Comment: A-Share Outlook In The Year Of The Ox: Need To Reduce Annual Earnings Expectations

Mingming (deputy director of CITIC Securities Research Institute, chief ficc Analyst)

In 2021, the main line of the market will be the global economic recovery in the post epidemic era, and the gradual withdrawal of early stimulus policies. The stock market will recover and digest the current relatively high valuation with rapid profits. It is expected that the annual A-share will be a slow rising pattern with rhythm. It is necessary to reduce the annual income expectation and pay attention to the varieties with high cost performance in structure. In the short term, we can focus on the procyclical sectors driven by the decline of overseas epidemic situation and the recovery of inflation, including energy and chemical industry, non-ferrous metals and optional consumption, as well as the new energy, defense and military industry, and semiconductor sectors under the theme of the "14th five year plan". At the same time, the blue chip market promoted by institutions in the early stage may spread to small and medium-sized market value companies.

First, it is expected to reach the top of the global epidemic in the first quarter of this year, and the major developed countries will meet the mass immunization standards in the third quarter. As of February 21, Israel continued to lead the world with 85 doses per 100 people, and the UK / US / China had 26.8 / 18.9 / 2.8 doses per 100 people. At present, the average number of newly diagnosed cases on the 7th day of the world has dropped from a high of 743000 cases / day in early January this year to less than 400000 cases / day. It is expected that with the expansion of vaccination coverage in developed countries and the strengthening of epidemic prevention measures in Europe and the United States, it is expected to see the top of the global epidemic situation in the first quarter of this year. According to the current vaccination rate, it is expected that the main developed countries will reach the group immunization standard of 60% antibody coverage by the third quarter of this year. The gradual abatement of the restriction of the epidemic situation on the economy is the main line of this year. The recovery of overseas demand has driven up the price of raw materials in the upstream, and the cyclical plate benefiting from the rise of commodity price is expected to benefit. At the same time, the off-line business scenarios, including aviation, airports, tourism, hotels, restaurants and cinemas, are expected to see a substantial improvement in fundamentals. As developed countries meet the group immunity standard, the Federal Reserve's monetary policy may also usher in an important turning point.

Second, in terms of the state of the economy, the domestic economy will move from recovery to periodic overheating and to the downward phase. From the perspective of short cycle, this year's domestic corresponding stage is the financial cycle downward, the real economic cycle continued to recover and peaked around the middle of the year. In terms of financial cycle, M1, M2, social financing growth rate, leverage ratio and other indicators reflecting broad liquidity are expected to decline throughout the year, which is the requirement of stabilizing leverage and preventing risks. The valuation of the stock market may be suppressed in the downward period of liquidity, and it is necessary to repair and digest the high valuation with profits. In terms of real business cycle, PPI, inventory cycle, enterprise profit, interest rate, real estate price and other indicators reflecting the prosperity degree of the real economy are expected to go up and down first, and the inflection point appears near the middle of the year, but the judgment of the turning point is greatly affected by the extreme base of last year. According to the historical rule that the inflection point of financial cycle is 10.9 months ahead of the inflection point of the real economic cycle, we can eliminate the base The top of the economic cycle may appear near the third and fourth quarters of this year. If we use the output gap to divide the state of the economy, considering that the GDP growth rate of 2020q4 may be above the potential growth rate, then the current economy may be in the overheated range, which means that the economy will enter the downward stage again at some point in the future.

Third, in terms of policy, the main line of monetary policy this year will be tightening liquidity in a broad sense and balancing liquidity in a narrow sense. "No sharp turn" is not equal to "no turning". At the same time, it is suggested to pay attention to the structural opportunities under the theme of the 14th five year plan. Since the beginning of the year, the liquidity expectation of the market has been greatly repeated. We always believe that this year will be a monetary policy combination of "stable currency" and "tight credit". The current global economic recovery makes the continuous "broad currency" not have the fundamental basis. Only when the "tight credit" leads to financial risks, especially credit risks exceeding the expected outbreak, can there be stages The "broad currency" of China. The "no sharp turn" pointed out by the central economic work conference actually represents a "slow turn". With the decline of epidemic constraints and the economic return to potential growth rate, the withdrawal of stimulus policies in special periods is a certain trend. For China, this year is the first year of the 14th five year plan, and the structural opportunities promoted by policy themes are worthy of attention. It is suggested to focus on external security (military industry), internal security (energy, food, information security), scientific and technological innovation (semiconductor, new materials, 5g), green and low-carbon development (new energy, photovoltaic, wind power) and expanding domestic demand (liquor, automobile, tourism, etc.) Five themes.

? ? ? In the long run, we are optimistic about the development of China's capital market. Factors such as the further improvement of China's economic share in the world, financial supply side reform, institutionalization and the entry of long-term capital into the market are expected to push A-share market into a bull market in the next decade, and China will rise a number of high-quality enterprises with international competitiveness. Looking at the short-term, we believe that the A-share market in the year of the ox will have a positive impact on the development of China's capital market The performance will be a slow rising market with rhythm. It is necessary to reduce the annual income expectation, repair and digest the relatively high valuation with profits, and pay attention to the varieties with high cost performance in structure. It is expected that the rhythm of A-share in the whole year will be better in the first and fourth quarters, and enter a quiet period in the second and third quarters. Structurally, we are optimistic about the energy and chemical industry, non-ferrous metals and optional consumption in the pro cycle, as well as the new energy, defense and military industry, and semiconductor sectors under the policy theme. At the same time, the blue chip market promoted by the early institutions may spread to small and medium-sized market value companies.

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