Our reporters Gu Mengxuan and Xia Xin report from Guangzhou and Beijing
Since the beginning of 2024, micro-cap stocks, which once enjoyed a prosperous future at the end of 2023, have been hit hard. Wind data shows that the Wind micro-cap index has fallen as much as 23.71% this year and 10.63% in the latest month.
He Xiang, general manager of the public equity department of Bohai Huijin Asset Management, said in an interview with the reporter of China Business News that the main reason for the decline of the micro-cap stock index this year is that the overcrowding of micro-cap stocks at the beginning of the year and the impact of the leveraged disk of private quantitative OTC DMA (private equity managers directly connect to the exchange through their own trading terminals and directly carry out orders, transactions and settlements with the exchange) leverage, resulting in a sharp decline in micro-cap stocks due to the impact of the liquidity crisis. After the liquidity crisis was largely resolved, micro-cap stocks experienced a round of rebound, and recently due to the market's over-interpretation of policies, micro-cap stocks have once again seen a large volatility correction.
The new "National Nine Articles" support the good and limit the inferior
Micro-cap stocks have had a tumultuous year this year. Finally, it ushered in a round of rebound after the fall, but it was hit again because of the market's over-interpretation and even misreading of the new "National Nine Articles".
The new "National Nine Articles" clearly state that it is necessary to improve the listing standards of the main board and the growth enterprise board, and conduct a more rigorous evaluation of the scientific and technological innovation attributes of the science and technology innovation board. There is a view in the market that "this delisting rule revision is mainly aimed at small-cap stocks". Small-cap stocks then fell.
In this regard, Guo Ruiming, director of the Department of Supervision of Listed Companies of the China Securities Regulatory Commission, clarified that the adjustment of the delisting index is aimed at increasing efforts to clear out the "zombie shell" and "black sheep", not for "small-cap stocks". (Policy) has made prudent arrangements in terms of standard setting and transition period arrangements, which will not have an impact on the market in the short term.
He Xiang pointed out that the introduction of the new "National Nine Articles" is mainly to better optimize the quality of listed companies, and at the same time, it is also conducive to the healthy development of the capital market in the long run. The purpose of the new "Nine Articles" is to support the good and limit the inferior, not to help the big and limit the small.
However, Ho Xiang doesn't think it's entirely a bad thing. "Due to the market's misinterpretation of the policy, the short-term micro-cap stocks have fluctuated and fallen in a large area, and this general decline has caused small and medium-sized companies with fundamental support and certain growth potential to be mistakenly killed by panic, and in the future, as the market sentiment gradually stabilizes, the price of this part of the wrongly killed micro-cap stocks is also expected to gradually recover. He Xiang said.
An insider in the fund company told reporters that judging from the content, the relevant content of the new "National Nine Articles" is to strictly control the entry of issuance and listing, strictly supervise the continuous supervision of listed companies, and increase the supervision of delisting. For these three points, the whole market is more pleasing to hear, because this may further lay and promote the cornerstone of the medium-term long-term bull of A-shares.
However, in the short term, the person pointed out that policy guidance has a certain negative impact on individual micro-cap stocks, and during the disclosure period of annual reports and quarterly reports, individual stocks have a certain potential risk of ST or even delisting, and some funds will amplify concerns about small and medium-sized market capitalizations out of risk aversion.
"However, there are only a few stocks with the risk of delisting, so in the case of a general decline in the sector, there are some situations called wrongful killing," the person said, overall, the new "national nine" has a medium and long-term benefit to the healthy development of the capital market that cannot be ignored, and the small and medium-sized market capitalization sector will eventually benefit from this, so we may be able to panic less and avoid blindly fast in and out to produce unnecessary higher transaction costs.
Large- and mid-cap funds are performing better
The decline in micro-cap stocks in recent months has dragged down the performance of funds investing in small caps. Wind data shows that as of April 23, only two of the 40 small-cap funds in the market have achieved positive returns this year, and the rest have negative returns. Among them, the highest return is Caitong Growth Preferred, with an annual return of 13.71%.
According to Wind's classification of fund investment styles, this year, the performance of large-cap funds and mid-cap funds is significantly better than that of small-cap funds. Wind data shows that as of April 23, 4,934 large-cap funds had an average annual return of -2.68%, 559 mid-cap funds had an average annual return of -7.7%, and 66 small-cap funds had an average annual return of -17.28%.
If we only look at equity funds, the average annual returns of the above three types of funds are similar. Wind data shows that as of April 23, the average annual return of 3,481 equity large-cap funds was -2.7%, the average annual return of 461 equity mid-cap funds was -7.39%, and the average annual return of 40 small-cap funds was only -14.49%.
In a situation where micro-cap stocks are in full swing, it is not easy to maintain a positive return for the year. The reporter consulted Caitong's growth preferred quarterly report and found that in the first quarter of 2024, fund manager Jin Zicai further adjusted the position sector. On the basis of a significant increase in overseas computing power in the fourth quarter of 2023, he continued to increase his holdings in the overseas computing power sector in January, when the market was relatively sluggish. At present, Jin Zicai still believes that the market underestimates the sustainability of the performance growth of the entire sector of overseas computing power, which is expected to become one of the main lines of allocation this year, with both winning rate and odds. In addition, he also pays close attention to the possibility of overseas technology giants to further develop the overall AI industry to the end side and application side, and does a good job of switching industry configuration in a timely manner.
In addition, Caitong Growth Select Fund has lowered its allocation to the media sector. In the current macro environment, Jin Zicai believes that it is difficult for the media sector to have a strong performance line for the time being, and he retains a small number of companies as the bottom position allocation, and continues to maintain tracking of the sector.
At the same time, Jin Zicai is also optimistic about the domestic supply-side reform of the industry, and has made some allocations, optimistic about the investment opportunities of the reversal of the fundamentals of these varieties.
After "wrongful killing", the cost performance is highlighted
What is the future investment value of micro-cap stocks?
He Xiang's research found that from 2005 to 2013, the number of A-share stocks was limited. He used the CSI 1000 Index as a representative of micro-cap stocks at that time, during which the CSI 1000 Index rose by 353%, and the CSI 300 Index, which represents large-cap stocks, rose by 137%. From 2014 to February 2024, He Xiang used the CSI 2000 Index as a representative of micro-cap stocks, during which the CSI 2000 Index rose by 95% and the CSI 300 Index rose by 50%, and micro-cap stocks continued to dominate. In other words, in the past two decades, the A-share market has had a significant small market capitalization effect, and micro-cap stocks have outperformed large-cap stocks in the long run.
Talking about the future performance of micro-cap stocks, He Xiang pointed out that although short-term micro-cap stocks and even small- and medium-cap stocks have been affected by negative market sentiment, from the past history of A-shares and the history of major global markets, the small market capitalization effect is long-term in most markets, and the short-term shocks and fluctuations caused by phased style switching are normal market phenomena. Moreover, due to the relative lack of attention of many micro-cap stocks in the A-share market, there has always been a phenomenon of weak market effectiveness, that is, the stock prices of some individual stocks do not fully reflect the fundamental status of their companies at certain stages, which is actually very conducive to quantitative investment with breadth of coverage to play an advantage in it and tap the relatively undervalued opportunities. "In the current market environment, the economy is still in a state of moderate recovery, and in the state of stock game, some micro-cap stocks with fundamental support in the undervaluation state will have a better cost-effective advantage after being mistakenly killed. He Xiang said.
According to the above-mentioned industry insiders, the current market attention to small-cap stocks is gradually increasing, especially after the decline of small-cap stocks, investors are thinking more deeply about small-cap stocks. Small-cap stocks have a valuation advantage and have outperformed over the long term.
"As of Feb. 7, the PB (average price-to-book ratio) valuation of microcap stocks fell to its lowest point in nearly three years, providing a good investment opportunity. Staying positive and looking ahead, investors should also pay attention to the cyclicality, volatility and valuation changes of small-cap stocks when allocating to them. However, the person cautioned that small-cap stocks are volatile and need to be managed carefully.