On July 20, Credit Suisse updated the target prices of MSCI China, Hang Seng Index and CSI 300 index. The latest target prices were 110, 28500 and 5500 respectively, and the PE target values were 18.2 times, 13.9 times and 17.6 times, respectively, with 18%, 14% and 22% upward space respectively.
Huang Xiang believes that although the valuation of a shares has been improved, it is not excessive, and the current PE of most indexes is still far below the peak in 2015.
In terms of industry valuation, Huang Xiang believes that the valuation of the old economic sector is still low. In the CSI 300 index, only the PE of healthcare sector is 43 times, which is 34 times higher than the peak in 2015. As far as Pb is concerned, only healthcare and compulsory consumption are valued at 7.4 and 6.6 times, respectively, higher than the peaks of 5.7 and 5.4 times in 2015. At the same time, PE and Pb in the industrial and energy sectors were less than half of those in 2015. Although the IT sector is hot in this round of market, its valuation is still low (Pb is 5.2 times, PE is 36.7 times), and at the peak in 2015, PE was 10 times and 53.7 times respectively.
In the next stage, Huang Xiang believes that we should not only look at the companys performance and industry prosperity, but also pay attention to the companys guidance for the future.
At present, Credit Suisse has updated the proportion of its simulated portfolio based on MSCI China Index. Although it is still heavily invested in optional and required consumption at the strategic level, from the tactical point of view, Credit Suisse has increased the layout of the sectors in the pre profit taking cycle and the enterprises in the recovery cycle. For example, Credit Suisse moderately reduced the proportion of real estate, it, health care, optional consumption and communication industries, and increased the proportion of public utilities, materials, Finance (insurance), compulsory consumption and energy.
Recently, the sharp fluctuation of northbound funds has aroused market attention.
Huang Xiang believes that compared with 2015, foreign investors participation in the A-share market has increased. Beishang capital contributed 6% of the trading volume in the A-share market, compared with 0.3% in 2015; the current A-share holdings of overseas investors accounted for 7% of the current market value, while in 2015, the proportion was less than 1%.
However, compared with the large-scale issuance of public funds, foreign capital is not the main driving force of this round of A-share upward. Similarly, Huang Xiang also believes that there is no need to over interpret the changes of northward funds, and a larger one-day outflow does not mean that foreign capital has become speculative.
Of particular concern is that on July 14, the Shanghai index fell by more than 2% in the intraday period and closed down to 0.83%. The capital outflow from the North was 17.384 billion yuan, a record one-day high. There are all kinds of foreign capital in the northbound capital. Some of them have high requirements for risk control. For example, due to risk control, there can not be a certain proportion of withdrawal. Therefore, at a certain time, there will be automatic position reduction instructions in the back system. Huang Xiang said.
But in the medium and long term, the northbound capital will continue to flow in. In recent years, foreign capital has been increasing its investment and research layout in Chinas market, and the main increase is for a shares. In recent years, foreign investors have become more and more interested in A-shares. From the beginning, they only allocated famous blue chips to second-line stocks, and the research level and company coverage are rising. For a foreign-funded institution, even if it only increases the A-shares in the overall portfolio to five, it may need to cover 50 companies, that is, it needs to cover the upstream and downstream of related companies. He said.
In addition to the institutional power of foreign capital, Credit Suisse believes that institutional investors, represented by public funds, insurance institutions and pension funds, still have a low degree of market participation and great potential for improvement. In 1998 and 2001, China ushered in the first closed-end and Open-end Equity Mutual Funds. As of the first half of this year, the total net value of the equity and hybrid public offering funds has reached 3.9 trillion yuan, accounting for 16% of the total market value of A-share free circulation. The continuous introduction of insurance institutions, pension and other medium and long-term institutional investors will further accelerate the process of A-share institutionalization.
At present, the total market value of listed stocks in mainland China and Hong Kong is close to US $13 trillion, equivalent to 97% of Chinas nominal GDP, while the total market value of US stocks is 44 trillion, equivalent to 210% of US GDP.
Foreign investors are happy to see a moderate extension of trading time of a shares
Recently, the discussion of appropriately extending the trading time of A-share is also heating up. Huang Xiang believes that the key lies in the consistency of the opening and closing of the two markets, which is conducive to the full response of information in the two markets at the same time, and is also conducive to the risk management of investors. If the trading time of a shares can be appropriately extended to the same level as that of Hong Kong shares, it may be more conducive for foreign investors to participate in a shares.
Some people believe that compared with the early 1990s, A-share market has undergone great changes. In particular, since last year, China has revised the securities law, intensified the crackdown on illegal and criminal acts in the securities market, launched a pilot registration system for the science and technology innovation board, and the reform and pilot registration system of the gem are also in progress. At the same time, the participation of foreign investors in A-share market is increasing. The short trading period of a shares has been difficult to meet the needs of domestic and foreign investors in the current market. During the two sessions this year, Li Dongsheng, deputy to the National Peoples Congress, and Li Weiping, member of the National Committee of the Chinese peoples Political Consultative Conference, respectively, proposed to extend the existing trading hours of the stock market, triggering heated discussions among investors.
For example, the closing time of Hong Kong stock market is 4:00 p.m. Beijing time, which is one hour different from that of a shares. If there is an emergency or company announcement during this period, a shares will not be able to fully respond. At the same time, for overseas investment institutions that allocate a shares, there will also be some situations that can not meet customers Redemption or purchase requirements. Huang Xiang said that the normal trading hours of the Shanghai and Shenzhen stock exchanges are four hours, the shortest among the major stock markets in the world. The Hong Kong Stock Exchange has repeatedly extended trading hours to 5.5 hours. The Singapore Stock Exchange cancelled the midday close for eight hours, close to the trading hours of major European exchanges.
In addition to trading time, in fact, a shares and Hong Kong shares also have the problem of trading holidays. Foreign investors mainly participate in A-shares through Shanghai and Shenzhen Hong Kong stock connect, and Mainland Chinas capital mostly distributes Hong Kong shares through the Hong Kong stock connect. However, the holidays in mainland China and Hong Kong are not the same. For example, June 24 is the Dragon Boat Festival holiday, but the southbound Hong Kong stock connect has been suspended since June 23. This problem leads to the possibility that foreign funds will not be able to sell their stocks if there is a demand for redemption from investors. This involves the problem that the clearing systems of the two sides are not unified. At present, the delivery and settlement system of T + 0 / T + 1 is adopted in mainland China. In contrast, most markets in the MSCI Index currently operate in T + 2 or T + 3 delivery and settlement cycles. Industry insiders said. In the process of opening up, the differences between local markets still need to be gradually adapted and bridged. Source of this article: Guo Chenqi, editor in charge of first finance and Economics_ NBJ9931
In addition to trading time, in fact, a shares and Hong Kong shares also have the problem of trading holidays. Foreign investors mainly participate in A-shares through Shanghai and Shenzhen Hong Kong stock connect, and Mainland Chinas capital mostly distributes Hong Kong shares through the Hong Kong stock connect. However, the holidays in mainland China and Hong Kong are not the same. For example, June 24 is the Dragon Boat Festival holiday, but the southbound Hong Kong stock connect has been suspended since June 23. This problem leads to the possibility that foreign funds will not be able to sell their stocks if there is a demand for redemption from investors.
This involves the problem that the clearing systems of the two sides are not unified. At present, the delivery and settlement system of T + 0 / T + 1 is adopted in mainland China. In contrast, most markets in the MSCI Index currently operate in T + 2 or T + 3 delivery and settlement cycles. Industry insiders said. In the process of opening up, the differences between local markets still need to be gradually adapted and bridged.