exceeded the 100 integer mark. In terms of the issue share of a single product that month, most of the top-ranked products are fixed-income products. However, this trend reversed after the index regained 3,000 points this week. The most typical example is the first new product after Zhao Yi, the former top-ranking champion in public offering, which was limited to 10 billion and sold out in one day, becoming the first active equity blockbuster this year. In addition, since the current three quarterly reports have not been released, we cannot know the latest stock positions of the public offering at the end of September, but the analysis of the sluggish trading volume and the killing of a white horse at that time may indicate that the enthusiasm for doing more was not high at that time, and the institutions Or reduce losses by intentionally reducing positions.
Profits are all good
The battle for Mao Ning takes on a new pattern
Institutions do more layouts, and they are more focused on consumption and medicine
As of October 12, among the 59 active equity funds with a scale of 10 billion yuan, only Qiu Dongrong’s Zhonggeng Value Pilot Mix has achieved positive returns this year. Another 3,000-point battle in the stock market is undoubtedly an opportunity for shame for an institution whose performance has been bearish for three quarters this year. Although new energy vehicles and semiconductors continue to be on fire this year, the Mao Index and Ning Index are still attracting attention in the market, so where will institutions show their swords at this stage? Will the investment theme and logic change?
Kou Zhiwei, a well-known veteran private equity and Chongyang Investment partner, said that the market likes to put labels, such as “Mao Index” and “Ning Index”. But looking back, when the label was called out, it was also near the high point of the stock price. It’s not that the labelled companies have no chance, but that their competitive advantages and growth potential as a whole were well-recognized and priced by the market at the time. Now that the valuations of many stocks have returned to a reasonable or even lower position, it is necessary to re-evaluate the match between the valuation and growth prospects of these stocks. The new structural differentiation in the future will definitely not apply the old labels.
In an interview with “Red Weekly”, Zhang Xun, TEDA Manulife star fund manager , pointed out: “The growth opportunity comes from the high prosperity of the incremental economy, and the value comes from cost performance and future policy expectations. Simply standing in the dimension of more than one year, both have opportunities. .But in view of the current uncertainties in geopolitics, overseas inflation control, Fed rate hikes, etc., I do not recommend betting on a certain direction alone, but rather, on the premise of adhering to personal and product styles, to balance growth and value. We are more Willing to start from the investment odds, slightly lengthen the investment duration, and buy companies that truly continue to create value, have core competitiveness, have higher growth, and have more outstanding cost performance. The core competitiveness of ‘Mao Index’ and the stability of the competitive landscape , good corporate governance and value for money are the stock selection factors we have been focusing on.”
A well-known public fund manager in Beijing pointed out that it is expected that the change in market investment preferences will be completed in the weak adjustment in the market stage. In the fourth quarter, we can focus on blue-chip sectors with low valuations and cyclical defense capabilities, such as food and beverage, real estate, banking, and household appliances.
Wind shows that the closely watched “Mao Index” and “Ning Index” are indistinguishable. As of the close on October 13, the “Mao Index” fell 27.6% during the year, and the “Ning Index” fell 29.67% during the year. From the perspective of risk premium ratio, the current Mao index value is only 1.39%, while the Ning portfolio is -0.74%. In this sense, the current secondary market has indeed reached a stage where there are treasures everywhere. Further, the current price-earnings ratio accounts for the historical average quantile from low to high. If the value is lower than 100%, it is lower than the historical average level. Except for Sungrow, the 52 Maoning portfolios are all below or close to the historical average valuation (for more AH low valuation stocks, please refer to page 84 of the data version).
In addition, “Red Weekly” also used Wind statistics to show that as of the close of October 13, according to the price-earnings ratio of Shenwan classification and the overall method, the top three sectors are defense and military industry, public utilities, and computers, while large In the consumer sector, food and beverages, pharmaceuticals and biotechnology are basically half of the leaders , about 30 times the first-line valuation level, and the cost-effectiveness advantage is reflected.
“With the gradual implementation of the ‘steady growth’ policy, the income level and employment status of residents may have a better driving effect on consumer demand and promote the marginal recovery of consumer demand. At the same time, the current consumer industry has experienced nearly two After the adjustment in 2018, its own valuation level is at a historically low level, and once there is a clear inflection point in profitability, it will be easier to form a double recovery of profitability and valuation.” said Tao Can, star fund manager of CCB Fund .
The above-mentioned well-known public fund manager in Beijing, who did not want to be named, said that he is optimistic about food and beverages in large-scale consumption. “The liquor leader still maintains steady growth, the performance fluctuation is small, and the valuation is close to a high safety margin. The price upgrade of the liquor industry hedges against the decline in sales. The structure of the market share is beneficial to famous wine companies. The high-end beer industry logic increases the price per ton, the upgrading of corporate structure and cost control and efficiency improvement are expected to bring about improvement in profitability, household consumption continues to grow, and sub-sectors such as quick-freezing and condiments perform relatively well Good.” Coincidentally, SDIC UBS fund manager Sang Jun , who was interviewed by this magazine before the holiday, is also optimistic about the opportunity of beer stocks. One of the main arguments for his support is that this year is the first football World Cup held in the northern hemisphere winter, which is expected to boost the Off-season consumption of beer.
Taking Kweichow Moutai as an example, although the recent external events have caused bad news for the industry, the company’s revenue in the first three quarters may increase by 16.5% year-on-year, and the net profit attributable to shareholders of listed companies may increase by 19.1% year-on-year. The data is in line with expectations. This week, Moutai’s share price once fell below the 1,700 yuan integer mark, which just gave investors who were afraid of high Maotai a chance to get on the car. Well-known investor Duan Yongping also publicly stated that he used his spare money to buy Moutai this week. The largest overseas Chinese stock fund, Allianz Shenzhou, began to significantly increase its positions in Kweichow Moutai as early as August, and in the last five trading days before the National Day, foreign investors bought the stock on a net basis for five consecutive days. From the perspective of another liquor leader, Wuliangye, the current rolling price-earnings ratio is about 23.6 times, which is far below the historical average of about 30 times. From this perspective, it reflects a better medium-to-long-term buying point.
And pharmaceutical stocks, which are gradually showing signs of reversal of difficulties around the National Day, have gradually become the focus of current institutional adjustment. In this regard, a new private equity person in Shanghai said that aging and consumption upgrading are the foundation for laying the foundation for the long-term needs of the pharmaceutical industry, and technological innovation is the inexhaustible driving force for the development of the industry. In the foreseeable future, the domestic pharmaceutical industry is still expected to maintain an annual compound growth rate close to double digits, and some innovative tracks with high barriers and high prosperity are still expected to maintain an industry growth rate of more than 20%. The reform measures such as DRGs and centralized procurement only reshape the industry structure, and will not change the rigid demand attribute of the industry itself. At present, the main medical reform policy framework has been basically completed, and the market has fully reflected the previous pessimistic expectations, and the downside risks are limited. The best time window for the pharmaceutical industry to enter the medium and long-term layout. “
Liang Xing, a star fund manager of Cathay Pacific Fund , admitted that investors may have some deviations in their understanding of the centralized procurement that has suppressed the industry in recent years. She analyzed: “Many pharmaceutical companies have to spend the cost of sales in the sales of drugs. Purchasing with volume saves marketing expenses and sales staff’s expenses in the sales process. Although the revenue has dropped, the profit drop has not been so great.”
Regarding the specific opportunities in the pharmaceutical industry, Wan Minyuan, the head of Rongtong Fund Star Pharmaceutical , said that the current overall configuration idea is to minimize the correlation with medical insurance, and choose a segmented track with medium and long-term logic, including CXO, retail pharmacy, high-end Import substitution of equipment, consumer medicine, and APIs and traditional Chinese medicines.
Judging from the current rise and fall of pharmaceutical companies during the year, the hot CXO track has been wiped out so far this year. WuXi PharmaTech, one of the most heavily organized pharmaceutical stocks, has fallen by about 38% this year. However, when the industry returns to the right path from disorder, especially in the post-epidemic era, the industry will usher in an all-round return sooner or later, and sub-sectors that encounter irrational valuations may have greater flexibility to recover lost ground. This Friday, WuXi PharmaTech, which has an excellent three-quarter report, ushered in a long-lost daily limit.
Hong Kong stock market may accumulate stronger rebound momentum
The best time period for the Internet leader to welcome the left layout
It is also the main battlefield of institutions, and the Hong Kong stock market is also going down all the way. The Hang Seng Index hit a record high of 33,484 points in January 2018 to September 30, 2022, almost halved, only one step away from 16,170 points in October 2011. It has hit the lowest level in the past 11 years, and the price-earnings ratio is only 8 times, which is about 1% since 2005. The Hong Kong stock market is arguably the worst-performing financial market in the world in recent years. The stock price of many Hong Kong stock companies, the more they repurchase, the lower they are.
The market will eventually be repaired when it reaches its extreme value. Zhu Jianming, deputy general manager of the equity investment department of Baoying Fund , analyzed: “The Hong Kong stock market has recently hit a 10-year low. On the one hand, Hong Kong stocks are more affected by the global liquidity crunch; on the other hand, the structure of Hong Kong stocks Mainly in financial real estate, there is a lack of high-end manufacturing of hard technology, which is greatly affected by the macro environment. Generally speaking, combined with valuation and fundamentals, Hong Kong stocks are still in the early stage of layout.”
According to “Red Weekly”, fund companies are also actively buying the bottom of Hong Kong stocks. Quanguo’s Zhao Yi and Bosera Fund are all paying attention to Hong Kong stocks, and the layout is still the first choice for several leading Internet companies in Hong Kong stocks. Bosera Fund mentioned in its written reply to this magazine that the domestic and foreign regulatory environment for the Internet sector has improved significantly, and it needs to wait patiently for the expected shift in tightening expectations after overseas inflation has eased significantly, as well as investment opportunities after domestic demand improves. “
A fund manager of a Shenzhen-based fund company said: “At present, the main contradiction of Internet companies is the reality that short-term income recovery is slow and the market’s deep-rooted growth label for the sector over the years. The reality boils down to various external circumstances. Then in the context of the easing of the above factors, the market is naturally looking forward to returning to a high growth rhythm .”
Taking Tencent Holdings as an example, the closing price on Thursday has fallen below HK$250, and the latest rolling price-earnings ratio is 11.5 times, which is almost close to the historical lowest valuation of 11.45. Many value investors are buying the stock more and more in practice. Well-known investor Duan Yongping once again bought 100,000 shares of Tencent ADR on Thursday. Also on October 13, Tencent Holdings topped the single-day net purchase of southbound funds, with a total net purchase amount of 770 million yuan. The second largest net purchase on that day was another Internet leader, the United States. group. The Kuaishou is the smallest decline in the year among the three major Internet leaders, but the current transaction volume is also the smallest among the three.
Zhu Jianming emphasized: “Internet companies are under pressure in the short-term profit situation, market sentiment is pessimistic, and the performance of the sector is sluggish, but there seem to be signs of improvement in the predicament, especially the continuous loosening of the domestic policy environment, including the restart of game editions, emphasis on the development of industrial Internet and digital The economy and the transformation of Internet companies are encouraged, and the future direction of the industry needs further observation.”