The macro and micro environments are still full of uncertainty, and investors prefer relatively safe assets.
At present, resources are continuously centralized to leading companies. Whether big consumption and big technology can continue the growth rate since this year will also be tested in successive three-quarter reports. Dongxing Securities Research and Report believes that in the current uncertainty, the more definite sector is consumption and technology leader.
If we look at a longer period of time, many institutional investors interviewed by reporters believe that the A-share index is not high, and in the medium and long term, it is relatively optimistic. Some institutions believe that if we can look forward to three to five years, A shares will still have very much to look forward to.
Short-term shrinking front
Since the beginning of the year, the Shanghai Composite Index and Shenzhen Composite Index have recorded 18.2% and 33.13% increases, respectively. In the short term, A shares have entered the adjustment stage since the low of August 6, 2733, and the high of September 16, 3042. Wind data show that since National Day, the volume of A shares has maintained at more than 30 billion shares, almost halved from the stage high of 73.6 billion shares on September 5. In the absence of large volume volume, callbacks are also expected.
Zhang Lin, director of research at Xinhua Fund, told reporters that some prudent adjustments would be made gradually in the fourth quarter. In August and September, it re-allocated TMT, which may be gradually reduced to focus on the large financial sectors with low valuations and industries with three-quarter reports exceeding expectations. Overall, the fourth quarter will definitely shrink the front step by step.
In addition to the large cumulative increase in the previous period, Zhang Lin said that the conservative reason is that the valuation level of A shares needs a repair process. The price-earnings ratio of some sectors is far higher than the historical median, and the GEM PE (TTM) is about 60 times. In the short term, there is a need for a time-for-space repair shock. In addition, the domestic economy has not yet reached a bottom, but is in the process of building a bottom, the global economy is not very clear, A shares in the fourth quarter of the opportunity is smaller than the third quarter.
At present, the biggest challenge for investors in A shares may lie in the fact that industry differentiation is at an extreme level in history. Chen Long, an analyst at China-Thailand Securities, believes that, on the one hand, it is more logically supported, relying on the weaker consumption and technology sectors for the real estate cycle, and the valuation premium between the traditional periodic sectors is expanding; on the other hand, the industry leader is expanding the valuation premium compared with other small and medium-sized market value companies. Behind this differentiation, it reflects the pursuit of safe assets by funds, and the scarcity of high-quality assets under the current macro-background. In the high-valuation area, the PE and PB valuation quantile of some technology and consumer stocks have exceeded 90%. Most of them have the attributes of high industry prosperity, stable profitability and smoother industrial logic. In the low-valuation area, the industry prosperity is either downward. , either the profitability has not yet bottomed out, or the small and medium-sized market value companies are gradually marginalized under the influence of the reshaping of the industry competition pattern.
Chen Long also believes that historical experience shows that breaking the polarization situation often relies on a large-scale rise or fall to complete, and the driving force behind it often derives from changes in macro-cycle and institutional level, which is difficult to emerge in a short time. When the economy bottomed out and picked up, there was a significant recovery before we could get out of the reverse market. Zhang Lin said that from the point of view of the inventory cycle, the inventory cycle in history is about 39 months, and it is a bottom area around the fourth quarter. But this year, unlike in the past, this round of policy is very strong, especially the restraint on real estate, and the global economy and the Sino-US trade war have not reversed significantly. This cycle will be prolonged and the chassis will be consolidated. The period may be extended for a quarter or two.
Opportunities in Prudence
At present, the funds are still holding the core assets of the group, and the consumption leader represented by Maotai, Guizhou, has even reached new heights before the festival. As of early October 11, Guizhou Maotai reported 1164.99 yuan, the first high-priced A-share.
At the moment, where are the investment opportunities for A shares?
In the direction of October allocation, Chen Long suggested two dimensions: one is the high valuation area, which has strong performance support; the other is the low valuation area, where profitability is gradually building the bottom mark. These two perspectives may focus more on bottom-up mining, and from top-down perspective, they tend to increase the allocation ratio of low-valuation plates. Overall macro environment, the real estate end is suppressed but still resilient, while the infrastructure end is underpinned but its strength is limited. As the fourth quarter gradually enters the peak season of policy underpinning, the infrastructure and real estate end may benefit, and the relevant leading signs have a higher margin of safety.
In the short term, Zhang Lin believes that there are some structural directions, such as some low-valuation big finance, plus some strategic allocation of technology and consumption. Frankly speaking, its very difficult to get a very magnificent market. The current policy line is quite different from the previous one. We will not engage in investment-driven flooding, nor will we engage in real estate or high-leverage stimulation.
In the long run, Zhang Yidong, Chief Strategic Analyst of Societe Generale Securities, believes that the A-share market has confirmed the golden pit and that the long-term bottom region has been identified, which is similar to the bottom region in 2005 and 2013. Therefore, strategic allocation and bargain arrangement are in good time. As of August 2019, the reciprocal earnings ratio of all A-share markets was more than twice the yield of 10-year Treasury bonds.
In the medium and long term, Zhang Lin believes that the core direction is big consumption and high technology. Take big consumption as an example. Chinas 1.4 billion people are born with a huge and incomparable consumer market. The average valuation of Chinas consumer stocks is about 20 times, but its growth rate is about 20% and that of the leading consumer stocks in the United States is about 20 times. However, the growth rate of Chinas consumer stocks has not increased much, so it is still optimistic about big consumption. There are too many big consumption directions, and the direction of consumption upgrading is worth digging deeply. The reasons for optimism about big science and technology are also very clear: the opening of the global science and technology cycle, the acceleration of domestic innovation cycle, the rise of 5G industrial chain and some post-application... With the support of the whole policy, including the introduction of the science and technology innovation board, large science and technology is also a very core configuration direction in the medium and long term.
Source: Responsible Editor of Economic Observation Network: Yang Bin_NF4368