Public Offering China Research Group | Mina
Editing, co-ordinating| Jamie
制作 | Jessica
The emergence of Chatgpt and SORA has made the AI sector the most eye-catching star in the secondary market, but the threshold for understanding artificial intelligence is really a bit high, and ordinary investors have said that they "don't understand", sighing at the skyrocketing sector brought by this wave of AI, and they are afraid that they can't participate in it and miss the opportunity to make money.
While people are still struggling with the A-share market index still hovering at 3,000 points, one of the sectors is "making a fortune in a muffled voice", that is, the dividend sector.
As of April 23 this year, the dividend low volatility 50 ETF (515450) has risen by 39.63% in the past three years, while the passive index fund has fallen by 20.42%, and the CSI 300 has fallen by 31.73%, and the dividend low volatility 50 ETF (515450) has reached 71.36% compared with the CSI 300!
The dividend sector has become more and more popular in recent years, and the dividend low volatility 50 ETF (515450) was issued in January 2020, and in this more than four years, its total return was as high as 65.03%, with an annualized rate of 12.44%, and the CSI 300 fell by 15.49% during the same time period, and the relative return of the dividend low volatility 50 ETF (515450) exceeded 80%.
With the introduction of the new "National Nine Articles", the dividend sector has once again attracted attention, and the allocation value has been further enhanced. Instead of chasing "top-stream" fund managers and looking for the trendsetters of the times, it is better to find "smart beta".
The Dividend Low Volatility Strategy Index is one of the "smart betas".
Low dividends, steady happiness
"Smart Beta" is one of the most sought-after investment concepts in the complex market in recent years, and it actually encompasses a series of strategic index funds, somewhere between passive (beta) and active (alpha), looking for valuable certainty in a world full of uncertainty.
"Smart Beta" has very clear and transparent index layout standards, and at the same time, it can also help investors obtain higher returns that exceed the average market return based on historical backtesting, in an attempt to give investors a reliable anchor.
Although this concept sounds unfamiliar, you may often see some funds on the market, such as "XX Index Enhanced Fund" and "XX Index Value Selection", which belong to this type of product.
Smart Beta Fund relies on strategy to rebalance, without human intervention, and without style drift, so it is more disciplined.
As one of the excellent representatives of "smart beta", bonus + low wave can be said to be a defensive weapon in a complex market.
Let's break it down, what is the bonus strategy?
In fact, it is based on high dividends, values the overall quality of the enterprise, and requires the company to continue to pay dividends, which to a certain extent indicates that an enterprise is continuously profitable and financially sound. Dividend strategies tend to favor companies that can make money and continue to pay dividends.
Dividend yield is the ratio of dividends to stock prices, which is a common value indicator, and the subtext of high dividend yields is often that stock prices are cheaper.
Therefore, the dividend strategy comes with a good and cheap stock selection logic.
The low-volatility strategy is committed to filtering out the abnormal risk of high volatility, which can better meet the needs of investors with a degree of offense and defense and low-level layout in the scenario of a volatile market, and the value of long-term investment allocation is more prominent in the context of slow economic growth and low interest rates.
All in all, the low-volatility strategy is to select those companies with relatively stable stock prices and small fluctuations, and one of its biggest characteristics is that they are resistant to declines, and excess returns are the most obvious in the falling market.
The dividend low volatility strategy is the intersection of the above two, that is, continuous dividends, high dividends + low yield fluctuations.
The index sample is generally adjusted every six months, and stocks with declining dividend yields due to rising valuations or other reasons will be called out, which is conducive to buying low and selling high to grasp profits.
To sum up, the dividend low volatility strategy is usually selected to operate steadily, outstanding profits, but the market has not paid too much attention to stocks, this variety will not rise particularly quickly and violently, just silently rise, can bring a kind of "stable happiness".
The market has outperformed other indices in the past decade
In fact, both the pure dividend strategy and the low-volatility strategy have been applied to the secondary market as a single strategy for many years, especially in overseas markets, but in the past few years, China's active equity market has risen to be "unknown".
According to the data, as of the end of 2022, the global dividend strategy index product size exceeded 400 billion US dollars, which is the largest tracking strategy index type in addition to style indexes, and equity ETFs account for 8%; The total scale of domestic dividend index funds is about 36.58 billion yuan, accounting for only 3%; The scale of industry-themed ETFs exceeded 490 billion, accounting for 31%.
However, we have statistically found that both the dividend strategy and the low volatility strategy index have historically outperformed other indices.
Taking the common CSI dividend as an example, the index selects 100 stocks with high cash dividend yield, relatively stable dividends, and a certain scale and liquidity in Shanghai and Shenzhen A-shares as the constituent stocks, and uses the dividend yield as the weight.
The chart below shows the comparison between the CSI Dividend Total Return Index and the CSI All Index Total Return Index in the past 10 years, with the CSI Dividend significantly outperforming the CSI All Index Total Return.
(Data source: Wind, statistical period: 2014/04/18-2024/04/16)
For the low-volatility strategy, taking the CSI 500 Industry Neutral Low Volatility (500SNLV) as an example, the index selects stocks with low volatility characteristics in the secondary industry of the CSI 500 Index as a sample, and while maintaining industry neutrality, the stocks in the industry are weighted by the reciprocal volatility.
Judging from the data of the past 10 years, compared with the CSI 500, the low-volatility strategy of 500SNLV has obvious comparative advantages in the long run:
(Data source: Wind, statistical period: 2014/04/18-2024/04/16)
And the bonus + low wave is superimposed, 1+1>2, and it is not surprising that the results are good.
For example, the S&P China A-Share Large Cap Dividend Low Volatility 50 Index selects 50 large-cap stocks with the least volatility and high dividend yields from the Shanghai and Shenzhen A-shares, weighted by the dividend yield of the most recent year.
As an example in the chart below, the S&P China A Large Cap Dividend Low Volatility 50 Index outperformed the CSI All-Share Index in terms of volatility and yield.
(Data source: Wind, statistical period: 2014/04/18-2024/04/16)
Among so many dividend strategy indexes, the S&P China A-Share Large Cap Dividend Low Volatility 50 Index has the best overall performance in the past decade, which is "far ahead" of other indices in the same category, and has the characteristics of less risk (slightly behind the CSI 300 Dividend Low Volatility Index in terms of annualized volatility and maximum drawdown).
(Data source: Wind, statistical period: 2014/04/18-2024/04/16)
How do ordinary people get on the bus?
From the above comparison between the different indices, we can conclude that in the China A-share market, dividends and low volatility effectively provide factor premiums in the long term.
The S&P China A Large Cap Dividend Low Volatility 50 Index is designed to provide investors with both liquidity and trading dividend and low volatility exposure, and its screening criteria are outlined below:
According to the above criteria, the S&P China A Large Cap Dividend Low Volatility 50 Index emphasizes the deep value of high-quality large-cap stocks, and according to its compilation standards, the targets selected by it generally cover "Zhongzitou + state-owned enterprises", and 63% of the index constituents are state-owned enterprises, of which 32% are state-owned enterprises, seizing the opportunity of increasing the valuation of state-owned enterprises driven by policies.
As of April 16 this year, the yield in the past ten years was 166.52%, significantly outperforming the CSI 300 Index (57.27%), the CSI 500 Index (29.15%) and the CSI 100 Index (64.15%), with an annualized volatility of 19.66%, a low maximum drawdown rate (39.68%) among the major red indexes, and a Sharpe ratio of 0.53, with a good investment price-performance ratio.
In addition, the superiority of the S&P China A Large Cap Dividend Low Volatility 50 Index was further highlighted during the bear market. In volatile markets, the S&P China A Large Cap Dividend Low Volatility 50 Index, with its low volatility and large-cap style, can provide some downside protection.
As of April 16, 2024, there are a total of 17 domestic fund products with the dividend low volatility strategy as the core, of which 16 are tracking the dividend low volatility index and the dividend low volatility 100 index compiled by China Securities Index Company, according to the data on the official website of S&P Dow Jones Indices, and the dividend low volatility 50 ETF (515450) and its feeder fund (Class A share: 008163; Class C Shares: 008164) tracks the S&P China A Large Cap Dividend Low Volatility 50 Index.
Are bonuses already too expensive?
The dividend sector has entered a rising market since the second half of 2023, and many fund managers have stepped forward to warn investors to pay attention to the future risks of the dividend sector in the fund's annual report.
However, on April 12, 2024, the new "National Nine Articles" ("Several Opinions on Strengthening Supervision and Preventing Risks and Promoting the High-quality Development of the Capital Market") were released, which mentioned that in the whole life cycle dimension of listed companies, it is proposed to strictly supervise listed companies continuously, require strengthening the supervision of cash dividends of listed companies, restrict major shareholders from reducing their holdings, implement risk warnings, increase incentives for high-quality companies with dividends, and take multiple measures to promote the increase of dividend yields. Enhance the stability, sustainability and predictability of dividends, and promote multiple dividends a year, pre-dividends, and dividends before the Spring Festival.
This is undoubtedly adding firewood to the already hot bonus sector.
So is it too expensive to buy it now?
However, a number of institutions interpret that with the introduction of the new "National Nine Articles", the huge changes in the system may be conducive to high dividends, and the "Dividend +" will usher in a long-term valuation reshaping.
Western Securities believes that geopolitical and great power game events such as "the escalation of the situation between Iran and Israel" and "the imposition of sanctions by the United States on Russian metals" will bring negative disturbance pressure to A-shares in the short term. Short-term volatility is expected to increase, continue to be bullish on the dividend sector.
The China Securities Construction Investment Research Report pointed out that under the background of the introduction of the new "National Nine Articles", theme stocks that are not committed to maximizing the interests of shareholders will gradually be marginalized, and the dividend style will still maintain a high winning rate.
With the long-term decline of the risk-free rate and the relative valuation of the current strategy, the low dividend volatility can still be expected in the future.
Specifically, let's take a closer look at the valuation level of the more representative dividend low volatility index.
Since 2023, although the rise in the market has led to valuation repair, both the CSI Dividend Index and the Dividend Low Volatility Index are currently at a relatively reasonable level, with the S&P Dividend Low Volatility 50 P/E ratio PE and P/B ratio PB being 8.27 times and 0.85 times respectively, lower than the 11.8 times and 1.27 times of the CSI 300 and the 10.3 times and 1.15 times of the SSE 50.
In addition, the index rebalances positions every six months, bringing out the constituents with low dividend yield and high volatility, and bringing in the constituents with high dividend yield and low volatility to control the valuation range of the index constituents.
From the perspective of trading volume, the popularity of the dividend low-volatility index is indeed much higher, and the dividend low-volatility strategy is further recognized by the market.
With the long-term benefits of the new "National Nine Articles" highlighted, the index is slow to bullish, but the structural bull market led by computing power and dividends will continue to ferment. With the completion of the disclosure of the first quarter of 2024, the trend of dividend revaluation is still in place.
Written by renowned psychologist Daniel Kahneman, "Thinking, Fast and Slow" delves into the mysteries of the human way of thinking, revealing the psychological mechanisms that influence our decision-making, among which Kahneman's two-system theory is worth mentioning. This theory divides our way of thinking into two systems: System 1 (quick intuition) and System 2 (slow rationality).
System 1 is our intuitive response, which is able to process information quickly, provide immediate feedback unconsciously and quickly, rely on emotions, memories and experiences, and reflect on investing in a stock that people hear from a friend at a party recommend, and they tend to get excited and want to buy it immediately.
System 2 requires more time and energy, in-depth thinking and analysis, which is reflected in the investment that investors need to gather more information before making decisions, such as the company's financial statements, industry trends, and you will also consider macroeconomic factors such as interest rates, inflation, economic cycles, etc.
Cognitive biases that can arise when system 1 processes information, which can lead to errors in our decision-making process.
However, by applying the careful thinking of System 2, we can correct these biases and improve the accuracy of decision-making.
The dividend low volatility strategy is an important tool to help us humans use System 2 more easily, it reduces the number of decisions as much as possible, and improves the winning rate of decisions, after all, investment is a long-distance race, and sometimes the current "slow", superimposed on the compound interest brought by long-term holding, is "fast".
For investors who do not have the time and energy to track individual stocks with high intensity, products such as low-volatility 50 ETF (515450) that closely track the underlying index and pursue tracking difference and tracking error minimization can keep up with the income during the rising market period, and the defense is in place when the market is more difficult, which is a relatively rare product that can meet the needs of diversification.
-END-