Recently, someone asked me what I should do if the A-share market has been volatile and the bear market will continue like this in the future.
So in order to alleviate everyone's anxiety,
I'm going to review the case again,
But the conclusion I came to hurt a little,
Let's tell the truth.
Taking the CSI 300 Index as an example, the last time it was 3,500 points was in 2014, and now more than nine years later, it is still 3,500 points.
And at that time, the 14-year CSI 300 P/E ratio was 12.5 times,
Now at 11.6 times, about the same valuation, the index hasn't risen in more than nine years.
Lying on the spot shows that there is likely to be a problem in A-shares.
Is it the return on capital of A-shares. Really zero??
In order to verify my conjecture, I looked at the SSE 50 again, and at 2390 points in 14 years,
It's a little higher than the current 2,374 points, when it was 9.9PE, and now it is 10PE.
It's even standing still!
This means that if you buy an index, in addition to earning some dividends, you will have no other money....
What's going on behind the scenes?
Okay, now I'm going to start smashing the field.
01
Global capital markets
I pulled the data of many stock markets around the world and found that we are not the only ones who have not risen for a long time.
For example, Singapore, Malaysia, and South Korea are also doing extremely badly.
It seems that Singapore's economy is doing well, but the stock market is similar to ours.
I take the data disclosed by the wind financial terminal as an example, according to the following official algorithm,
Let's take a look at the earnings growth data of the major indexes:
(1 + EPS earnings change) × (1 + P/E ratio change) = 1 + index change
Source: wind
EPS, which can also be understood as the profit change of the index, here strictly speaking, due to the change of the constituent stocks, the EPS data will not be so accurate,
But it's convenient to calculate, so I'll disclose this to you.
Let's talk about a few more tragic cases, in the past ten years:
- Singapore Straits Index, EPS +9.3%, valuation -15%;
- Malaysia Index, EPS -43%, Valuation -8%;
- Korea Composite, EPS +6%, valuation +6%;
- 沪深300，EPS-4%，估值+37%；
Ten years ago, the valuation of the CSI 300 was even lower than it is now, with a price-to-earnings ratio of only 8.6 times.
Since it happened to be the bottom of the valuation of the broader market at that time, it has risen by 32% in the past ten years, mainly earning a valuation premium.
But if you look at EPS, the EPS (USD) growth of the CSI 300 turned out to be negative.
I was also confused when I wrote this, has it been that A-share listed companies have not made money for ten years?
PS: I'll answer this shocking bug later.
OK, the poor performance of the above four indices is most likely due to poor earnings growth, and then let's look at the overseas indices that perform better:
- Nasdaq 100, EPS+212%, Valuation+65%, Davis Super Double;
- S&P 500, EPS+92%, Valuation+46%, Davis Minor Double;
- India SENSEX30, EPS+79%, Valuation+33%, Davis Nuclear Double;
- Nikkei 225, EPS+93%, valuation -4.8%;
- Vietnam 30, EPS +83%, valuation -12.7%;
- German DAX, EPS +76%, valuation -16.1%;
- France CAC40, EPS+115%, valuation -35%;
Judging from the above data, in fact, the real profits and valuations are only U.S. stocks and India.
The main reason is that in the past two years, the rise of AI has increased the valuation of information technology stocks too much.
In fact, other U.S. stocks are not all expensive, and cheap U.S. stocks are actually fine.
In other markets, although EPS growth is good, valuations are under pressure to some extent.
The S&P 500, India, Japan, Germany, France, and Vietnam are not too different in terms of EPS.
In the past decade, the growth rate in US dollar terms has been around 70-90%, and the compound growth rate is 5-8%, which is reasonable.
……
02
The mystery of the CSI 300
So many people here are curious again, why has the EPS growth of the CSI 300 been so bad in the past decade?
No, I pulled the profit data of the top 10 heavyweights in the CSI 300 ten years ago, and found that the actual profit actually increased by 50%.
Although it is not as high as that of European and American companies, the difference is not so big, and it is absolutely impossible to be negative growth.
So back to the algorithm at the beginning.
The rate of change in EPS earnings depends on the rate of change in the index and the rate of change in the price-to-earnings ratio
It must be one of these two that is wrong.
We look at the European and American markets are still relatively normal, so what is the problem?
After studying for a long time, the case has finally been solved!
It is the CSI 300 chasing up and killing the bearish rebalancing, which has produced continuous negative returns, resulting in serious distortion of the index yield.
In the past decade, if the CSI 300 weighted stocks are not adjusted, the yield can increase by another 50%.
Since when calculating EPS, it is the change in index return/index P/E ratio,
However, the index yield is 50% less out of thin air, which is why EPS growth is calculated to be negative.
That is to say, in fact, the EPS of 300 should have increased by 40-50%, but because the index is blind J8 repositioning, it is not accurate!!
So why does the CSI 300 rebalancing continue to generate negative returns?
The main A-share market is an irrational market, and it is the most taboo to chase up and down.
For example, the inclusion of CATL and Mindray Medical in 21 years, and the inclusion of LeTV in 15 years, etc., have caused a wave of trauma to the index.
Repeated chasing up and down has worn out a lot of gains.
………
Speaking of which, there may be some people who are curious.
Even so, the EPS of the CSI 300 increased by 50%, but it is still not as good as that of European and American countries?
Isn't it clear that our GDP growth rate is even higher!
So on this issue, I looked into it again.
I found a bug.
That is, whether you look at the indexes of Germany, France, or Japan, they are all globalized.
These companies may not have anything to do with their own country's GDP!
Here's an example
BBA, SAP, Siemens...
French Hermes, LV, Airbus...
Toyota, Sony, Nintendo in Japan...
Needless to say, Apple, Microsoft, Amazon, Tesla.
Even many of these companies make much more money in China than in their own countries.
More than 70% of the business comes from overseas.
Therefore, when investing in these indices, don't think that they are tied to the fortunes of the country.
They have been integrated into the world economy.
Even because they have enjoyed huge Asian dividends, they have grown much faster than GDP and outperformed the average performance of global stock markets.
In conclusion, overseas stock markets are not necessarily linked to the domestic economy
……
But, pay attention!
Our company, taking CSI 300 as an example, is not a truly global leader.
For example, in the top 10, I only found three overseas companies with overseas revenue accounting for more than 30%, Ningde is 32%, and Midea and Zijin are about 40%.
Therefore, the economic relationship between A-share CSI 300 and us is still not small, and the proportion of overseas revenue is not too high.
Seeing this gave me a bit of an epiphany;
Indices in mature capital markets are global, so it's no wonder the experience is so silky
Our CSI 300 is highly correlated with market policies....
Old fans who often read my articles know that I have been sharing various types of QDII overseas funds over the years.
It is also to make everyone's experience in the capital market better, don't stud a variety
Now that real estate prices have entered a historic downward cycle, real estate companies are often losing tens of billions of yuan, and bad debts are collapsing upstream and downstream
Many companies have overcapacity or are forced to move to Southeast Asia.
Domestic demand is under great pressure, the people have no money, the debt leverage is too high, and science and technology have been curbed by the United States.
The current index profitability is no longer what it used to be!
The net asset income (profitability) of the CSI 300 has fallen from the previous 15% to 10%, a decline of 40%!
So how to break the game?
First of all, we must understand and acknowledge that there are real difficulties in the economy right now.
But optimistically, in the world division of labor system, China is still indispensable.
It's just that the past model of developing the economy with financial real estate has been completely abandoned.
In some directions, such as new energy vehicles, we can still show off the world and show the superb innovation and product power of the Chinese people.
Therefore, as a bet, it can still be dispersed layout, but it can no longer be brainless.
Even if you choose a broad base, you have to be a little cautious, at least like the CSI 300 and SSE 50, which will not be the best choice.
Wide base I recommend the bonus quality 50,
I didn't control it.,Today's article is a bit too long.,Now that you've seen this.,Remember to like it.。
……
1. The "National Nine Articles" will be upgraded after ten years. Today's post-market third country nine articles are coming, the specific content is not much different, that is, similar to the previous mention, to improve the capital market, but to sort out a general. Generally speaking, the nine articles of the country are released in the range of the bottom of the bear market, such as January 31, 04, the market rose from 1000 points to 6100 points, and on December 31, 2013, the second national nine market, from 2000 points to 5100 points, this time it is the third national nine.... Although history does not represent the future, it objectively also shows that the current stock market is sluggish, and investors need to continue to cheer up, but the A50 futures index has not responded, and foreign capital has not bought it for the time being.
2. Wang Jianlin's Beijing Wanda Plaza was taken over by a subsidiary of Xinhua Insurance, and the previous real estate tycoons have basically become dishonest people, but Lao Wang is still selling assets to survive.
3. Vietnam's richest woman, Zhang Meilan, was sentenced to death. The main charges include fraud, embezzlement of public funds, and bribery. From 2012 to 2022, Zhang Meilan managed to gain control of Vietnam's fifth largest bank, Saigon Bank, to develop real estate, and defrauded 12.5 billion US dollars from it, and calculated that she alone defrauded about 3% of Vietnam's GDP.