A share V-shaped reversal, "small composition" revealed the direction of fund managers to increase positions: waiting for the "clock" to swing back, high dividends, track stock opportunities can be expected

Editorial Department of this journal | Qi Yongchao

On January 24, the market stopped falling and rebounded, and the Shanghai Composite Index regained 2,800 points. Recently, the Shanghai Composite Index has repeatedly oscillated around 2,800 points, and the voice of the market expecting a reversal is constantly emerging. 

Recently, the 2023 quarterly report of the public fund has been intensively disclosed, and it can be seen from the "small composition" of the fund report that the turning point of the market is getting closer and closer, "Past experience tells us that when market participants are overly pessimistic, it is getting closer and closer to the pendulum of the market." "In this context, fund managers believe that a number of main lines will present investment opportunities, such as stable high dividends and track stocks with high elastic expectations, which are worth looking forward to in the future. 

2800 points "tug-of-war" is expected to break the game?

Mutual funds are happy to watch the market

Since January, the market as a whole has shown a volatile adjustment trend, and the Shanghai Composite Index has continuously fallen below the 2,900 points, 2,800 points and other important index thresholds. Recently, the "tug of war" around 2800 points is still being staged.

In this anxious state, some funds have been "brightened" and entered the market to absorb low, such as foreign capital represented by northbound funds, following the net purchase of more than 1 billion yuan on January 22, and continued to buy an additional 3.7 billion yuan on January 23. 

Looking back at the historical performance of A-shares, the Shanghai Composite Index closed around 2,800 points many times, such as March and April 2020, May 2016, July and November 2011, etc., in addition to other time points (see Table 1). 

According to further observation, in many stages near 2800 points, the Shanghai Composite Index has come out of the bottom reversal market. For example, in March 2020, the Shanghai Composite Index fell below 2,800 points due to the impact of public health emergencies, and fell to a low of 2,646.80 points on March 19, 2020. However, after that, the Shanghai Composite Index ushered in a rapid rebound, and regained 2,700 points and 2,800 points in a row, and by July 9, 2020, it once rebounded to 3,456.97 points, an increase of nearly 30% during the period. 

In January 2016, the Shanghai Composite Index also fell below 2,800 points, and then fell to a low of 2,638.30 points on January 27, 2016, but after that, the Shanghai Composite Index also ushered in a recovery rally. After that, until January 2018, the rising index continued to rise to around 3,560 points, an increase of 30%. 

Judging from the "small composition" of the 2023 quarterly report disclosed by the public fund, this possibility is increasing, which is related to factors such as the market's declining valuation level, fundamentals and market sentiment.

Ruxing Securities Global Heheng Three-Year Holding Fund said that from the perspective of indicators such as the dividend yield of the CSI 300 Index, PB valuation, and the risk premium of A-shares, A-shares have been in a historically low position. Valuation is the core factor of the medium and long-term returns of the stock market, and in the long run, the potential return space of A-shares has been opened. 

Recently, various economic indicators have been released, and the mainland's economy as a whole has been stable and improving. In the 2023 quarterly report, HSBC Jinxin Dynamic Strategy Fund believes that the current domestic economic development has undergone positive changes, and various economic data continue to improve month-on-month, coupled with positive fiscal policies, and it is expected to maintain a moderate recovery trend in the future. In the past quarter, the yield spread between China and the United States has continued to widen, and equity market valuations have come under pressure. Against the backdrop of recessionary pressures in major overseas economies and the possibility of starting to cut interest rates, corporate earnings and market valuations are expected to resonate as China's economy continues to resonate. 

For a long time, behind the ups and downs of the market, "emotionality" is also an important driving factor, and from the perspective of the "pendulum principle", the probability of the market swinging back to the positive side is also increasing. E Fund Core Advantage Fund said that past experience shows that when market participants are overly pessimistic, it is getting closer and closer to the pendulum swing of the market. The CSI 300 Index currently represents the market at a PE multiple of only about 11x, corresponding to a 9% earnings return, which is already an attractive risk premium for equities compared to the current risk-free rate of 2.6% (10-year Treasury yield). 

The main line of high dividends is favored

Coal, banks, etc. have "rushed"

From the perspective of market rules, the main line of high α and the stable theme often have a "seesaw" effect, such as when the market risk appetite is high, the stable theme shows a decline, and vice versa. High-dividend sectors are an important proxy for prudent investing, often performing well during periods of weak market volatility due to more robust and certain earnings expectations.

Judging from the current level of sector dividend yield, among the 31 major industries in Shenwan, the dividend yield of the coal sector (the average dividend yield of individual stocks in the sector, the same below) is the highest at 7.47%, followed by banks, with a dividend yield of 5.47%. In addition, steel, transportation, and real estate also have high dividend yields of more than 3%. In addition, a number of industries have dividend yields of more than 2%, such as home appliances, food and beverage, textiles and apparel, light manufacturing, biomedicine, and public utilities (see attached chart). 

In recent times, the high-dividend sector has continued to play a "leader" role. Statistics show that since the second half of 2023 (as of January 23, 2024, the same below), the market as a whole has shown a weak adjustment, during which only the coal sector has risen among the 31 major industries in Shenwan, with a cumulative increase of more than 6%, and the banking sector ranked second with a decline of 0.5%. 

From the perspective of individual stock performance, since the second half of 2023, many stocks with higher dividend yields (>4%) have risen against the market, and some stocks have risen by more than 30%. It has been observed that most of these stocks are distributed in sectors with higher dividend yields, such as coal, banking, and transportation. In addition, there are many other industries such as non-ferrous metals, medicine and biology, food and beverage, petroleum and petrochemical, trade and retail (see Table 2). 

In the 2023 quarterly report, many fund managers are optimistic about the high dividend strategy and have increased the relevant allocation. Guotai Nongyi Fund said that in terms of stocks, it continued to maintain a low position in the fourth quarter, continued to reduce its position in growth industries, increased the allocation of high dividends and varieties in the pharmaceutical industry, and improved the defensive nature of the portfolio; 

Which type of funds are more inclined to the theme of high dividends? Will the industry continue in the future? Huatai Berry Incentive Power Fund said that from the perspective of incremental funds, in the current market environment, there is still a high probability that insurance funds and quasi-funds can still be used to organize funds to enter the stock market, including social security and enterprise annuities, etc., this kind of funds are generally low-risk preference style, and the investment cycle or assessment cycle is longer, and it is more likely to favor low valuation, high dividends and high dividend strategies. Guotai Junan Shanyuan Stable Pension Target One-Year Holding Fund said in the 2023 quarterly report that looking forward to the next quarter, high dividend yields are still attractive in the context of the continuous downward movement of the interest rate pivot.

Money poured into track stocks

TMT, new energy, medicine, etc. are concerned

However, while the high-dividend strategy is favored by funds, there are also a number of mainstream tracks that are sought after by the market. 

According to Choice statistics, in Shenwan's 31 major industries, electronics, power equipment, computers, medicine and biology, machinery and equipment, automobiles, basic chemicals, media and other tracks are among the top in terms of turnover of more than 500 billion yuan, with a total turnover of 6.5 trillion yuan, accounting for nearly 6 percent of the total market turnover since January. 

Judging from the 2023 quarterly report disclosed by fund companies, many institutions have increased their allocation to related industries. 

Among them, Shen Wanling Xinle Dao held the fund for three years, that is, increased the allocation to the TMT field, and included a number of information technology and chip companies such as Heda Technology, Zhenxin Technology and Jiulian Technology into the top ten heavy stocks (see Table 3). 

In the strategy report, Shen Wanling Xinle Dao Three-Year Holding Fund has a view that it will increase the proportion of positions in the main track of TMT in terms of investment strategy, with computers and electronic semiconductors as the core. Entering 2024, the technology sector that has experienced a relatively obvious correction may already be at a relatively low level, and there is a certain process of market repair. Compared with the background of the difficulty and high cost of trading brought about by the rapidly rising market at the beginning of the year, it is expected to usher in a more relaxed allocation environment. 

It is also observed that many funds have increased their allocation of pharmaceutical stocks, such as Gülen, which, according to the China-Europe Medical Innovation Fund at the helm of the company, has increased its positions in Pharmaron, WuXi Biologics and Gloria. The fund said in the strategy report that looking forward to the first quarter of 2024, the global investment and financing environment is expected to gradually recover after the interest rate hike cycle, the domestic policy side may remain stable, and the industry's understanding of the impact of compliance will be clearer. Although the base of different sub-sectors is different, the pharmaceutical industry as a whole will still maintain a steady growth trend, and the driving force for the long-term growth of outstanding enterprises has not changed significantly.

In the 2023 quarterly report, many funds have also increased the layout of new energy. For example, the Vermilion Bird Industry Smart Selection Fund has increased the weight of photovoltaic stocks such as Hewang Electric, Sieyuan Electric, and Guodian NARI. In its strategy report, it said that it is optimistic about the investment opportunities in the photovoltaic industry in 2024. First, the photovoltaic cell link in the industrial chain of technological progress is still large, is the future photovoltaic sector in the direction of more opportunities, in the long run, the battery structure is expected to gradually develop in the direction of BC; The second is to look for the leader of the photovoltaic industry that can go through the cycle, the head enterprises have stronger self-hematopoietic ability, sufficient funds in hand, and the market share is expected to increase; The third is to focus on power equipment to find a deterministic high-growth track. 

Soochow New Energy Vehicles has increased its allocation to new energy vehicle-related companies, and in its disclosed 2023 quarterly report, Xpeng Motors-W and Li Auto-W were included in the top ten heavy stocks, in addition, it added positions in Desay SV, Bethel, Tuopu Group, Baolong Technology and other auto parts companies. For the market opportunities, the fund said that looking forward to the future at the current point in time, the intelligence of new energy vehicles is expected to enter the 1-N growth stage from the 0-1 cultivation stage in 2024. From the perspective of investment experience, the growth stage may be a relatively good period for industry investment.

(The individual stocks mentioned in the article are for example analysis only, and do not make trading recommendations.) ）