Last week's A-share market experienced a wave of extreme differentiation.
From the data point of view, the Shanghai Stock Exchange Index fell below 3000 points at the lowest point and broke through 3100 points at the highest point, with an overall increase of 1.52%; The trend of heavyweight stocks and small cap stocks deviated significantly, among which the Shanghai Stock Exchange 50 Index rose 2.38%, the Shanghai Shenzhen 300 Index rose 1.89%, the China Securities Exchange 2000 Index fell 5.54%, and the Wande Micro cap Index fell 12.11%. If it hadn't been for the official voice to appease the market sentiment after the second session last week, I'm afraid that the decline of small cap stocks would have been far more than that.
The reason is naturally influenced by the new "National Nine Rules".
After the meeting on April 12, the State Council issued Several Opinions on Strengthening Supervision and Risk Prevention to Promote the High Quality Development of the Capital Market, which is the third "National Ninth Article" of the capital market. What is different from the previous two times is that the core keynote of the new "National Nine Rules" is strict. In terms of the overall requirements, it is proposed that we must comprehensively strengthen supervision, effectively prevent and resolve risks, stabilize the keynote, and be strict, so as to ensure that the supervision is "long teeth with thorns" and has edges and corners. The market generally believes that promoting the healthy development of the capital market with higher and stricter standards will be the next theme.
Fundamentally, the new "National Nine Rules" can be said to directly hit the current pain point of A-share, which is exciting. With the implementation of the new "National Ninth Article" and the subsequent supporting rules, a comprehensive and three-dimensional regulatory system will be gradually established, which will promote the ecological optimization of the capital market and enhance its internal stability. In the medium and long term, the new "National Nine Rules" will certainly promote the rectification of the chaos in the capital market, reshape the value of A-shares, and further promote the improvement of the quality of listed companies. At that time, investors will also be expected to obtain more ideal investment returns, and the healthy and sustainable development of the capital market will be more guaranteed.
However, according to historical experience, any reform is bound to be painful, and the new "National Nine Rules" is no exception. Considering that many of the statements, such as "deepening the reform of delisting system, accelerating the formation of a normalized delisting pattern that should be fully retired and cleared in time", "restricting the reduction of major shareholders and implementing risk warnings for companies that have not paid dividends for many years or have a low proportion of dividends", will directly affect those listed companies that have weak fundamentals and whose dividends are not up to standard, Therefore, it is inevitable that there will be a wave of selling of shares of such companies in the short term, which is also the direct reason for the sharp drop of small cap stocks in the market last week.
It should be noted that, Under the influence of the new "National Ninth Rule", the investment style of A-share is likely to change fundamentally in the future The individual stocks with poor performance and substandard dividends will be gradually cleared, while the blue chip stocks, core assets, high dividends and other directions will be increasingly favored by the capital. The allocation ideas of investors should also be adjusted in time, and the best policy is to follow the trend.
Among them, the most noteworthy plate is "China Special Estimation".
The so-called "China Special Valuation", which is the abbreviation of "valuation system with Chinese characteristics", mainly involves central enterprises, state-owned enterprises and other sectors. Fundamentally, the central enterprises and state-owned enterprises can be regarded as the pillars of the national economic system, and are in a dominant position in key areas and sectors. Among more than 5000 A-share listed companies, the number of state-owned enterprises accounts for about 27%, and the market value is generally large, mainly distributed in coal, petrochemical, power, transportation, steel, communications, military, real estate, banks and other sectors, which can be called the ballast of economic and social development.
Historically, central enterprises and state-owned enterprises have been controversial for a long time because of their low operating efficiency and weak sense of market competition. However, for many years, the senior management has been vigorously promoting the reform of central enterprises and state-owned enterprises, and has achieved a series of results. In particular, at the end of 2022, after the "three-year action of state-owned enterprise reform", the reform actions of major state-owned enterprises, such as mixed ownership reform, introduction of equity incentive plans, asset restructuring and injection into the listing platform, have been rapidly promoted, and the overall efficiency of state-owned enterprises, from governance to operational capacity, to state-owned capital allocation, has been significantly improved, and the face of state-owned enterprises has taken on a new look.
However, the senior management did not stop the reform of central enterprises and state-owned enterprises because of the gratifying stage.
Since 2023, the SASAC has repeatedly stressed that "we should focus on improving core competitiveness, improve the return on assets of enterprises, highlight the reform tasks in improving mechanisms, restructuring and integration", and "we should aim at the functional orientation of state-owned enterprises, continue to deepen reform, and further optimize the layout of the state-owned economy". At the beginning of this year, it was also proposed to "incorporate the effectiveness of market value management into the assessment of the heads of central enterprises", which is not only the improvement of the assessment system of central enterprises, but also an important milestone, It means linking the development of central enterprises with the changes in the market value of the secondary market, which helps guide listed central enterprises to pay more attention to the internal value and market performance of companies, and also pay more attention to the interests of shareholders, which can further boost investor sentiment and promote the stable development of the capital market.
Moreover, in the context of the new "National Nine Rules", the "China Special Valuation" with the central enterprises and state-owned enterprises as the core will certainly usher in greater investment opportunities, mainly for three reasons:
First, the profitability stability of central enterprises and state-owned enterprises is relatively stronger.
In recent years, due to a series of uncertainties at home and abroad, the pressure on China's economic growth has increased, and the operation of listed companies has been repeatedly disrupted, resulting in the pressure on the share prices of many listed companies. At this time, companies with stable profitability have obvious advantages.
Thanks to a series of reforms implemented in recent years, central enterprises and state-owned enterprises have strong profitability stability. Data shows that since 2017, the ROE of central and local state-owned enterprises has been significantly higher and more stable than that of private enterprises, highlighting the excellent profitability and anti risk ability of central and state-owned enterprises, and playing the role of "stabilizer" and "ballast". Generally speaking, enterprises with high ROE should enjoy higher valuation, but the valuation level of state-owned enterprises and central enterprises has been lower than that of private enterprises for a long time, indicating that the current valuation of state-owned enterprises and central enterprises does not fully reflect their value and is underestimated.
Considering that in the context of the new "National Ninth Rule", it is a general trend to stay away from junk stocks and embrace blue chip stocks. Therefore, central and state-owned enterprises with more stable profits will certainly become the target of capital care, and their valuation should also have more repair power.
Second, the stocks of central and state-owned enterprises have strong attributes of high dividends.
In the new "National Ninth Article", the cash dividends of listed companies are highly valued: on the one hand, we should take multiple measures to promote the increase of dividend yield and enhance the stability, sustainability and predictability of dividends; On the other hand, it is also necessary to promote the listed companies to pay dividends many times a year, pre dividends and dividends before the Spring Festival. In addition, for those companies that have not paid dividends for many years or have a low proportion of dividends, not only the reduction of major shareholders is restricted, but also the risk warning is implemented for the stock. The purpose of this move is to crack down on the "iron rooster" behavior in the capital market, effectively protect the interests of small and medium-sized investors, and also imply that high dividend assets will be more popular in the market.
As the name implies, high dividend assets refer to equity assets with high dividend yield. Such assets are generally mature value enterprises with stable cash flow, high dividends, undervalued value, and insignificant fluctuations. Therefore, they are often regarded as defensive or fixed income assets, and can often generate excess earnings during the market adjustment period - while central enterprises and state-owned enterprises are typical high dividend assets.
According to the statistics of China Merchants Securities, since 2017, the overall dividend scale of state-owned enterprises of central enterprises has been significantly higher than that of private enterprises. In 2022, the overall dividend scale of state-owned enterprises of central enterprises will exceed 1.1 trillion yuan, far exceeding the total dividend of private enterprises in the same period of 394.2 billion yuan. By industry, the dividend amount of banks, petroleum and petrochemical, transportation, coal, utilities, non bank, construction and other industries among state-owned enterprises of central enterprises is relatively high, and the dividend rate of some state-owned enterprises of central enterprises can even reach 5%~7%.
These are naturally attractive to investors. Especially since the second half of last year, due to various factors, The volatility of A-share has increased, and the overall market preference has declined. At this time, a considerable number of investors prefer to pursue the steady preservation of assets rather than the pursuit of substantial growth. The attractiveness of high dividend and high dividend sectors such as central enterprises and state-owned enterprises has become prominent. This advantage is expected to continue to allow the central enterprises and state-owned enterprises sector to obtain funds.
Third, central enterprises and state-owned enterprises are ushering in a new round of value revaluation.
The new "National Ninth Article" emphasizes that it is necessary to promote listed companies to enhance their investment value, and guide listed companies to cancel their shares after repurchase according to law; Encourage listed companies to focus on their main businesses, and comprehensively use M&A, restructuring, equity incentives and other ways to improve the quality of development. This is highly consistent with the follow-up development logic and direction of central enterprises and state-owned enterprises.
As mentioned earlier, at the beginning of this year, the senior management proposed to "incorporate the market value management effect into the assessment of the heads of central enterprises", It means linking the development of central enterprises with the changes in their secondary market value, which helps guide listed central enterprises to pay more attention to their internal value and market performance. Then, the heads of many central enterprises, such as PetroChina, China Mobile, CRRC, etc., all expressed their opinions and actively responded to the call.
For example, PetroChina claims that "the market value performance has been included in the annual performance assessment of the management, and the market value performance has been quantitatively evaluated from two aspects of stock price change and market image. In the future, the company will continue to strengthen the market value management, and strive to return to shareholders with more excellent performance"; The person in charge of China Mobile also mentioned that it is necessary to "put the fundamentals of strengthening and optimizing enterprises in the first place, actively guide the market to transform the valuation logic, and transform the valuation model to a direction that better reflects the company's scientific and technological innovation, digital intelligence transformation, scale efficiency and other values", etc.
To sum up, with the arrival of the new "National Ninth Rule" and the implementation of the subsequent detailed rules in all aspects, the advantageous assets in the "China Special Valuation" sector are bound to achieve further value remodeling. Of course, the investment opportunities in this sector should not be underestimated, and may even have a good performance for a long time in the future, which deserves investors' long-term attention.
In terms of specific configuration, among many industries distributed by central enterprises and state-owned enterprises, those industries with low valuation and large ROE increase in recent years are expected to fully benefit from the reform of central enterprises and state-owned enterprises, including coal, petroleum and petrochemical, communications, banking, military industry, etc. In addition, under the tone of "overall planning of security and development", the importance of energy security, information security, science and technology security and other areas related to national security is increasingly prominent. As the most reliable reliance of the country, central enterprises and state-owned enterprises will continue to play a key role in the future, and the related information and innovation, power, high-end manufacturing and other sectors are also of great investment 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" by Fu Yifu, a senior researcher of Xingtu Financial Research Institute
