A-share spring market duet: domestic investment chooses to grow, and foreign capital buys white horses

Liquidity is loose, Sino-US trade conflict eased, foreign capital continued to flow in, A shares are entering the repair stage of oversold rebound, it is too early to talk about the bull market, monetary policy has done what can not be done, the future also depends on whether fiscal policy and industrial policy can be forced, whether the profitability of enterprises can be improved, this is the foundation of the stock market to continue to improve

"Caijing" reporter Wu Haishan Guo Nan 丨 Wen Lu Ling 丨 editor

As the bottom performing market in the global stock market in 2018, A-shares ushered in a deep "V" rally in 2019, and the Shanghai Composite Index rose more than 300 points in just over a month after hitting a low of 2440.91 on January 4. After the Spring Festival, A shares are full of spring.

Most market views believe that liquidity is loose, the Sino-US trade conflict has eased, foreign capital continues to flow in, and A shares are entering the repair stage of oversold rebound.

There are radical views that the bull market is at the beginning of the bull market, but some investors say that they are now close to the highs of the rally.

Shao Yu, chief economist of Orient Securities, believes that it is too early to talk about the bull market, monetary policy has done everything that can be done and cannot be done, and the future also depends on whether fiscal policy and industrial policy can be exerted, and whether the profitability of enterprises can be improved, which is the foundation for the stock market to continue to improve.

It's too early to talk about a bull market

After the beginning of the year, A shares continued to rise in the momentum before the Spring Festival. As of February 20, the 2019 stock index opened well. The Shanghai Composite Index rose by 10.72%, the Shenzhen Composite Index rose by 17.04%, and the ChiNext Index rose by 12.62%.

Liu Chenming, chief strategist of Tianfeng Securities, told the Caijing reporter: "Tianliang Social Finance has alleviated the market's overly pessimistic expectations for the economy and performance, and the market continues to be in a window period of risk appetite improvement and valuation repair, which is different from the stage when foreign capital inflows dominate the white horse style in January. Regarding the long-term trend, focus on M1, which means that companies start to make money or financing begins to increase. ”

Zhang Yulong, chief strategist of CITIC Construction Investment, said in the report "The Starting Point of the Bull Market" on February 18 that on the one hand, the increase in the scale of social financing can be seen as the starting point of wide credit, and with the subsequent improvement of social financing structure and profit improvement, economic recovery will be seen in the third quarter; on the other hand, the Sino-US trade conflict is gradually easing, and the conflict in 2018 is different, and in 2019, it will continue to make up for differences and move towards republicanism.

For the adjustment of two consecutive days after the sharp rise of A shares on February 18, Zhang Yulong also has a clear view: "It is difficult to buy bulls to turn back, and it has been expected to change hands, and it is recommended that investors comprehensively improve their positions during the pullback process." ”

"The current performance of A shares can be said to be a repair of the oversold rebound, the end of last year was indeed oversold, with the improvement of all aspects, whether it is economic policy, monetary policy, Sino-US trade, etc., everyone's psychological expectations are developing in a good direction, risk appetite has improved, coupled with the entry of foreign capital, the repair is very reasonable." A large public fund manager told Caijing.

"This rally is close to the end." A large private equity investment director told Caijing reporters.

In Shao Yu's view, there are two main reasons for the stock market to improve, on the one hand, the central bank has increased its currency investment in the financial market, M2 has bottomed out, accompanied by the Fed's suspension of interest rate hikes, the global stock market has rebounded, liquidity is an important driver of risk assets; on the other hand, the Sino-US trade conflict has eased, the official statement is more moderate, and may be properly resolved this year, so the uncertainty caused by the trade conflict is dissipating.

Regarding the future trend of the market, Shao Yu said: "It is too early to mention the bull market, in addition to liquidity, we also need to observe the changes in fundamentals, monetary policy has done what can not be done, the future also depends on whether fiscal policy and industrial policy can be forced, whether corporate profits can be improved, which is the foundation for the future stock market to continue to improve." ”

Foreign capital is the biggest winner?

In this round of A-share rally, while some fund managers are busy making up positions, other fund managers may be sitting and counting money. Zhou Wenqun, A-share fund manager of Fidelity International, is one of them.

A month ago, Zhou Wenqun told the "Finance" reporter: "What I advocate is a bottom-up stock selection, macro timing operations are relatively small, preference for high-quality companies, basically full positions." Although opening a position at a certain time may reduce costs, it is also easy to miss the big rise when the inflection point comes. Zhou Wenqun just grasped this inflection point.

The influx of foreign capital like Fidelity International is seen as a factor in driving A-share listings. On February 19, the total amount of funds going north through shanghai-Hong Kong stock connect was 1.89 billion yuan. Since the beginning of this year, the total inflow of funds from the north has exceeded 100 billion yuan.

If there are no surprises, the inclusion factor of A-shares in the MSCI Emerging Markets Index in 2019 is planned to expand from 5% to 20%. At the same time, starting in June, the FTSE Russell Index will determine the inclusion of A-shares in its index. S&P Dow Jones also announced the inclusion of A-shares in its associated six indices. These actions will bring about a stable flow of foreign capital into A-shares.

Zhou Wenqun said that the valuation of A-shares as a whole is basically close to the lows of the past 2014-2015 from a historical point of view. In contrast, the global average price-earnings ratio is about 13 times, China is 9.8 times, the earnings growth rate is double digits, and the attractiveness of A-shares is relatively large in the horizontal ratio. Zhang Yuxiang, fund manager of the Quantitative and Derivatives Investment Department of Penghua Fund, also said that from the perspective of valuation, the valuation of the ChiNext index is in a very low value range, which has a strong investment value.

However, foreign capital, when entering the Chinese stock market, also has certain characteristics, such as foreign capital is basically concentrated in index constituent stocks, big white horse stocks, positions and transactions are very concentrated.

A researcher at a foreign-funded institution who specializes in tracking Chinese stocks told Caijing that in 2018, a stock found that foreign capital accounted for 18% of the annual transactions. The Shenzhen Stock Exchange also issued an announcement that the foreign shareholding of the two stocks has reached the upper limit of 30%. According to the current regulations, the holding of foreign capital in a single stock cannot exceed 30%.

Morgan Stanley predicts that foreign capital inflows into A-shares in 2019 will be about 70 billion yuan to 125 billion yuan. However, Morgan Stanley chief strategist Wang Ying told the "Finance" reporter: "Although 2019 is a record year, from the perspective of volume, it is only equivalent to 1% to 2% of the entire market value, which is equivalent to 1-2 days of daily trading volume, so relying only on foreign capital is not the power to make A shares rise." ”

Wang Ying specifically mentioned two data changes, one is non-financial corporate loans and the other is net corporate bond issuance. January data showed that non-financial institutions saw more than 40 percent growth and corporate debt 300 percent growth. Wang Ying said: "In the case of the overall poor liquidity of enterprises in 2018, the credit scarcity of enterprises is particularly obvious, and these two data show that the credit and liquidity of enterprises have improved, which is one of the reasons why we continue to be optimistic about the A-share market." ”

For the 2019 trend of A-shares, Gao Ting, chief strategist of UBS Securities, set the target of the CSI 300 Index at 3800 points at the end of 2019, and Wang Ying's forecast was 3650 points. As of February 20, the CSI 300 index was 3451.93 points.