I don't dare to open a stock account

Author | sharpshooter

In January 2024, the regulator's efforts to rescue the market in multiple dimensions can be described as full of sincerity.

In terms of monetary policy, it is extremely rare for the central bank to announce the news of RRR and interest rate cuts in intraday trading. In terms of the market, the China Securities Regulatory Commission rarely proposed to build an "investor-oriented" capital market, the national team has repeatedly launched ETF protection indexes, and the State-owned Assets Supervision and Administration Commission has proposed that central enterprises should be assessed for "market value management". In terms of real estate, first-tier cities have successively adjusted sales and purchase restrictions......

However, the market made a fuss and fell into a downward trend again.

01

In January, the Shanghai Composite Index fell 6.3%, the Shenzhen Component Index fell 13.8%, and the ChiNext Index fell 16.8%. In addition, the CSI 300 fell 6.3%, the CSI 500 fell 13.5%, the CSI 1000 fell 18.7%, and the STAR 50 fell 19.6%.

Many mainstream indices have fallen in one month to lose the decline of the whole of 2023, setting the second worst record since 2010.

At the individual stock level, there were 367 gainers and 4,972 decliners in January, accounting for 90% of the total. Among them, 651 companies fell by more than 30%, and 2,806 companies fell by more than 20% (accounting for 53%).

In addition, among the 22 trading days in January, the number of companies fell in a single day on 8 days exceeded 3,000, 5 days fell by more than 4,000, and 3 days fell by more than 5,000 in a single day.

Looking at the performance of the industry structure, there are two heavens.

In January, coal rose 11.4%, petroleum and petrochemicals rose 8.9%, and banks rose 7%. On the other hand, electronic devices and computers both plummeted by more than 23%. The national defense industry, medicine and biology, power equipment, and automobiles all plummeted by more than 15%.

Several traditional industries can significantly outperform the market for the following main reasons:

First, the national team's bailout funds are weighted by ETFs to protect the CSI 300, which overlaps with the above traditional industry leaders.

Second, since the market fell in 2021, the market risk appetite has become lower and lower, and the risk aversion is strong, and the high-dividend sectors are piled up. For example, the dividend yields of coal, banks, and petroleum and petrochemical are 7.2%, 5.5%, and 4.3% respectively, far exceeding those of many industries.

Third, in January, the State-owned Assets Supervision and Administration Commission (SASAC) enlarged its recruitment and included the effectiveness of market value management in the assessment of the heads of central enterprises. This will inevitably drive the top leaders of central enterprises to really expand and strengthen their performance, pay attention to market changes, and maintain market value performance. The policy has driven the comeback of the "special valuation" market.

Due to the low risk appetite of the market, the A-share growth sector continues to be sold off in the context of no incremental funds entering the market, especially the photovoltaic and new energy vehicle industry chains. Of course, this is also closely related to the continuous deterioration of the current industry fundamentals.

For example, since the avalanche of photovoltaic polysilicon, silicon wafers, cells, and modules began at the end of 2022, the cumulative decline has been roughly about 70%, and many prices have returned to before the significant expansion of production.

In addition, the evolution of photovoltaic technology is to further reduce the cost of components, and there is no story to tell in the future price dimension, and there is basically no mismatch between supply and demand that leads to sky-high prices. In terms of volume, the growth rate of downstream terminal demand is obviously continuing to decline. The result of the decline in volume and price is that the fundamentals of PV have not yet bottomed out, and the stock price is under obvious pressure in the weak market environment.

In the past few years, new energy investors looked down on and looked down on old energy, but now the latter's stock price has soared, and the former has been reduced to the old department and continued to be abandoned by the market. China Shenhua, Shaanxi Coal Industry, and Yangtze River Power continued to hit new highs, while CATL, Ganfeng Lithium, and LONGi Green Energy continued to hit new lows.

This is really a good reincarnation of heaven.

Overall, in January, the market fell far more than most people expected, leading to a collapse in market confidence. The level of pessimism is now comparable to that of the end of December 2018.

02

Financial markets fell sharply in January, but macroeconomic fundamentals and monetary policy have improved to a certain extent in the short term.

The manufacturing PMI in January was 49.2%, with an expectation of 49.2% and a previous value of 49%. This performance is slightly higher than the seasonal performance. You must know that the average month-on-month value from 2010 to January 2022 is -0.3%, and the Spring Festival holidays in 2016, 2018, and 2019 are -0.3%, -0.3%, and 0.1% respectively.

On the whole, the contraction of manufacturing PMI prosperity in January showed a certain marginal improvement, ending the decline for three consecutive months.

Split, the manufacturing PMI in January has several significant characteristics:

First, supply is stronger than demand. The production index in January rose sharply by 1.1% month-on-month to 51.3%, which is related to pre-holiday production and stocking, and has become an important factor driving the PMI month-on-month.

Second, the new orders index rose 0.3% month-on-month. Among them, the new export orders index rebounded by 1.4% month-on-month, but its sustainability remains to be seen.

Third, the overall supply is still strong and demand is weak, the inventory of finished products rebounded by 1.6%, and the ex-factory price continued to fall by 0.7%. The ex-factory price is the lowest in the last 7 months.

In addition, the construction PMI fell 3% month-on-month to 53.9% in January. On the one hand, it is due to the decline in seasonal factors. On the other hand, during the period of local government bonds, infrastructure investment has converged. In addition, property sales continue to be weak.

In the first 30 days of January, the average real estate sales in 30 cities were 256,000 square meters, -38.6% month-on-month. This month-on-month decline is more than the usual seasonal decline.

Overall, the PMI stopped falling and rebounded, reflecting that the economy is still resilient, but weak demand is an inescapable reality. This still requires policy increases to carry out counter-cyclical adjustment and improve business expectations.

In terms of monetary policy, the People's Bank of China is still proactive.

On January 24, Governor Pan Gongsheng directly announced a 50bp RRR cut on February 5 to provide liquidity of 1 trillion yuan for the market. The RRR cut is 25BP more than the 25BP in the past 5 consecutive times, which is not small, and responds to the general concerns of the market.

In addition, the Fed's monetary policy is more likely to influence the market to a certain extent.

On January 31, the Federal Reserve decided to pause interest rate hikes again, and the federal funds target rate was 5.25%-5.5%, in line with market expectations. It also marks the end of the Fed's rate hike cycle.

In addition, the meeting statement differed from December in several ways. First, in terms of policy guidance, delete the phrase "additional tightening". Second, in terms of policy considerations, the previous "cumulative tightening magnitude, lag in policy impact, economic and financial development" was revised to "latest data, changes in outlook, and risk balance".

In the press conference later, Powell was still evasive, keeping a secret about the timing of the rate cut, but said that it was unlikely to be cut in March. As for the issue of balance sheet reduction, he believes that it will be discussed at the March meeting, and there is no need to wait until the scale of reverse repo is reduced to 0 before taking action. Overall, Powell's statement was slightly hawkish, and U.S. stocks fell under pressure overnight.

However, for the market, it is inevitable that the Fed will cut interest rates this year, but it is only a matter of frequency and pace. Since November last year, the U.S. financial market has fully priced in interest rate cuts this year, believing that there will be 5-6 rate cuts this year. In the future, the market will face the problem of repeated "loose trading".

In fact, the Fed's interest rate cut will be the underlying logical driving force for global risk assets. Although the overseas market is expected to be relatively full in the early stage, as long as the actual landing is not far worse than expected, the market will not have a deep pullback, and there is a high probability that it will fluctuate and digest and then rise steadily.

However, the Fed's monetary policy has shifted sharply, and the A-share market has not priced any transactions. When the interest rate cut actually lands this year, it is still expected to cover the pricing.

Year-to-date, the accelerated decline of A-shares has no absolute relationship with short-term macroeconomic performance, corporate earnings, and external markets. Because whether it improves or not, the market seems to be unmoved, and the brain is down.

Logically, this downward sentiment is not a reflection of short-term pricing factors, but may be feeding back medium- to long-term pressures on the economy, and the trigger point is still real estate and local debt.

But this pricing may be too irrational, as it is not necessarily right to extrapolate linearly the pessimistic scenario for the next few years based on current data. It's like two sides of a mirror, but when the market is going up, the valuation of the 100 everywhere doesn't feel expensive, and the future growth is full.

A-shares are so magical, they go too long when they go up, and they go too far when they fall.

03

At present, the PE of the CSI All-Share Index is 14.67 times, which is basically down to 10 years ago. From the perspective of valuation, it is already quite cost-effective.

At present, there is almost no incremental capital entering the market, and the selling power is greater than the buying power, resulting in a continuous decline in the index. The decline of the index triggers the liquidation and selling of leveraged funds, forming a negative cycle.

From this perspective, although the valuation of the market is very low, there is no impetus to drive a wave of smooth rise to break the negative cycle. Unless a large-scale stimulus policy is introduced, the expectation is greatly improved, or the trillion-level leveling fund is forced to pull up, but the probability of occurrence is relatively low at present.

For rational investors, it is better to wait for new positions to be opened on the right side of the market, and the bottom on the left side has been buried for several waves. For positions that have been hedged, it is necessary to assess whether the company's own fundamentals have deteriorated, and if there is a reduction in positions, the stop loss is higher. Otherwise, it will face the same cage dilemma as photovoltaics, which has plummeted for more than 2 years, and will fall by nearly 20% in 1 month. If not, lie down and wait for the resurrection, but be prepared for a long period of suffering.

I don't sell it, how can you cut me? It's just a placebo, don't believe it all. (End of full text)