Recently, the A-share index has significantly increased its volatility, but also showed strong resilience.
For example, the expectation of interest rate cut on Monday failed, and the Shanghai Stock Exchange ended the decline and turned red after falling for a while; Tuesday saw a V-shaped rebound. In the morning, the Shanghai Stock Exchange Index also broke the previous low, and in the afternoon, it again stubbornly closed red.
Intuitive feeling is that A-share is no longer susceptible to negative factors. As long as there is a fall, there will be medium and long-term funds to buy at the bottom, resulting in a fall. The bear market does not say the bottom. Behind the fact that the index does not move, the main reason is that the market has reached the bottom of its expectations for the fundamentals and believes that the situation will not get worse.
What are the market's expectations of fundamentals at this stage?
From the perspective of the three major demands, that is: exports will not be worse; Consumption will not be worse; Investment will not be worse.
Exit, it can't be worse 。 In 2023, China's total export volume will grow by - 4.6% year on year, turning negative for the first time since 2017. Judging from the 12-month moving average growth rate, China's export growth rate has bottomed out in October 2023, and then picked up in the next two months, releasing a positive signal.
As far as 2024 is concerned, the logic of continued improvement of exports mainly comes from the inventory cycle in Europe and the United States. In 2023, the major demanders of the global economy such as Europe and the United States have experienced a destocking cycle, leading to a decline in import demand. In terms of data, not only China's exports declined, but South Korea's (- 7.49%) and Vietnam's (- 4.36%) exports also grew negatively. At present, Europe and the United States are at the bottom of the inventory cycle, and the pressure of destocking will be significantly reduced in 2024, which will help restore import demand and help manufacturing countries to become positive exporters.
Investment, not worse 。 From January to November 2023, China's fixed asset investment grew 2.9% year on year, lower than the GDP growth, which is a drag. Specifically, among the three sub projects of manufacturing, infrastructure and real estate, real estate development investment was the main drag, with a year-on-year growth of - 9.4%. At the same time, the growth rate of infrastructure investment has also continued to decline, and the effect of bottom support has declined.
As far as 2024 is concerned, the trillions of additional treasury bonds issued in Q4 last year will form a physical workload this year. With the expectation that the central government will actively increase leverage, the supporting effect of infrastructure investment is expected to be strengthened. With the decline of completion investment, the investment rate of real estate development will still be low. However, due to the hedging of three major projects, the drag of real estate investment on the economy is expected to weaken. Fixed asset investment will not be worse.
Consumption, not worse 。 In the first three quarters, the contribution of final consumption to GDP growth was as high as 83.2%, which was very high, but also very false. From January to November, the total retail sales of social consumer goods increased by 7.2% year on year, but the two-year compound growth rate was only 3.5%, which was actually a drag on GDP. At present, China's consumer confidence index is still low, especially the employment confidence, which is still significantly lower than the normal level.
Consumption is a function of income. Income expectations depend on employment, which is closely related to exports and investment. In 2024, exports and investment will not get worse, which will help stabilize residents' employment confidence and consumption willingness. In this sense, consumption will not be worse.
All three carriages are showing signs of bottoming out, which will make it difficult for economic fundamentals to become a drag on the market in 2024, and the index will not fall at this position: As the index continues to fall, medium and long-term funds dare to buy at the bottom, and can't move up objectively 。
But falling doesn't mean rising.
In the short term, the market is mainly worried about the upcoming high base problem.
In the first quarter of 2023, there will be a small peak of multi-party resonance in economic operation. On the consumer side, the backlog of demand during the epidemic was released centrally; On the investment side, rapid investment growth driven by recovery expectations; On the export side, the backlog of export orders is delivered centrally; On the financing side, massive credit supply
In the face of such a high base, unless there is a strong hedge at the policy side, it will be difficult for the Q1 2024 year-on-year economic data to perform well. At that time, data fluctuation will disturb the trend. For example, the negative growth of exports may expand again if the decline continues to narrow, which will greatly drag down market sentiment.
Based on this, Unless we see a strong bottoming signal on the policy side, it is difficult for the market to have great expectations for Q1. In this context, the large-scale market does not have the starting conditions.
In the medium term, the issue of housing prices has always been a major uncertainty in the minds of investors. How will housing prices evolve in 2024? Can we stop the decline and how? Although everyone has their own views, the market lacks consensus.
Without consensus, under the guidance of pessimism, the pessimistic side will be magnified and become the accelerator of market decline under specific circumstances.
In the face of this environment, what should investors do?
To some extent, the market has given the solution to the problem.
Since the beginning of the year, A-shares have declined as a whole, but the industry differentiation is very obvious. From the beginning of the year to January 16, coal rose 4.84%, led by fault, followed by banks (2.19%), transportation (1.7%), beauty care (1.53%), household appliances (1.37%) and utilities (1.08%); Computer, electronics, national defense and military industry declined significantly, all exceeding 10 points; Communications, media, machinery and equipment, medicine and biology, food and beverage all declined by more than 5 points, and the performance was also very poor.
Such obvious differentiation among industries, to a large extent, reflects the attitude of incremental funds: the dividend sector is popular, and the growth sector is not popular.
At present, insurance funds, social security funds, wealth management funds, etc. are rare sources of incremental funds. These funds are characterized by their steadiness, and they prefer the dividend sector of interest collection. Coal, banking, household appliances, transportation and other leading industries are all steady interest earning assets. The dividend yield of the past 12 months measured by the current stock price is 7.48%, 5.88%, 3.27% and 2.68% respectively. It is not surprising that they are sought after by funds.
In contrast, TMT, defense and military industry, medicine and biology and other sectors with large declines are highly sensitive to interest rates, and are greatly suppressed against the background of low risk appetite and the revision of the Federal Reserve's interest rate cut expectations.
For investors, they can adopt the following strategy, focus on the dividend sector, and have both offensive and defensive capabilities: advance, and enjoy the beta gains brought by the index reversal; If you withdraw, you can enjoy the dividend of the dividend plate.
However, there is an inherent defect in the dividend sector, which is that rising share prices will reduce the dividend yield, thereby weakening the attractiveness of assets. Therefore, dividend plate leads the rise, which is usually lack of sustainability, and it is impossible to drive the market out of a big wave of market.
In the short term, despite structural differentiation, the market will fluctuate at the bottom. The turning point comes from the change of fundamental expectations, which depends on whether there is a strong policy issued subsequently to reverse the pessimistic expectations of the market, including but not limited to the unexpected interest rate and reserve ratio cuts, slightly bold fiscal policies, strong policies to stabilize housing prices, and real gold and silver consumption promotion policies.
Before these changes occur, it is expected that the index will not change significantly, and investors should remain patient.
[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
