Text | Financial Street Old Lee
April 25, 2022 is a historic dark moment for A-shares, today's super rally has not appeared, and the market is far from optimistic.
Yesterday, the two stock indexes opened low and went low, and the intraday unilaterally plunged sharply, the Shanghai index fell 5.13%, losing the 3000 point mark, the Shenzhen component index fell by more than 6%, the ChiNext index fell more than 5.5%, and lost 2200 points. In one day, the three major A-share indexes have created new lows in the year, the three major indexes have also created a new high in the past two years, this morning, the two cities still did not rebound super, fortunately, the value stocks took the lead in picking up, but the growth stocks still did not improve.
Shanghai Composite Index Daily Candlestick
Yesterday's market, no matter from which point of view, has no bright spots:
From the perspective of the broader market, the market is green across the board, with the military, nonferrous metals, semiconductors, chemicals, coal, oil and other sectors falling in the front, and the brewing, pharmaceutical, automobile, insurance, real estate and other sectors are weakening. Specifically, the concept of stability and financial concepts are relatively resistant to decline, growth and cycle performance is poor, non-bank finance (-3.64%), household appliances (-4.28%) and building decoration (-4.31%) are the opposite of the decline of the sector, while non-ferrous metals (-8.45%), defense and military industry (-8.05%) and electronics (-7.84%) are the least resistant to decline.
From the perspective of individual stocks, more than 4300 stocks in the two cities are in a state of decline, with a median increase of -8.21%, and the rise rate of individual stocks is only 3.10%. It can be said that yesterday should be the day with the biggest loss effect since November last year, whether it is buying value stocks or buying growth stocks, everyone is empty-eyed.
In such market sentiment, turnover, sales of funds from the north, and value/growth-related indices are no longer able to influence and characterize the trend of the broader market.
The Gem is the K-line
After yesterday's close, many institutions are discussing the reasons for the sharp decline in the market, Lao Li also received a lot of seller reports, frankly speaking, everyone is hindsight, in the face of such a market situation, industry researchers have "lying flat", strategy researchers have also begun to appear "passive slack" mood. The core reason for the sharp decline in the broader market is the loss of "confidence", which is manifested in the following three points:
First, the rebound of the domestic epidemic, especially the epidemic in Beijing, has caused absolute panic in the market. Since the beginning of the year, reality has shown that only the real economy can create value, and the suspension of production and work has promoted the downward pressure on the economy, and since Sunday, the epidemic in Beijing has become a "catalyst" for the market bearishness, and the recent epidemic bearishness was released yesterday.
Second, the liquidity of the international market and the domestic market has a greater impact on the stability of A-shares. We have always said that no market exists independently, and in the current situation, the global "butterfly effect" has intensified. Yesterday, the RMB exchange rate fell sharply, falling below the 6.55 mark, hitting a new low since November 2020, and the accelerated depreciation of the exchange rate had a greater impact on domestic confidence, affecting the stability of A-shares. Moreover, the current ten-year Treasury bond yield is still at a low level, hovering between 2.7% and 2.8%, coupled with the net outflow of 4.396 billion yuan from the north yesterday, which increased the downward pressure on the market.
Third, with the "explosion" of some enterprise annual reports and quarterly reports, the market began to control risk appetite in order to survive the intensive period of quarterly report release. Last week, the annual reports of some companies narrowed or even declined, and many companies, including pharmaceuticals, consumer electronics, insurance and other fields, fell to a single day. Due to the epidemic, since the first quarter, many enterprises have indeed faced greater operational pressure, including the Ningde era, and leading enterprises, including the Ningde era, have also delayed the release of a quarterly report, and institutions need to control risks.
In fact, the reasons that Lao Li just talked about, the market took into account last week, but did not expect that a variety of bearish factors will be concentrated, A-share institutions quickly have a "risk aversion" preference, when the big fall, easy to step.
Recently, many friends asked Lao Li, in this situation, how should it be operated?
If it is a friend of the institution, Lao Li's opinion is very clear, that is, waiting, and the fund managers of many institutions are indeed waiting. If it is an ordinary retail friend, it is difficult for Lao Li to give an answer, and the risk bearing ability of each friend is different, but Lao Li believes that in the absence of financial pressure, waiting is still the best choice. Yesterday Lao Li chatted with the partner, in the 2018 bear market, the opportunity was waited out, waited for half a year, the same period last year, the opportunity was also waited out, waited for a quarter.
Because the institutional funds are huge, in fact, from the operational point of view, the operational flexibility of retail investors is much better than that of the institution, some friends also have the idea of bottoming out or selling, Lao Li believes that the current market still has the possibility of diving below 2800, if the market reverses, then the bottom may be a more ideal choice.
Judging from the current market characteristics, the market has reached the bottom, the level of trading, the level of market turnover rate has approached the historical low, the trading volume of many individual stocks is even less, and the scale of industrial and capital reduction has also decreased significantly; at the valuation level, the valuation rate of many leading enterprises has reached a historical low, and many stocks are close to the valuation level of the lowest point in the market in March 2020; at the wind level, the central institutions, central banks, securities regulatory commissions, The Banking and Insurance Regulatory Commission and other departments have made positive statements on the recent economic situation and capital market environment. Although we think that a series of signals such as trading, valuation, policy, and capital have bottom characteristics, which sectors of the market will have an advantage next?
The answer is simple, the short and medium term is based on value, and the medium and long term is based on growth. Lao Li has always mentioned that the market is about growth and value constantly switching:
Before November last year, it has always been the world of growth, represented by the Ningde era, after November last year, the growth value style showed signs of switching, and the value style re-dominant.
From a long-term perspective, the low valuation strategy can achieve higher absolute returns, since November 2021, the overall market is weak, the excess return of the low valuation sector is in the front, in the past 4 months, the value style is more dominant, this year, the funds of heavy value stocks have performed well. Many institutions believe that in the context of steady growth, the direction of the market will be like this:
The first is the "steady growth" related sectors, such as traditional infrastructure, real estate stable demand related industrial chain (real estate, building materials, building materials, building appliances, home furnishing, etc.), which is already the market consensus; followed by the pharmaceutical, consumption and other sectors with more adjustments in the early stage, low valuation, and still clear medium- and long-term prospects, including medicine, medical treatment, liquor and large consumption; and finally the manufacturing growth sector, including new energy (referring to upstream energy such as wind power and photovoltaics), new energy vehicles, semiconductors, etc.
Lao Li would like to say here that the reason why everyone puts new energy vehicles at the end is not because their fundamentals are not good, but because the macro and strategic style determine that the next stage of "stable growth" and "big consumption" prosperity is better. A share market style has been constantly switching, since November last year, the market has entered the value style, in this case, the opportunity for growth stocks is not large, but once the growth stocks are reversed, Lao Li believes that it is necessary to look at the Ningde era, BYD and Great Wall Motors, which are the vane of the next stage of reversal.
There is nothing new under the sun, and lowering expectations and studying history while waiting is the easiest and wisest thing to do at the moment.