In this round of adjustment, we pay attention to the low absorption range of 2950-2850, which will be the time node of the second entry this year, and sort out the logic of our optimism about the future market.
- First of all, the current situation is: the Chinese and foreign G markets are seriously separated, and the main reason for this phenomenon is the flow of funds!
- The fundamental reason for all changes in capital prices is the flow of funds, where the flow of funds begins, where the price of assets will rise, which is an absolute law, and the flow of funds is often related to monetary policy. The fundamental reason for the serious divergence between Chinese and foreign capital markets in 22-23 is that the West, represented by the United States, has started a crazy interest rate hike at a historic level since 22 years, and the corresponding China has begun to cut interest rates continuously, resulting in a large flow of domestic and global capital to the West, which has caused a serious pumping, causing a sharp drop in A-shares.
Why do we say that we are now actively bullish on A-shares?
One: The international situation – the world is beginning to take sides again
- Behind the turmoil in Ukraine, Russia, Palestine and Israel, and the South China Sea, in fact, they are the result of a new round of games between the major powers represented by China and the United States. In addition to Israel, the Middle East has basically fallen to China, and the reconciliation between Iran and Saudi Arabia in Beijing is the most significant proof, and in Asia, the Philippines, Japan, South Korea, and India, in addition to the Philippines, Japan, South Korea, and India, have also basically fallen to us, and the recent request from Japan and South Korea to China to participate in economic and trade agreements also shows that their attitude has also begun to waver, and the development of the China-Kyrgyzstan-Uzbekistan railway in West Asia has also begun to connect the Middle East and Europe with us. It has also begun to show that it wants to break away from the control of the United States, the Palestinian-Israeli war has torn apart the hypocritical face of the United States and the West, and the genocide has also made the world angry; It is only a matter of time before the internal political problems of Laos and the United States are serious, the competition between the two parties is fierce, and the world pattern has begun to change..........
2. International funds - individual countries have begun to cut interest rates
- In 22-23 years, the foreign rise and the domestic decline are very important reasons: the monetary policies at home and abroad are different, foreign interest rates are raised, and domestic interest rates are cut, resulting in a large number of funds seeking risk-free returns to go abroad, resulting in a blood-sucking effect on the Chinese market. However, our action of cutting interest rates is right, one is that foreign countries have printed a lot of money due to the epidemic, which has caused a serious inflation problem, so we must curb inflation by raising interest rates, and our epidemic printing money is limited, which has not caused inflation, but is still a bit deflationary, so it is definitely not possible to raise interest rates; The second interest rate hike will also increase the borrowing cost of enterprises, and it will also increase the interest rate on housing loans. But at present, the dead knot of foreign interest rate hikes and domestic interest rate cuts is beginning to loosen slowly
- At present, Canada and Europe have recently begun to bear high interest rates and take the lead in cutting interest rates, and we also think that more countries will begin to follow the interest rate cuts, and then international funds will re-enter the process of team selection, whether to flow to China with low valuations, or continue to flow into the United States, no matter what, there will be a part of incremental funds, more or less.
- The most important thing is the issue of the Federal Reserve cutting interest rates, the Federal Reserve has recently maintained interest rates unchanged, after all, it is still the world's largest country, and it can still resist high interest rates for a period of time, but according to the attitude of most countries not to buy U.S. bonds and buy gold, everyone has begun to maintain an increasingly skeptical attitude towards the instability of the U.S. high interest rate state, and the interest rate cut is coming back, it is just a matter of time
Three: domestic policy - quantitative change leads to qualitative change
- From the second half of 23 to 24 years, the continuous policy benefits are frequent, sometimes after 20 years, the third national nine, 04, 14 years of the national nine have given birth to a round of good market; The chairman of the China Securities Regulatory Commission is replaced, and each substitution is basically at the low point of the market; Including a series of policies such as letting listed companies pay dividends, blocking the channel of reducing holdings, avoiding the reduction of holdings on the company's listing, and not operating well, the capital outflow channel is currently blocked, and the stock market pool is almost full of funds, and the tide of foreign interest rate cuts, we believe that it will become the next wave of rising support.
- For the second half of the year, the 4.30 Politburo meeting signal is positive, and the third plenary session of the Central Committee in July is more worth looking forward to for the medium and long-term economic reform, and the current domestic policy effect is undergoing a process of quantitative change to qualitative change, which may occur at some point in 2024 or 2025 and then form a reversal trend, but cautiously, the second half of the year may rise again in the range of 3200-3400
Four: A-share valuations are low-lying – all of them are near historically low levels
- The following chart is the historical price-to-book ratio of CSI 300, the price-to-book ratio can reflect the valuation of some mature enterprises, at present, we have two price-earnings ratios in history have fallen below the opportunity value, and there has been a relatively good market, this time the market has fallen to around 1.24, which is basically the lowest valuation in history
- Generally speaking, when the stock market performs well, the number of bonds purchased decreases, and when the stock market is bad, in order to hedge the risk, the funds to buy bonds will increase, and generally when the risk premium is high and sideways, it is generally when the risk premium peaks, and it is also near the bottom of the stock market. Before the risk premium fell and the index rose, there were often many opportunities in the market, and this is also the case now, when the risk premium was high and sideways, starting to fall above the standard deviation, and the stock market began to slowly stabilize, and there were no small opportunities.
- Looking at the price-to-book ratio of Wande All A, this is a composite index of all indices in the market, when the price-to-book ratio is around the standard deviation, the market often indicates signs of bottoming, and in recent times, the price-to-book ratio is also near the historical low.
Fifth, the stock market is likely to replace the property market as the next savings pool
- Before 2019 - Comparison of Chinese and foreign household asset structure, the proportion of equity assets in the stock market is too low
- Where residents' savings are located, it is the direction of the rise in asset prices, and the social assets of the United States are all in the stock market, so the rise in the stock market represents the improvement of the economy; The assets of Chinese residents are all in real estate, so the rise in housing prices represents a good economy, but after 2019, the market began to change, the property market began to decline, and the reason why the mainland took the initiative to puncture the bubble is: the stock market rises, and the profits of enterprises grow at the same time, and the bubble can always exist and increase; However, the value of the house itself is limited, and it will not grow like a business, so the price increase of the house can only be linked to the income of residents and the flow of population, and the increase is always limited.
As shown in the chart above: after 2019 - the property market is down, and assets are starting to find a new way out again. The similarities between the property market and the stock market, why can they be substitutes? Everything is ready, waiting for the change in the flow of funds, waiting for the money-making effect to come.
- There are two major aspects of making money from houses: (1) rent (the rent-to-sale ratio is about 2% in the first tier, about 2.5% to 3% in the second tier, and 3.5% or even 4% in the third tier cities); (2) Housing price growth
- The next direction of the stock market: (1) dividends (bank stocks and other good companies, dividend yields are relatively high); (2) Stock price growth
- Encouraging dividends: The New Rules on Cash Dividends mainly contain three parts: further encouraging the orientation of cash dividends, simplifying the procedures for medium-term dividends, and strengthening the constraints on enterprises with unusually high percentage of dividends. Considering that the proportion of listed companies that do not pay dividends is close to 2,000, and the number of new shares issued after 19 years is 2,000, the actual all-A dividend yield is actually significantly higher than that of four years ago.