Why Is A-Share Firm And Optimistic In Spring?

Last week, the Shanghai Composite Index rose 0.99%, the GEM Index rose 0.79%, the SME Board Index rose 1.50%, and the Shanghai Composite Index and the SME Board Index hit a new closing high in this round. After the two sessions, the market was disturbed by various negative factors, but it did not fall but rose, and its performance was very strong. We have always been firm and optimistic about the current spring market. This week, we will discuss why the market is indestructible.

The market is strong due to the continuous negative and worries. At the beginning of the two sessions investment There are many worries. One is that the interest rate increase of the Federal Reserve in March caused the decline of A-shares. The other is that the "stability" momentum disappeared at the end of the two sessions of the NPC and CPPCC. The sensitivity of the stock market to the exchange rate has declined, and there is no statistical law of market decline after the two sessions of the NPC and CPPCC. Now it is seen that the interest rate increase of the Federal Reserve and the market did not decline after the two sessions of the NPC and CPPCC.

The core logic of this round of quotations is the continuous improvement of fundamentals. At 2638 at the end of January 2016, we proposed that the bear market would end and enter into a volatile market. In the first half of 2016, the Shanghai Composite Index reached 2638-3100-2800 points, and in the second half of 2016, 2800-3300-3000 points. In the first half of 2016, the central shock rose nearly 200 points, due to the improvement of fundamentals. At present, it is still continuing the continuous rise of the bottom since the end of January last year. This is a benign shock, similar to the spring, when the temperature slowly rises.

From the perspective of the monthly amplitude of the Shanghai Composite Index, the monthly amplitude from December of last year to March of this year was 6.5%, 4.2%, 4.2% and 2.5% respectively, which is far lower than the historical average of 9.4% since 2010 and is at the lowest range in history. In retrospect, the periodic narrowing of amplitude in the past has finally broken through upward. The first time occurred from January to August in 2012, with the amplitude within 20%. At the beginning of December, the market slightly reached 1949. With the success of the 18th National Congress of the Communist Party of China, the market was full of confidence in the reform and transformation determination of the new leaders, and the banking stocks led the market to soar.

The second time occurred from June, 2013 to July, 2014, with an amplitude of less than 25%. In July, 2014, the Shanghai Hong Kong Stock Connect was expected to rise, and then Zhou Yongkang was put on file for review. The market's expectation of reform was strengthened, and risk appetite was rising. Finally, the market made a breakthrough and formed a bull market. The third time occurred from June to September 2016, with an amplitude of only 13%. In October 2016, thanks to the acceleration of state-owned enterprise reform, the improvement of the third quarter report performance, and the substantial raising of insurance funds, the Shanghai Composite Index finally broke through the previous peak, reaching a maximum of 3301 points by the end of November.

The narrow range market is expected to widen again: first, since the end of January, the core logic of this round of spring market is that economic data has improved and policy environment has been friendly, which has not been destroyed at present. Secondly, the reform of state-owned enterprises and the Belt and Road policy accelerated. In addition, it is currently in the announcement period of the annual report and the first quarter report, and the data rate is good. The performance of companies with excellent performance is also conducive to boosting the market.

In the medium term, the amplitude is also expected to expand upward compared with the past shock cities. We have always divided the market into three states: unilateral rise is defined as a bull market, unilateral decline is defined as a bear market, and interval fluctuation is defined as a shock market, Over the past 90 years, A-share has gone through five rounds of shocks (1994/8-1996/1, 1997/5-1999/5, 2002/1-2004/11, 2009/8-2011/4, 2012/1-2014/7). The five rounds of shocks lasted for 17 months, 24 months, 34 months, 20 months, and 30 months, with an average of 25 months. The amplitude was 81%, 31%, 39%, 33%, and 28%, with an average of 42%.

Continue to be optimistic and track changes in policies and fundamentals. At 2638 at the end of January 2016, we put forward that the bear market ended and entered into a volatile market. In the first half of this year, the central market continued to rise in the same way since the end of January last year. The Shanghai Composite Index reached 2638-3100-2800 points in the first half of 2016, 2800-3300-3000 points in the second half of 2016, and the central market rose nearly 200 points in half a year. This trend continues because the fundamentals continue to improve slowly. At the beginning of December last year, we turned cautious, and in late January and early February, we were optimistic. This wave of market is due to improved data and friendly policies.

Since March, the market has been worried and bad, such as The Federal Reserve raises interest rates The real estate policy was tightened, the overseas market fell sharply on Tuesday, the 21st, and the B share fell sharply on Thursday, the 23rd, but the A share was indestructible. The core logic was that the fundamentals continued to improve. The current macro and micro fundamental data were good, and the spring market continued. In the future, we will focus on the policy developments after the release of the data in the first quarter of April. The good data in the first quarter will provide better conditions for deleveraging. We will focus on the possible Sino US trade Friction.

In the era of two-dimensional investment, consumption upgrading+theme cycle+value growth. Theme cycles such as the national reform and the Belt and Road Initiative, Shanghai state-owned enterprise ETF has recently been included in the target list of margin trading, becoming one of the only 15 ETFs in the list, which means that Shanghai state-owned enterprise ETF has been well recognized by the capital market since its establishment last year. In addition, during the two sessions, the State owned Assets Supervision and Administration Commission proposed that state-owned listed enterprises should be responsible shareholders and improve the dividend mechanism. On March 18, China Shenhua announced that it planned to pay dividends of more than 59 billion yuan, with a dividend yield of 18.17%. The investment opportunity of high dividend shares deserves attention. On March 27, the Boao Forum for Asia opened, and the "Belt and Road" has become an important topic, which will lead regional economic cooperation. During the financial reporting period, select value oriented growth stocks whose performance and valuation match.

At present, some people are worried about the high valuation of leading stocks. In fact, the level of leading PE is different between five years and ten years. The historical valuation of leading stocks is relatively high in terms of consumption and cycle in five years. Among them, the PE valuation of leading stocks such as liquor, household appliances, automobiles, real estate, building materials, construction, transportation, coal and steel is 80-100% of the previous five years. The historical valuation of leading stocks in the 10-year cycle is relatively high. The PE valuation of leading stocks in steel and coal is in the 70-90% percentile of the previous 10 years, but the historical valuation percentile of leading consumer stocks is moderate, mostly in the 30-60% range. The historical valuation of leading technology and financial stocks is relatively low.

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