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Source: Yao Wang
First, behind the recent adjustment: rising congestion and acceleration of rotation, but it is difficult to adjust deeply, there is no need to worry too much, and bullish thinking should still be maintained.
We have been emphasizing "long thinking" since February, and the market continues to repair in doubt. Recently, we have seen that as the rise spreads, the center of industry congestion rises significantly, and the rotation of the plate accelerates, and the intensity of the rotation of the industry increases rapidly. The market itself has reached a time to consolidate gains, digest congestion and consolidate the main line.
The degree of congestion is our exclusive construction, which is used to measure the trading sentiment of various industries and tracks, and it has a strong indication effect in terms of short-term timing. In mid-May, most industries had reached [moderately high] or [higher] water levels, which have been digested after this week's adjustment.
At the same time, the industry rotation intensity has risen rapidly since May, which also points to increased market divergence. Through the sum of the absolute value of the rise and fall of the first-tier industry in the past five days, we have constructed the industry rotation intensity index to show the industry rotation speed of the market. Since May, we have observed a rapid rise in this index, and now it has come to a higher position again, indicating that the market has once again come to a time when it is more chaotic and lacks a clear main line.
However, it is also difficult for the market to adjust deeply, and it is still recommended to maintain long thinking. The direction of policy easing is clear, fundamental expectations are improving, and this wave of adjustment is more likely to be triggered at the trading and emotional level, so it is difficult to adjust deeply. Emphasize again that the overall tone of 2024 is "bullish thinking", especially when there is a periodic adjustment or risk appetite contraction, should be more active response.
Second, the more important significance of the adjustment is that the big waves sweep the sand and the fire sees the real gold, and the real main line will be clearer and more deeply rooted in the hearts of the people after being washed away.
Referring to April and May of 1919, the main line of core assets was gradually established and became a consensus in the process of adjustment. Reviewing the market of core assets opened in 2019, if we look at it in stages, the main line of core assets in 2019 is gradually established and reached a consensus in the market adjustment in April and May. Since then, with the accelerated establishment of various capital United front, it finally deduces a bull market in core assets:
Stage one: at the beginning of 2019, the market ushered in a deep rebound in the beta market, the main line is not clear. From 2019-1-4 to 2019-4-8, under the stimulation of the loosening of monetary and credit policy, the landing of tax and fee cuts, the turning of the Federal Reserve, the relaxation of Sino-US relations, the improvement of domestic economic data, and the net inflow of foreign capital exceeding 120 billion from January to February, the risk appetite warmed up sharply, and the market came out of a wave of "fast bull" market. The broad base index rose about 40% on average, with the shanghai stock exchange lagging behind but still up 32%. The market bottomed out and rebounded, investment opportunities blossomed more, and there was no clear main line. Mao index began to take the lead, but the advantage was not significant.
Stage two: in the second quarter of 2019, the market experienced a correction. In the shock and fluctuation, the market gradually finds a consensus and focuses on the core assets. Policy margins tightened after the politburo meeting in April, while expectations of economic recovery were falsified, trade frictions between China and the US escalated again in May, and global market resonance fell. In the process of risk appetite contraction, the broad base index adjusted sharply, and the small and medium-sized stocks with higher previous gains adjusted more deeply, but the Mao index with higher previous increases still showed a strong anti-fall attribute, falling only less than 10%. To investigate the reason, after shocks and fluctuations, funds began to focus on looking for high-quality assets with safer, stable long-term returns, better performance and larger volume, superimposing the three major international indices to expand their capacity. as a "smart money", "value" of the concentrated layout of foreign investment white horse, with food and beverages, banks, home appliances and other direction of return certainty gradually become a capital "safe haven", the core asset market has come to the fore.
Stage 3: after June 2019, the market fluctuated, the core assets United front was established, and the consensus was accelerated. After a rapid decline from April to May, the market remained volatile throughout the year, but the structural main line was very clear and a consensus on core assets was formed. The influx of foreign capital has changed the market aesthetics, the layout of domestic capital has also accelerated, the establishment of a United front of domestic and foreign capital in core assets, the focus of market consensus, and the combined force of incremental capital increase and stock fund exchange have given birth to a vigorous bull market of core assets.
Third, stick to the real main line: leading white horse, core assets
We predict the return of core assets in 2024 in our annual strategy ("return and break: advanced Core assets-2024 A-share Strategy Outlook", December 10, 2023).
Since the beginning of the year, we have witnessed that the leading style and core assets have become an important source of excess returns. Since the beginning of this year, the Shanghai 50, Shanghai and Shenzhen 300 and other market indices have made significant excess gains. Further, we counted the median rise and fall of Shenwan's 31 primary industries since the beginning of the year, and found that the top five leading stocks in each industry showed obvious excess returns compared with the industry as a whole except banks. Even in strong sectors such as non-ferrous metals and home appliances, the leader has significantly outperformed, but the median increase in the industry has been close to-10%, further verifying the characteristics of this year's [strong style beta, industry weak beta, leading to victory].
Behind the success of the leader is, on the one hand, the reshaping of the United front of core assets on the capital side.MondaybingonearmeOn the other hand, it is the highlight of the leading profit advantage under the current macro background.
threeMondaybingonearme.1. The core assets United front is being reshaped.
At present, we have seen some positive signals that all kinds of funds in the market are beginning to focus on the leading white horse, and the United front is gradually being established: 1) active fund positions "must be combined over a long period of time" and re-focus on the leading position. 2) ETF and risk capital are important marginal incremental funds this year, which also drives the market to further focus on the leading white horse and core assets. 3) recently, foreign investment has entered the market on a large scale, and it is still focused on the leader, which resonates with various domestic institutions.
3.2. The profit advantage of the leader has been highlighted.
From the overall point of view of the leader, its profit advantage compared with Quan An is gradually highlighted. On the one hand, as of 2024Q1, the overall net profit growth of the leader is-0.Mondaybingonearme.91%, the growth rate is 3.35 percentage points higher than that of all A shares, which is significantly larger than the 0.10 percentage points in 2023; on the other hand, the proportion of industries with the leading performance growth rate of 2024Q1 has significantly increased from 61.29% in 2023 to 70.97%.
In terms of sub-industries, the year-on-year growth rate of leading net profits and ROE levels in most industries are higher than those in the industry as a whole. As of 2024Q1BI, the net profit growth rate of 22 of the 31 first-tier industries is higher than that of the industry as a whole, and the ROE_TTM of all industry leaders except agriculture, forestry, animal husbandry and fishery is higher than that of the industry as a whole.
IV. "15: 3": the core asset of the new era, adjustment is the opportunity, and "chaos is the ladder"
This year, the Xingsheng strategy team first proposed "153s" (15% growth rate and 3% dividend yield) as the screening criteria for core assets in the new era. Compared with the traditional core assets, "1503" has both high prosperity, high ROE and high dividend, which makes it easier to build market consensus and form a United front.
Moreover, we can see that "15-3" can often win in chaos, and the excess earnings have increased significantly in the period of market volatility. Since January and late March, the two most significant periods of "15-3" excess earnings increase so far this year, which are characterized by increased volatility. In January, the market adjusted sharply. The absolute income of "153.3" was flat, with a relative income of 6.3%. From February to March 20, the market bottomed out and rebounded, and the market rose with the market, and the excess did not converge. Since March 20, the market has fluctuated sideways and increased volatility, and "153rd" has risen against the trend again in fluctuations, and absolute and relative returns are still significant.
"153s" assets are core assets that are more responsive to this era and are expected to continue to be the key to winning in the market turmoil, and recent adjustments will provide an opportunity to accelerate the embrace:
First of all, "153s" is an investment concept that conforms to the era of high success rate investment, and it is the secret of winning in chaos. In essence, 1503 pursues not only a certain growth rate as a guarantee of long-term space and sustainability, but also an appropriate dividend as a confirmation of short-term stability and security; not only pursue the "future", but also pay attention to "feet"; cherish both "dreams" and "reality". We have always stressed that high success rate investment is the consensus after big fluctuations, and we should focus on "certainty" in the chaos. "15% 3" assets not only have a certain degree of growth, but also have a high dividend guarantee, while implying a higher ROE, so they are natural high victory rate assets.
Secondly, under the background of weak economic recovery and no systemic risk, "153s" is the better solution under the dumbbell rebalancing configuration. The dumbbell configuration of the market over the past two years is centred on the lack of "good things" in the earnings downward cycle, forcing investors to opt for defensive high dividends on one end and small-cap growth stocks that benefit from liquidity on the other. However, in our annual strategic outlook at the end of last year, we made it clear that this year's dumbbell configuration may usher in a rebalance, with the "waist assets" and high-quality leading assets among the dumbbells ushered in repair. the core is that this year will be the stage of profit stabilization. This year, we also see that economic expectations continue to rise from the excessive pessimism at the beginning of the year, and the repair of economic expectations converges the excess returns at both ends of the dumbbell, but the upward resilience of the economy still needs to be observed. Therefore, under the background of weak economic recovery but no systemic risk, "15% 3" is the better solution for high dividend elasticity and high growth.
Third, under the new regulatory background, the market will focus more on certainty. The new "National Nine articles" require "strict access to issuance and listing", "strict continuous supervision of listed companies", "strengthening delisting supervision", "strengthening securities fund institution supervision", and "strengthening transaction supervision". It is expected to lead the market to further focus on high-quality leading assets. The "153rd" is a good asset to adapt to the new regulatory environment because of its stable growth, high dividend rate and definite long-term rate of return.
Finally, the "153rd" is compatible with high prosperity and high dividends, and naturally has the attribute of high ROE, which makes it easier to forge a consensus on all kinds of funds and form a United front. For investors with high prosperity, high growth looks down for stability. For investors with high dividends, high dividends look for flexibility upward. In addition, "1503" naturally has the attribute of high ROE, which is the focus direction of many kinds of institutional funds. Incremental funds determine the market style. This year, the market mainly comes from insurance, ETF, foreign capital and so on, which will further drive the market to focus on such high-quality assets. Insurance focuses on high dividends, and the dividend yield of more than 3% is very attractive to insurance; ETF expansion and increment are mainly concentrated in the weight direction of the market, such as Shanghai and Shenzhen 300, and further focus on leading assets; foreign investors are natural investors with high success rates. Therefore, the "15-3" is expected to become the consensus of all kinds of major incremental funds, and the United front is being formed.
The "153rd" asset provides simple and clear screening criteria, which are as follows (relaxed on the basis of "153"):
1) CSC 800 constituent shares, with a market capitalization of not less than 30 billion
2) the growth rate of net profit of 2024Q1, 2024E and 2025E is not less than 10%
3) the dividend yield in 2023 is not less than 2.5%
There are a total of 33 "15-3" asset target pools, the specific list is welcome to contact the card-building strategy team to obtain.
Suggestions on Industry configuration in May and May
5.1, May key industry recommendation: food and beverage, Dianxin, optical module, electronics, Hong Kong stock Internet
1. Food and beverage: financial report shows profit resilience, high dividend ratio + low valuation provides high margin of safety.
Since the beginning of the year, the market has been divided on the strength of the recovery in consumption, but the latest results show that the food and beverage sector continues to prove its stable growth and high profitability, while the dividend ratio is also among the highest in the industry. Taking into account the current plate valuation is relatively low, the follow-up as the consumer recovery continues to be verified, CPI is expected to hit bottom to pick up, the plate is worth focusing on.
2. Power equipment and new energy: pessimistic expectation is expected to repair, focus on going out to sea + dilemma reversal logic
Early investors have great differences on the profitability, growth and other issues of the plate, but recently the relevant concerns have been gradually alleviated: on the one hand, the power grid has benefited from the high demand at home and abroad, especially the strong and sustained external demand has been verified; on the other hand, the contradiction between supply and demand of lithium power, photovoltaic and other links has been gradually alleviated, and the mitigation profitability of the follow-up industrial chain is also expected to be repaired gradually, and the dilemma can be reversed.
3. Optical module: the capital of large factories has begun to increase significantly, and 1.6T is expected to exceed expectations next year.
At the end of the performance disclosure period, the risk appetite of the TMT plate is expected to improve, and the optical module as one of the directions with strong economic certainty and performance flexibility is expected to benefit. Industry chain multi-link verification next year 1.6T optical module is expected to exceed expectations, the recent AI capital expenditure of large overseas companies has also increased significantly, the certainty of future growth is further strengthened.
4. Electronics: the global consumer electronics cycle has rebounded, and the acceleration of AI computing power construction supports the core link boom.
In addition to the optical module, the electronic sector is also an important direction of TMT performance recovery with high certainty and benefiting from the AI wave. On the one hand, the rebound in terminal demand such as smartphones and laptops is expected to pull the industry chain to a sustained recovery; on the other hand, the outbreak of computing demand driven by AI will also continue to catalyze infrastructure-related links.
5. Hong Kong stock Internet: the suppression factor alleviates and the low valuation brings positive feedback, and the follow-up still has the flexibility of repair.
Repressive factors to ease the superimposed valuation of low, Hong Kong stocks Internet sector still has upward flexibility. Recently, the Internet plate of Hong Kong stocks has risen sharply, mainly due to the obvious relief of repressive factors at home and abroad. On the domestic side, the recovery of economic data and policy determination are reversing investors' expectations of domestic demand repair recently, and the Internet sector of Hong Kong stocks is greatly affected by domestic demand, so it is greatly boosted. Overseas, the rise in expectations of the Fed's interest rate cut has given a certain boost to the Hong Kong stock market. In addition, the recent mediocre performance of some previously active Asian markets, such as Japan, may lead some foreign investors to return to the Hong Kong stock market, especially the Internet sector, where the valuation is relatively low. With reference to the previous repairs of the Hong Kong stock market in the past two years, the Internet of Hong Kong stocks is one of the important directions with greater flexibility and better sustainability. Considering that the current positive catalysis at home and abroad continues, and the valuation of the Internet sector of Hong Kong stocks is still on the low side, the Internet of Hong Kong stocks in May is still an important elastic direction in market repair.
5.2 and May comparison of Multi-dimensional Industries
1. Mid-view prosperity
The prosperity dimension is mainly based on [188 prosperity tracking framework] to observe and compare the prosperity level of each industry. 188 Prosperity Index is an important indicator of our exclusive construction to depict the subdivision of industries, major categories of styles and the overall level of market prosperity, which is aggregated according to 188 industries and a total of 1000 + core meso-indicators, tracking the trend and changes of market prosperity every month.
Combined with the latest meso data, at the level of the first-level industry, the prosperity index of most industries increased month-on-month, in which the industries at a higher level and improved mainly include food and beverage, media and household appliances.
2. Transaction congestion
The degree of congestion is an important index to reflect the trading sentiment of the popular track exclusively constructed by the stock market strategy team, which is composed of energy, price, capital, analyst forecast and seven indicators to quantitatively track the changes of market mood. it has a strong indicative significance for the short-term trend of stock prices.
At the level of first-tier industry, the transaction congestion in most industries has been digested in the past month, among which the industries with relatively low congestion include media, real estate, coal, commerce and retail, textiles and clothing, automobiles and so on.
3. Fund position
According to the latest quarterly report of the Fund, from the configuration of the primary industry, the positions of non-ferrous metals, communications, household appliances, utilities and power equipment have increased in the first place, and these five industries are also the industries with the largest increase in overmatching ratio compared with the previous year. Among them, the non-ferrous metal position has been at the highest level since 2010, and the communications position is also close to the all-time high, but it is still low compared with the market capitalization of the industry.
At the same time, the positions of medicine, biology, computer, electronics, national defense military industry and non-bank finance are at the top of the decline, while from the perspective of overallocation, the decline in the proportion of bank and petrochemical overallocation is more obvious than that of national defense military industry and non-bank finance.
4. Valuation level
The valuation dimension mainly examines the industry PB valuation in the past five years quantile. At the level of first-tier industries, 23 of the 30 industries have PB valuations of less than 30%, of which coal, communications, utilities, petrochemical and automobile valuations are relatively high, while food and beverage, architectural decoration, real estate, non-bank finance and construction materials are relatively low.
5. Summary of comparative information of first-tier industries