Xiongguan Mandao is really like iron, and now it is stepping forward from the beginning.
After two consecutive years of adjustment in the A-share market, the "value depression" has been further highlighted. As of the end of 2023, the total number of A-share listed companies has exceeded 5,300, with a total market capitalization of 83.73 trillion yuan.
The capital market in 2024 is about to begin, and after a continuous decline in the early stage, the market is looking forward to the performance of A-shares in 2024. The Central Financial Work Conference held in October 2023 and the Central Economic Work Conference held in December 2023 both released positive policy signals, China's economy may achieve a growth rate of about 5% in 2024, which is at the leading level among the world's major economies, and domestic macro liquidity may remain relatively loose in 2024, and incremental funds will actively enter the market.
In the context of the continuous increase in domestic stable growth policies and the approaching inflection point of global monetary policy, market participants expect that in 2024, the policy will help the economy to pick up, the fundamentals of the stock market will further recover, and the A-share market will gradually rise due to the decline in US bond yields and the entry of incremental funds.
Policy signals are positive, consolidating the foundation for stable growth
"Vitality reappears", "growth is stable and far-reaching", "stable response", "confidence is restored", "breakthrough and breakthrough" ...... Combing the key words of major brokerages looking forward to the domestic macroeconomic situation in 2024, it can be found that promoting the steady recovery of the economy has become a consensus.
Confidence is more important than gold. In the eyes of brokers, both the Central Financial Work Conference held in October 2023 and the Central Economic Work Conference held in December 2023 have released positive policy signals, laid a solid foundation for stable growth, and depicted a more ambitious blueprint for the steady recovery of the economy.
"At present, the structural adjustment of the demand side of the mainland economy is basically in place, and the financial market environment has improved marginally. Yang Changchang, chief economist of Shenwan Hongyuan Research, said that China's economy has entered a new round of stable growth.
"The macro theme of 2024 is the reappearance of vitality. Yang Fan, chief macro and policy analyst of CITIC Securities, judged. She believes that in 2024, China's economy will be vigorous on the basis of consolidating the foundation and cultivating the yuan, and the economic vitality will be better released under the premise of a weakening dollar and policy increases, and economic growth will gradually return to normal.
Zhang Wenlang, chief macro analyst of the research department of CICC, believes that the economic recovery will gradually accelerate in 2024. The economic situation may evolve from "endogenous bottoming" to "exogenous recovery", and the real GDP growth rate for the whole year of 2024 may be around 5%.
In the view of brokers, behind the steady recovery of the economy, it is inseparable from the continuous efforts at the policy level.
"Looking ahead, the slope of economic recovery will still depend on stable growth policies. Xun Yugen, chief economist and director of the research institute of Haitong Securities, said frankly that in the context of the peak and fall of U.S. bond yields, there is more room for active fiscal policy in China, and monetary policy remains stable and loose. He believes that drawing on overseas experience, the decline in China's real estate sales and construction starts has slightly exceeded the median level of 48 overseas sample economies, and the decline in investment is slightly smaller than the median, and the future urban village renovation and affordable housing construction will hedge the impact of the real estate downturn. In 2024, with the efforts of stable growth policies and the upward trend of the inventory cycle, the macro fundamentals are expected to be repaired. In the medium and long term, China is in a critical period of industrial structure upgrading, China has the foundation for the development of new quality productivity, and some high-end industries such as new energy are gradually rising.
Yang Fan said that the short-term counter-cyclical increase at the policy level and the drawing of a long-term reform blueprint will be carried out simultaneously. On the one hand, the policy will move according to the times, strengthen macroeconomic regulation and control in a timely manner, and ensure that the economic momentum of stability and improvement can be consolidated; on the other hand, the policy will plan for the long term, seek vitality from reform, and accelerate the construction of a new development pattern.
Huang Wentao, chief economist of China Securities Securities, predicts that the fiscal policy mix at the beginning of 2024 may appear in the form of "a deficit rate of about 3.5% + new special bonds of more than 3.8 trillion yuan". From the perspective of risk prevention, it is expected that the fiscal policy will give a clear direction on the implementation strategy and medium- and long-term planning of the debt package.
Liquidity is easy and incremental funds will be actively entered
With positive policy signals and good economic recovery expectations, liquidity is also an important factor driving the A-share market.
Wind data shows that in 2023, the annual net inflow of northbound funds will be 43.704 billion yuan, of which the net inflow of Shanghai-Hong Kong Stock Connect funds will be 21.928 billion yuan, and the net inflow of Shenzhen-Hong Kong Stock Connect funds will be 21.776 billion yuan, and the net inflow of northbound funds will be at a historically low level. As of December 28, 2023, the financing balance in 2023 has increased by more than 140 billion yuan.
In 2024, macro liquidity will remain relatively loose, and the active entry of incremental funds into the market has become an institutional consensus.
In the context of fiscal succession and steady growth, Huang Wentao believes that expanding demand and preventing risks require monetary policy to provide a relatively loose liquidity environment and a suitable and stable financing interest rate, and the central bank has no incentive to tighten liquidity for a long time. He expects that in 2024, the central bank will continue to cut the reserve requirement ratio and interest rates, which may be similar to 2023, that is, the RRR will be cut by 50 basis points, the interest rate will be cut by about 20 basis points, and the deposit rate will be lowered.
"As the Fed ends its interest rate hike cycle, exchange rate constraints are gradually relaxed, and domestic monetary policy has gained more room to operate, and there may be more significant interest rate cuts in 2024. Tu Qiang, a senior macro analyst at Shenwan Hongyuan Research, said that it is expected that there will be two 25 basis point RRR cuts in 2024, one in the first and second half of the year.
"Where does the incremental funding come from" has been a topic of discussion in the market. In this regard, Qin Peijing, chief strategic analyst of CITIC Securities, said that in 2024, changes in the behavior of four types of investors will bring incremental funds, of which long-term allocation funds are the main force. Specifically, first, it is expected that the trend of active public offering rebalancing and allocation to low-level recovery sectors will continue in 2024 with the domestic positive policy signals and the stabilization and recovery of fundamentals, and passive ETFs may continue to become a channel to undertake over-the-counter incremental funds into the market in 2024. Second, the overall position of small and medium-sized subjective long private equity is low, and the potential allocation space is broad, and the quantitative strategy has entered an orderly and benign development stage. Third, the marginal shift of transactional foreign capital has turned positive, and allocation-oriented foreign capital is still waiting for the opportunity to enter the market. Fourth, the steady entry of medium and long-term funds such as insurance will become the ballast stone. At present, the overall valuation of A-share core assets is low, and the window for insurance funds to enter the allocation has been opened.
"It will be the general trend for medium and long-term funds represented by pension insurance and enterprise annuities to increase the allocation of equity assets. Chen Guo, chief strategy officer of China Securities Securities, said bluntly.
At present, A-shares are low-level assets in the allocation of RMB assets and the allocation of major global equity markets. In this context, the value of the "valuation depression" of A-shares is highlighted.
"In 2024, foreign capital is expected to return to the inflow trend, resonate with domestic medium and long-term funds and institutional funds, and regain control of market pricing power. Chen Gang, chief strategic analyst of Soochow Securities, predicts that the incremental funds of A-shares may reach 1.2 trillion to 1.7 trillion yuan in 2024.
Expected improvement valuations are at historically low levels
After two consecutive years of correction in 2022 and 2023, as of the end of 2023, Wind All A has a rolling P/E ratio of 16.67 times, which is at a historical low. Based on the expectation of policy, fundamental recovery, easy liquidity and marginal improvement in incremental funds, institutions are generally optimistic about the A-share market in 2024.
"The recovery of fundamentals in 2024 is expected to support the upward movement of A-shares. Xun Yugen judged that there is a cyclical law in the operation of the stock market, and the current A-share is already in the bottom area. "From the perspective of trading, asset price comparison, and valuation indicators, the adjustment of A-shares has been more significant, and market sentiment and risk appetite have fallen to a low level. Zheng Zixun, co-chief analyst of Haitong Securities Strategy, also said that looking forward to 2024, the recovery of A-share fundamentals will be an effective support for the market to rise.
Multiple positive factors are gradually converging, will the "bull market" come?
Chen Guo believes that in 2024, A-shares are expected to turn from bears to bulls and enter a small bull market, mainly due to the improvement of two major factors: first, the global macro liquidity has improved significantly, and second, the domestic stable growth policy may exceed expectations, which will promote the positive growth of A-share companies in 2024. Fu Jingtao, chief analyst of Shenwan Hongyuan Research A-share strategy, believes that there will be new structural opportunities in the A-share market in 2024, but the overall market is still volatile.
Looking back on 2023, from the perspective of market style, the industry style of the A-share market presents the characteristics of a dumbbell. How will the market style be interpreted in 2024?
Zheng Zixun expects that the white horse growth sector has a cost-effective investment, and the style is expected to "move from the two ends to the middle", and the performance-driven white horse growth stocks may be dominant, especially the structural highlights in the hard technology, pharmaceutical, and consumer sectors. In addition, the banking and brokerage sectors may also usher in phased opportunities.
In terms of thematic style, from the perspective of small and large cap stocks, small caps may be relatively dominant overall. However, Yang Chao, chief strategy analyst of China Galaxy Securities, said that in the second half of 2024, the U.S. monetary policy will usher in an inflection point, the net outflow of foreign capital is expected to narrow, and the possibility of local dominance of large-cap stocks will gradually increase. He expects that in the first half of 2024, the market growth value style will be relatively balanced, but with the shift of overseas monetary policy, the probability of growth stocks will gradually increase in the second half of 2024.
Looking back at the industry allocation of the A-share market in 2023, in the environment of "slow performance + scarce growth + tight balance of funds", the traditional industry allocation model of tracking demand prosperity has become more difficult, and high-dividend sectors and thematic rotation have become prominent structural features of A-shares in 2023. In 2024, how to grasp the industry allocation?
"The allocation opportunities in 2024 are expected to be better than those in 2023, and it is recommended to combine the economic recovery with the offensive and defensive of dividend assets. Li Qiusuo, chief analyst of domestic strategy at CICC's research department, believes that in 2024, there will be more industries with economic rebound or fundamental reversal, and some areas with good medium-term prospects will experience long-term adjustment and fully digested valuations, policies will continue to support economic transformation, technological progress and innovation are expected to become potential structural growth highlights, and the allocation environment will be better than in 2023.
Li Qiusuo suggested that the next 3-6 months focus on three main lines. First, during the transition period, growth sectors that are supported by policies and conform to the trend of innovative industries, such as semiconductors and communication equipment, while the pharmaceutical and new energy sectors still need to pay attention to marginal changes in industrial policies and fundamentals, but the valuation risk has been released more. Second, looking for the direction where demand is the first to improve or there is an opportunity for supply to clear from the bottom up, there may be greater flexibility to improve performance, such as automobiles and parts, oil and gas services, precious metals and marine equipment. Third, high-dividend assets with sufficient cash flow and consistently high dividends, such as telecom services, upstream resources and utilities.
Wu Kaida, chief strategic analyst of Debang Securities, believes that the two main investment lines in 2024 may revolve around "industrial upgrading" and "development support". In terms of industrial upgrading, we can focus on the two major sectors of digital China and manufacturing power, and in terms of development support, it is recommended to pay attention to the two major sectors of energy security and financial power.
Source: China Securities Journal
Editor: Xiang Yanhong