Recently, Hong Kong stocks and A-shares have entered a stage of shock after experiencing the previous surge across the board. In this regard, the market has also questioned the reliability of the bull market.
So standing at the moment, how to look at the follow-up market trend and the main line of future investment.
1· Confidence is more important than gold, how do you view this round of market conditions?
It is undeniable that the "bullish rise" performance of the Hong Kong A-share market has benefited from the superimposed liquidity stimulus with unexpected policies, which has also greatly boosted market confidence for a long time.
However, it is obviously not realistic for the market to continue to rise sharply, so it is inevitable to usher in a pullback in the short term.
However, from a long-term perspective, the expectation of long and slow cattle is still certain.
On the one hand, the Fed's monetary policy pivot and the start of the interest rate cut cycle will help the return of long-term funds and support market liquidity for the A-share and Hong Kong stock markets.
According to the research report of Guohai Securities, from a historical point of view, since 2019, during the three overseas easing trading periods, A-shares have experienced a substantial net inflow of foreign capital.
(Source: Wind, Guohai Securities)
Of course, the Fed's interest rate cut will not happen overnight, and it can be seen from the recent signals released by the Fed that there are certain differences, which also directly disturbs market sentiment. However, it is a sure thing that the United States is still in a long-term interest rate cut cycle, and the return of overseas capital has strong logical support.
On the other hand, the long-term performance of the stock market is still inseparable from the support of economic fundamentals, judging from a series of positive signals released by recent policies, the market is mostly optimistic about the positive trend of the economy, and with the implementation of a package of support policies, the market is also expected to continue to be catalyzed.
The press conference of the Ministry of Finance on October 12 continued to release positive signals, and Minister of Finance Lan Foan introduced a package of targeted incremental policy measures that will be launched in the near future.
In this regard, the macro research team of Tianfeng Securities issued a research report saying that from the policy content announced at the press conference, it is almost the top policy support that can be given within the authority of the Ministry of Finance, and the most important thing is not that the specific scale is trillions, but that it has established a signal from contractionary finance to expansionary finance.
Guoxin Securities believes that compared with the historical fiscal policy, the direction of this round of policy stimulus is clearer and more precise. From the perspective of the general tone, this meeting provided relatively clear guidance for the next policy work, and the overall expression of the press conference was more positive, and the incremental information was more abundant. From the perspective of specific policy deployment, the meeting made it clear that the incremental policy will be tilted towards people's livelihood, real estate, debt, financial risks, etc., and the overall fiscal thinking will continue.
At the same time, the relevant views of the market believe that the package of incremental policies has played an important role in improving the overall economic situation, which is conducive to the stabilization of real estate and the development of large commercial banks, and has also dispelled the market's doubts about policy expectations to a certain extent, which can reverse investors' pessimistic expectations and drive market confidence to rebound.
Guojin Securities also recently pointed out that the domestic macro, meso, and micro levels are expected to usher in marginal improvement in the next quarter, so it maintains an optimistic attitude towards this round of "rebound" market.
In addition, combined with the performance of the global market in recent years, the overall valuation level of the A-share and Hong Kong stock markets is still at a low level, especially in the context of the sharp rise in many markets around the world in recent years, A-shares and Hong Kong stocks are slightly sluggish, highlighting the potential for repair.
In this regard, Zhongyuan Securities pointed out that the current average price-earnings ratios of the Shanghai Composite Index and the ChiNext Index are 13.74 times and 33.47 times respectively, which are at the median average level in the past three years, which is suitable for medium and long-term layout.
(Source: Wind, as of 17 October 2024)
To sum up, although the market has been volatile in the short term, in the long run, policy support and the positive expectations of the macro environment have provided a solid foundation for the bull market, and the trend of long bulls and slow bulls is worth looking forward to.
2· stock selection is more important than the time of selection, and the logic behind Midea's "surprise attack".
At this time, for market investors, they should pay more attention to the importance of "stock selection", focus on fundamental analysis, and pay attention to companies with stable operations and long-term growth potential.
It is noted that in this round of market, Midea Group, as a leading enterprise in the home appliance industry, has performed well in the market, especially after the company ushered in the rise of H shares, which has attracted the attention of many markets.
(Source: Futu Quotes)
Hong Kong stocks have always been a market dominated by institutional funds, and Midea Group is obviously supported by clear logic behind the market's optimism.
First, the company has good performance, mature business model, and a solid leading position in the home appliance industry.
According to the annual report of Midea Group in recent years, the company's revenue and net profit have grown steadily. Among them, in 2023. The total revenue was 373.7 billion, a year-on-year increase of 8.1%, the net profit attributable to the parent company was 33.7 billion, a year-on-year increase of 14.1%, and the net operating cash flow was 57.9 billion, a year-on-year increase of 67.07%. At the same time, in the first half of 2024, Midea Group achieved a total revenue of 218.1 billion yuan, a year-on-year increase of 10.3%, and achieved revenue exceeding 100 billion yuan for the first time for two consecutive quarters; The net profit attributable to the parent company was 20.804 billion yuan, a year-on-year increase of 14.11%.
It can be seen that under the overall scale and volume that has reached such a large base, the company still shows a high growth momentum and shows the company's good earnings quality. Looking ahead, with the economic recovery and continuous support at the policy level, Midea Group's performance growth is expected to be further supported. The company's continuous optimization and market expansion in core business, as well as the active layout in smart home, B-end business and overseas development, all indicate the continuous release and growth potential of the company's future value.
(Source: Wind)
Secondly, Midea Group operates steadily, has abundant cash flow, and implements a stable cash dividend policy, which provides a high safety cushion for investors.
According to the financial report, the company's dividend rate in 2023 is 61.6%, and the dividend rate has been on the rise in recent years. In addition, Wind data statistics show that since the overall listing of Midea Group in 2013, the cumulative cash distribution has reached about 107.5 billion yuan.
It is worth mentioning that the company attaches great importance to investor returns, and in order to ensure the continuity and stability of the profit distribution policy, Midea has also specially formulated the "Shareholder Return Plan for the Next Three Years (2022-2024)", and the cumulative profit distributed in cash each year shall not be less than 30% of the average annual distributable profit realized in the last three years.
(Source: Wind)
In addition, in the current favorable policy environment, Midea Group's overseas strategic layout has brought a large gap between the company's performance and growth expectations.
On the one hand, the state's support policies for the home appliance industry, such as trade-in and other measures, provide additional growth momentum for the company, in particular, this round of policies set a certain threshold for energy efficiency, and put forward relevant requirements for the main qualifications of participating enterprises.
It is worth mentioning that since August, the Ministry of Commerce and other 4 departments have issued the "Notice on Further Improving the Trade-in of Household Appliances", giving subsidies to consumers to purchase 8 types of household appliances with energy efficiency or water efficiency standards of level 2 and above. As of October 15, 20.667 million consumers applied and 10.134 million consumers purchased 14.624 million units of 8 categories of household appliances, enjoying 13.17 billion yuan of central subsidies, driving sales of 69.09 billion yuan.
On the other hand, Midea Group's overseas listing has also further opened up the growth space of overseas markets for it, and the subsequent potential should not be underestimated.
According to the financial report data in 2023, Midea Group's overseas revenue reached 150.9 billion yuan, a year-on-year increase of 5.79%. Overseas business revenue has accounted for about 40% of the company's total revenue, becoming an important engine for the company's growth. Midea Group's overseas business continues to expand, and the listing of Hong Kong stocks can not only bring more capital channels to Midea Group, but also is expected to further expand its international influence, accelerate the company's layout in the global market, and drive the company to usher in a new round of growth.
In addition to the achievements that have been made, Midea held the 29th Science and Technology Month on October 16, which continues to demonstrate its breakthroughs in focusing on basic common technologies, key core technologies, diversified industries, and OBM (private brands). These advanced R&D achievements will also strongly support Midea's technology leadership strategy, continue to provide impetus for Midea's global localization transformation, and maintain its leading position in the global market competition.
3. · Conclusion
In the current market environment of bull market expectations, it should be wise for investors to remain patient in the midst of volatility and choose and hold high-quality assets.
Looking at the entire market, Midea Group continues to be recognized by the market for its certainty and robustness, value potential. At the same time, the company also has a high safety cushion, especially in the capital market to support the policy environment of attracting long-term capital, Midea Group's global layout and diversified development strategy will further promote the company's growth and bring continuous value release dividend opportunities to the company, which market investors must be aware of.