Since the press conference of the State Council Information Office was held on September 24, a number of stimulus policies have been introduced one after another. The A-share market set off a rising boom, with the Shanghai Composite Index rushing all the way up from around 2,750 points, standing at 3,000 points, and then rushing to 3,400 points, approaching 3,500 points.
At the moment when the favorable policies continue to increase, the A-share market is hot, has the bull market arrived? Which industries and directions are more valuable for allocation? Nandu's "Chief View of Bay Finance" specially invited Chen Guo, chief strategy officer of China Securities to interpret.
A number of new words emerged in the high-level meeting
Nandu Bay Finance Society: We understand that among the chief brokers, you are the first to speak out and make sure that the meeting will make every effort to revitalize the economy, what do you think are the highlights of these policies?
Chen Guo: For the market in the second half of this year, we have a judgment ourselves: with the Fed cutting interest rates and China's inventory cycle depleting, there will be an inflection point at the end of the third quarter.
This policy change is very unusual. First, on September 24, there was a press conference at the top of the financial sector, followed by a meeting of the Politburo on September 26. The early convening of the Politburo meeting explains the situation in August and early to mid-September, and has attracted considerable attention from the top level, and it is necessary to reassess and deploy economic policies at this point in time. Judging from the content of this Politburo meeting, it also reflects a significant difference from the end of July.
Why do I say it sends a very strong signal of all-out efforts to revitalize the economy? Judging from the content of the meeting, we are now facing difficulties and challenges. Some economic indicators need to be improved in the eyes of the top management.
In addition, the content of the Politburo meeting contained a lot of words that were difficult to see in the past. For example, at the micro level, "helping enterprises tide over difficulties" means that there may be many enterprises that are already in difficulty, so the economy must be significantly improved, and to help them, there must be a series of relevant policies.
A new word is also used in the real estate market, "stop falling and stabilize". Generally speaking, the real estate market has price and volume, and the decline is generally related to price, and stability is generally related to volume. Stopping the decline in the real estate market is a very high goal, and it needs to significantly boost the economy in the current situation, including residents' incomes and future income expectations, in order to reverse the trend in real estate prices.
At a very unusual time, some relatively rare and novel wording was used, and the policy coverage was also very wide, so my interpretation is that the policy should be fully revitalized to revitalize the economy.
The most important thing in the bear-bull transition is the mindset shift
Nandu Bay Finance Society: The WeChat group name is a window to show your views. Recently, you have changed the WeChat group name several times, and the latest one should be "Confidence Revaluation Cow". What do you think is the basis for judging that A-shares are expected to usher in a bull market reversal?
Chen Guo: The name of our WeChat group is "China Securities Construction Investment Strategy", which will not change, but there is a status bar of the group after the group name that will be changed, mainly to remind investors in the group to pay attention to some of our new views. Because the market is changing and updating, of course, this status bar must be updated. Actually, we change very infrequently, about four times a year, once a quarter or so.
Now this market, I think it has confirmed that it has entered a bull market, and the duration of this bull market is still relatively long from the current situation assessment. Then the most important thing for bear-bull conversion is that people's thinking mode should be changed, because after being in the bear market for too long, when the bull market has just begun, they will use a bear market thinking to face the bull market, resulting in the risk of shorting.
Currently, the A-share market environment is a standard bull market environment. At the heart of the stock market are three factors: earnings expectations, liquidity, and risk appetite. If one of the three factors improves, it has the potential to rebound; If two factors improve, it is likely to be a very big rally, or even a bull or a small bull market; All three factors are improving in the future, and that is a sure bull market.
In the second and third quarters, listed companies seem to have obvious negative growth in revenue and earnings, which is abnormal, which has something to do with confidence, and the entire market, including social confidence, is too low. This, in turn, worsens the fundamentals and creates a vicious circle. Fortunately, the meeting held in late September broke the spiral in time and re-established a positive cycle. It can be seen that the rise in the stock market now brings about a wealth effect, which will also improve consumption and confidence. Slowly, this confidence will be transmitted from 200 million shareholders and 600 million basic citizens to the whole society.
The government's monetary policy, fiscal policy, industrial policy, and real estate policy have boosted the economy to a certain extent. At the same time, the Federal Reserve is at a very high interest rate in history, and has just begun to cut interest rates, and the global interest rate downward level may be relatively large. In this process, China can calmly continue to cut interest rates without significant fluctuations in the RMB, which I think is very rare and beneficial to the stock market.
In the asset allocation of RMB, there are not many preferential options, which gives the stock market an advantage. From the perspective of the global stock market, it is basically at a record high, and then the Federal Reserve will continue to cut interest rates from a high level, and this rate cut may last for two years or even longer, and this magnitude may accumulate a lot, where will the money go?
In such an environment, if China's stock market is not out of the bull market, it is difficult for me to imagine what kind of environment can get out of the bull market. Of course, judging from the statistics of global stock markets, if a major index rises by 20% from the bottom, it has entered a bull market and will not make new lows for a long time.
It is only by cooking oil that the Chinese stock market can be activated
Nandu · Bay Finance Agency: From the perspective of time, how long do you think this wave of bull market can last? From the perspective of allocation, which industries or sectors do you think are more worthy of focus and observation in this wave of market?
Chen Guo: I don't think there is a mathematical formula that can accurately predict the absolute space and time of a stock market. Space and time are certainly interrelated.
The recent stock market rally has been very fast. In my opinion, China's stock market is frozen, in fact, only this kind of burning oil type of short-forcing rise can activate China's stock market from the dead air, otherwise every time it rebounds, it will hit a new low again. So there is no way, it must be the only way to turn this market around.
After this reversal, we have to look at the speed of its subsequent rise and the improvement of fundamentals. If we only talk about the fundamentals, one to two quarters after the policy is implemented, there will be a marginal improvement in the fundamentals, and if the policy is still sustainable at that time, the fundamental improvement will take longer. Broadly speaking, it can be assumed that the economy will be better in the fourth quarter than in the third quarter, and this improvement will not be obvious, and it will be more obvious in the first half of next year.
There is a high probability that the market will be divided into three stages, that is, there will be a fall after a rapid rise, and then shocks, and then a round of recovery after the fundamentals slowly improve. If you look at it from this perspective, I think it is reasonable to infer that this bull market will last at least half a year.
Structurally, this round of the market has one characteristic: an extreme lack of confidence at the bottom. When it flips all at once, the entire valuation system should be reversed, and the level of the flipping market will be very large.
Under the extreme valuation of the market, the proportion of companies that are net broken in the A-share market exceeds 16%. In my opinion, these are all pricing that is close to a crisis. Once the market improves, these valuations should be repaired, such as banks, central state-owned real estate companies, and some high-quality private enterprises.
In addition, the future of China will of course depend on the new quality of productivity. From the perspective of the background of the times, we are moving from industrialization to informatization and intelligence. Intelligence here includes artificial intelligence, automotive intelligence, more intelligent robots, or low-altitude and economical drones.
Value investors can look more at the revaluation opportunities, and growth investors can pay more attention to some of China's growth opportunities in new quality productivity.
The rise in A-shares will be stronger than that of Hong Kong stocks
Nandu · Bay Finance Agency: In addition to the A-share market, Hong Kong stocks have also recently performed strongly. Looking ahead, do you think the two markets will move in the same way, or will there be some divergence?
Chen Guo: The Hong Kong stock market is the same as the A-share market, and most of the companies themselves are representatives of China's economy. But its liquidity situation is different, first of all, the pricing of the entire fund basically follows the Fed's interest rate, so the risk-free rate is more dependent on the US Treasury yield.
The second is that there is a difference in the market mechanism, A-shares have a 10% price limit, Hong Kong stocks do not, and the refinancing of Hong Kong stocks is relatively simple. Compared with Hong Kong stocks, the A-share market still attaches more importance to small and medium-sized investors and retail investors.
In addition, the mechanism of the Hong Kong stock market has led to a more institutionalized market risk appetite. From the perspective of valuation, the valuation of Hong Kong stocks will be lower than that of A-shares, and the liquidity and turnover rate will also be lower. If the market enters a bull market atmosphere, the valuation ceiling of A-shares will be higher because it will be more liquid and investors' risk appetite will be higher.
Of course, for narrow value investors, the valuation of Hong Kong stocks is relatively higher than the margin of safety. For investors with higher trading liquidity needs, they may prefer the A-share market. This in itself depends on different investor attributes.
Previously, the Hong Kong stock market was the first to reach the bottom of the valuation, and then slowly bought by value investors, and then at a certain stage, value investors may begin to reduce their tolerance for its valuation, and its rise may slow down, or enter a shock. The A-share market will be less constrained in this regard and may be stronger in the magnitude of the rise.
Investors are advised to "three do's and three don'ts"
Nandu · Bay Finance Agency: Recently, the sharp rise in the A-share market has not only attracted many old investors who "return to trading", but also attracted a large number of new shareholders.
Chen Guo: When new investors first start to enter the market, often the market has already begun to shift, so it is easy to make money at the beginning, but after a round of bull market, there are very few new investors who can really make money.
In simple terms, the advice includes "three do's and three don'ts". Let's talk about the "three musts" first, the first is to use the money that does not affect the consumption of daily life to make investment, because investment is risky, try not to let it affect the overall daily life.
Second, it is to study your own circle of competence and choose some high-quality companies in the circle of competence, which is relatively less difficult to fluctuate or risk.
Third, if your circle of competence is limited, and you can't see which company is stronger in the corresponding field, and its valuation is reasonable, then you should consider buying an index fund, or an industry index fund, or a fund of an excellent fund manager.
In this configuration process, I feel that we need to emphasize the "three don'ts".
First, don't blindly chase the rise. Don't keep joining just because the bull market is coming, and stocks are basically up and down. Many times, there are certainly opportunities to make money in a bull market, but blindly chasing the bull is easy to get stuck at a relatively high level.
Second, don't buy indiscriminately. If you don't choose, see which stock has not been capped, and chase it, it is likely to choose a company with poor performance or quality.
Third, don't use leverage. While the bull market is bullish, there is also volatility in the bull market. The bull market is long and yin, and there are fluctuations and retracements in the bull market, which may not be small. If there is no leverage, this drawdown can be held out, but with leverage, it is easy to get out of the process of this drawdown.
Curator: Wang Ying
Co-ordinator: Li Ying
Executive co-ordination: Qiu Moshan, reporter of Nandu Bay Finance Society
Appearance: Chen Xinyu
Written by: Nandu Bay Finance Society reporter Wu Hongsen
Editor: Liu Yaoning
Editor: Ye Haocheng
Editor: Wu Hongsen