The valuation advantage emerged, and the Brand 100 Index outperformed the three major A-share stock indexes in January

Every reporter: Liu Mingtao Every editor: Xiao Ruidong

In the first month of 2024, the "report card" of A-share operation was released, and the three major stock indexes all fell, with the broad-based index falling the least by the Shanghai Composite 50, with a monthly decline of 3.09%, and the brand 100 index falling by only 5.51% per month, outperforming the three major stock indexes of the Shanghai Stock Exchange, the Shenzhen Component Index and the ChiNext Index. In the context of weak economic recovery, the high-dividend strategy is still the best choice for investment in the market at present.

The Brand 100 Index bottomed

Affected by multiple news and trading sentiment before the Spring Festival, A-shares adjusted again this week. Among them, the Shanghai Composite Index fell 6.19% to close at 2,730.15 points, the Shenzhen Component Index fell 8.06% to close at 8,055.77 points, and the ChiNext Index fell 7.85% to close at 1,550.37 points. The Brand 100 Index fell by 2.97%, resisting the decline and continuing to build a bottom.

From the perspective of monthly trends, the Shanghai Composite Index fell by 6.27% in January, the CSI 300 Index fell by 6.29%, the Shenzhen Component Index fell by 13.77%, the ChiNext Index fell by 16.81%, and the Brand 100 Index fell by 5.51% on a monthly basis, outperforming the three major A-share stock indexes.

Historical data shows that in the past ten years, the probability of the Shanghai Composite Index rising in January is 50%, while the probability of the Shanghai Composite Index rising in February is 70%, and the market may have increased the probability of rising compared with January. The PMI data released in January showed that the manufacturing PMI was 49.2%, up 0.2% from December last year.

It is worth noting that the executive meeting of the State Council held on January 22 emphasized that it is necessary to further improve the basic system of the capital market, pay more attention to the dynamic balance of investment and financing, vigorously improve the quality and investment value of listed companies, increase the intensity of medium and long-term capital entry into the market, and enhance the internal stability of the market. It is necessary to take more effective measures to stabilize the market and confidence. At the same time, the vice chairman of the China Securities Regulatory Commission said that it is necessary to build an investor-oriented capital market and strengthen investor returns. It is expected that market confidence will be boosted, the current domestic economy will continue to stabilize and improve, and corporate earnings expectations will gradually improve.

Some institutions pointed out that the unexpected RRR cut will be implemented in February, which will enhance macro liquidity in February, and market liquidity is also expected to improve. Policies to stabilize the capital market and boost confidence in the capital market are expected to continue to be introduced. The implementation of relevant policy measures has also largely reversed the recent weakness of the market. At present, the market valuation is low, the risk premium and turnover rate indicators all show that the market is in the bottom area, and the value of the layout is also increasing. As the economy continues to improve and corporate earnings recover, the market will strengthen positive expectations.

High dividends may be the best strategy

Although the index has readjusted, the dividend index has performed better. Taking January 4, 2022 to January 24, 2024 as the statistical interval, from January 4, 2022 to January 24, 2023, the closing prices of the Shanghai Composite Index and the Dividend Index increased by -22.34% and 0.15% respectively, and the absolute excess return of the Dividend Index compared with the Shanghai Composite Index was 22.19%.

It is not difficult to see that in the context of a slower-than-expected economic recovery, the position of high-dividend stocks as a defensive allocation in the market will be raised, and the yield of the dividend index has gradually outperformed the Shanghai Composite Index so far in 2022.

From the perspective of dividend yield spread (DRP), the dividend yield spread of A-shares has gradually increased, with the Shanghai Composite Index DRP gradually rising from -2.5% in January 2010 to 0.56% in January 2024, and the dividend index DRP rising from -1.4% to 3.8%, and the dividend yield spread of dividend stocks has risen faster. Since August 2022, the dividend index DRP has clearly reached a new high, indicating that high-dividend equity assets have become more attractive than risk-free assets.

In the future, the mainland interest rate center is expected to continue to decline, in the overall downward cycle of return on capital, the high spread between stock and bond ratios, making the cost performance of high-dividend equity assets gradually highlighted, and high-dividend stocks may be repriced by the market.

Specifically, the domestic economy may still be in a weak recovery in the short term, and liquidity may remain stable and loose. Therefore, the high-dividend style may continue in the short term, and high-dividend assets still have high allocation value. Some traditional industries, such as banking, petroleum and petrochemical, and other traditional financial cycle industries, have relatively high dividend yields, and from the perspective of valuation, congestion, and fundamentals, these industries currently have a certain cost performance and margin of safety. In addition, the dividends of food and beverage, household appliances, communications, media and other industries are gradually increasing, and the current valuation is at a low level, with a certain cost performance and margin of safety. Pan-high dividend industries represented by food and beverage, household appliances, communications, media, etc. are also worth paying attention to.

The industry leader carried the banner of rebound

Judging from the performance of the constituent stocks of the Brand 100 Index this week, the leading stocks with relatively high dividend yields in industries such as banking, oil and home appliances have a strong trend and have basically risen against the trend. Among them, Gree Electric Appliances rose 5.76% for the week, the largest increase, and Mengniu Dairy and Agricultural Bank of China also rose more than 2% for the week.

According to public information, Gree Electric is a leading enterprise in the field of air conditioning, with a stable position in the industry, and has actively promoted channel reform to improve its own operating efficiency in the past 20 years. In terms of business, the company is stepping from a single air conditioning business to multiple business areas, including the full-category layout of the 2C home appliance business and the 2B new industries such as the new energy vehicle industry chain, energy storage and battery manufacturing equipment. In terms of dividends, the company has historically maintained a high dividend ratio, with a dividend yield of 6.35% in 2022.

Mengniu Dairy(2319.HK) HK) is a leading enterprise in China's dairy industry. The company has a rich product matrix, covering liquid milk, milk powder, cheese and ice cream and other sectors, with synergistic development between various businesses, and obvious core competitive advantages in various segments. Driven by per capita dairy consumption, as well as the high-end of fresh milk, cheese, ice cream and other segments, the dairy industry will continue to maintain steady growth. As one of the two giants in the industry, Mengniu has established deep competitive barriers, and will continue to maintain steady growth in the future and continue to improve its profitability.

As a state-controlled bank, ABC has a high degree of equity concentration, strong financial strength and strong ability to resist risks. With the theme of high-quality development, the company highlights the two major positioning of "a leading bank serving rural revitalization and a major bank serving the real economy", and fully implements the three strategies of "three rural" counties, green finance and digital operation.

With the integration and synergy of online + offline channels, the development of county-level business is expected to drive the company's loan expansion and expand its coverage, and at the same time form a certain support for interest margins. In the context of the increasing uncertainty of the economic environment and the need to boost the effective demand for credit, the company's assets have expanded steadily, and the profit growth rate is still guaranteed to a certain extent. With the rebound of economic prosperity, the gradual improvement of effective financing demand in the market, and the improvement of debt cost control, the decline of NIM is expected to slow down.

National Business Daily