I have written monthly outlook for A-share for one year in a row. Most of the time, the reality is disappointing. In December, A-shares began their annual closing battle. It is time to see whether the year 2023 will be a bull or a bear.
From the beginning of the year to the end of November, Vandequan A, Shanghai Stock Exchange Index and Shanghai Shenzhen 300 rose by - 3.2%, - 1.93% and - 9.7% respectively; At the sector level, communications (25.53%), media (20.1%), computers (11.17%), automobiles (9.8%), and electronics (8.58%) rose higher, while beauty care (- 29.1%), commercial retail (- 26.66%), electrical equipment (- 26.37%), real estate (- 21.38%), and building materials (- 19.44) fell higher.
In November, Vandequan A, SSE Index and CSI 300 rose 0.35%, 0.36% and -2.14% respectively; At the sector level, coal (7.06%), media (6%), social services (5.62%), machinery and equipment (4.4%) rose higher, while building materials (-4.44%), power equipment (-4.35%), non bank finance (-3.39%), and non-ferrous finance (-3.33%) declined higher.
In the market outlook for November ("It's Dawn in November!"), we gave the view that investors can be optimistic. It is a high probability event that A-shares will repeat the reversal of the market in November last year.
In fact, the performance of A-shares in November was not good. In terms of rhythm, in the first half of November, driven by the rapid downward trend of 10-year US bond interest rate, A-share growth sector led the rise, driving the main index upward; In the middle and late ten days, with the release of economic data in October and the slowdown of US bond interest rates, weak reality brought weak expectations, and both fundamentals and emotions became worse. The index began to fluctuate downward.
Weak reality, On the one hand, most of the economic data of October disclosed recently were less than expected, and on the other hand, the degree of detente between China and the United States was also less than expected. For example, the expected reduction of export tariffs to the United States was not achieved. In November, the economic performance was still weak. For example, the transaction area of commercial housing in 30 large and medium-sized cities fell by 16.5% year on year, the decline continued to expand, and the phenomenon of both quantity and price falling did not improve; The manufacturing PMI recorded 49.4% in November, falling below the boom and bust line for two consecutive months. The "rescue" policy expected by the market, such as the "three no less than" policy in the real estate field, is not so much a stimulus as a bottom support, which is not enough to reverse the trend of "simultaneous decline in quantity and price" of real estate.
Weak expectations, Based on the above weak reality, the weak expectation for 2024 is derived. The article "Many People Pretend to Be Optimistic" combs the main judgments of the current market about 2024. The words of neutral optimism such as "Don't be pessimistic" and "Opportunities outweigh risks" appear frequently. The conclusion is generally that "the economy is expected to continue to improve, but the process will not be smooth". For the A-share investment in 2024, most of them are ambiguous words of "optimistic but not too beautiful".
In December, where does the turnaround come from?
First, thanks to the low base effect, the economic reading is expected to exceed expectations. Prospective data such as real estate sales and PMI show that the economic data in November is likely to be lower than expected. However, from November last year to January this year, affected by the epidemic, exports, investment, consumption, real estate sales, etc. were all at the same period's low points. Benefiting from the low base effect, the economic year-on-year data in the next two months are expected to perform well, which will have a boost effect on market sentiment.
Second, the major conference in December is still worth looking forward to. On December 12-13, the Federal Reserve held the last interest meeting of the year, probably announcing no interest rate increase, and fully fulfilling the expectation of the end of the interest rate increase cycle, which is expected to drive the 10-year US bond interest rate to start a new downward cycle; At the same time, the central economic work conference will be held in China to set the tone for the economic work in 2024, and signals can be found from the conference on policy stimulus, real estate and other market concerns.
It is precisely because the current economic data is weak and the market's expectations for the meeting are not high that the heavy meeting is more worthy of expectation. Expectations are already very low. If you give me some sunshine, it will be brilliant.
So in the next one to two weeks, The market is likely to transition from weak reality and weak expectation to weak reality and strong expectation, and the stock market is expected to usher in a new round of quotations.
In terms of structural judgment, the real estate chain may perform in the short term, but its sustainability is not strong.
At present, the crux of weak domestic demand is real estate. Just in stabilizing real estate, the policy space is limited. At present, efforts are made to keep high-quality real estate enterprises (the rumored white list of 50 real estate enterprises) by means of blood transfusion from financial institutions, but the policy space is increasingly limited for stabilizing housing prices and boosting the demand for housing.
From a time point of view, in 2024, the approximate rate of house prices will still be volatile to find the bottom, and after 2025, the probability of stabilizing new house prices will gradually increase.
As far as 2024 is concerned, the market should first digest the centralized release of the supply of completed but unsold new houses brought about by the "guaranteed delivery of buildings". Later, under the conduction of land acquisition and new construction, the completed area began to increase significantly and negatively, and the supply of new houses began to decline.
In addition, after the industry reshuffle in 2024, small and medium-sized real estate enterprises have accelerated their liquidation, and the market supply pattern has become clearer. Surviving real estate enterprises will be more stable in operation and have a stronger demand for profits. It is likely that they will deliberately slow down the pace of land acquisition and construction, so as to promote the balance of supply and demand structure of new housing and accelerate the stabilization of housing prices.
From the demand side, in 2024, house buyers will still have a strong wait-and-see mood, and in the process of clearing out small and medium-sized real estate enterprises, house buyers will still give priority to second-hand houses that do not have the risk of thunder explosion, and the demand for new houses will hardly recover.
However, after the shock in 2024, the demand for new houses is expected to reach the bottom in 2025. First, after the high single digit decline in the area of new house transactions in 2024, the overall transaction hub has been significantly lower than the reasonable level in the medium and long term, and can no longer fall; Second, with the clearing of small and medium-sized developers, the surviving real estate enterprises have strong strength, and the willingness of buyers to buy new houses is expected to bottom out.
With supply shrinking and demand recovering, it will be a high probability that housing prices will stabilize in 2025.
Under standard conditions, In 2024, the volume and price of real estate will continue to fall, small and medium-sized developers will continue to clear up, the real economy will recover weakly, and the A-share stable growth plate will also be difficult to show substantial performance.
As far as December is concerned, the probability rate will go through a "strong expectation" stage, and the catalytic and stable growth plate will dominate for a short time; However, as the weak reality is repeatedly verified, the sustainability is not strong, and how to rise will also fall.
Looking at the growth sector, short-term emotional decline suppressed, but the perspective was extended, The growth sector is relatively independent of the economic fundamentals, and benefited from the end of the Federal Reserve's interest rate increase cycle and the start of the interest rate cut cycle. It is likely that the rate will have a better excess return.
Specifically, the advanced manufacturing sector that benefits from automobile intelligence, semiconductor localization and military building, the innovative drug sector that benefits from aging population and declining U.S. debt interest rates, and the media, computer and other sectors that benefit from the rapid landing of large models still have good medium and long-term configuration value.
[Note: The market is risky, so investment should be cautious. In any case, the information or opinions contained in this subscription number are only for exchange of views, and do not constitute investment suggestions for anyone. Except for special remarks, the research data in this paper is supported by Flush iFinD]
This article was originally written by "Xingtu Financial Research Institute", and the author is Xue Hongyan, vice president of Xingtu Financial Research Institute
