Yin Zhongzhong: Why is the stock market so deeply differentiated?

Zhongxin Jingwei client April 2, 2016 Title: "Yin Zhongzhong: Why is the stock market seriously differentiated?" 》

　　Author Yin Zhongzhong (Senior Research Fellow, National Laboratory for Finance and Development)

　　Looking back at 2020, the biggest feature of the stock market is sharp differentiation, and the market has an image statement - "beautiful 100, miserable 3000", to the effect that there are 100 stocks that are very strong, but the remaining 3,000 stocks have experienced serious declines, which to some extent illustrates the characteristics of this market. Why is the market fragmented? What are the trends ahead?

　　As can be seen from the overall operation of the market, the major indexes of the stock markets of most countries in the world will rise in 2020, but there are also some countries whose stock indexes are falling, and the stock markets of China and the United States are the best performing. However, from different quarters to different quarters, the Chinese stock market has seen a sharp decline in the first quarter, which is well known to be due to the impact of the new crown pneumonia epidemic. The stock index ended in decline in the first quarter, but as the epidemic was gradually controlled, and more importantly, monetary and fiscal stimulus policies were gradually introduced, and the stock market began to rise and recover in the second quarter. However, it is also up, and the rise in the second quarter is different from the third and fourth quarters. In the second quarter, technology stocks and growth stocks rose significantly stronger than large-cap blue-chip stocks, but from the third quarter onwards, the market's rise was dominated by blue-chip stocks, but the previously active technology stocks and small and medium-sized market value growth stocks weakened, and the trend of divergence between blue-chip stocks and small and medium-sized market value stocks was strengthened in the fourth quarter.

　　From the perspective of market trends, the Shanghai 50 Index and the CSI 500 Index, the two indexes before the third quarter, are following the same trend, there is no obvious differentiation, but from the second half of 2020, there has been a growing trend of "horn mouth", that is, there has been a serious differentiation between small and medium-sized market value stocks and blue-chip stocks. If the stock market is divided into 8 groups according to the difference in market value, of which the two groups with the largest market value have 59 stocks with a market value of more than 200 billion yuan, the average increase in 2020 is close to 70%, and the median increase is about 40%; there are 67 stocks with a market value between 100 billion yuan and 200 billion yuan, with an average increase of nearly 80% and a median increase of more than 60%. In the three groups with relatively small market capitalization, there are more than 500 listed companies with a market value between 10 billion yuan and 20 billion yuan, with an average increase of only about 34%, which is significantly lower than that of the group with a relatively large market value; the listed companies with a market value of less than 10 billion yuan have basically not risen, and there are more than 1700 companies with a market value of less than 5 billion yuan, and their average increase and median increase are in the negative range. This can be seen in the law of stock price differentiation, that is, blue chips rise, and small and medium-sized market value stocks generally fall.

　　There are two reasons for the divergence of stock prices, the first is because the acceleration of new stock issuance has led to the depreciation of "shell value". Because of the rapid increase in new ipOs in 2020, the time for the proposed listed company to wait for issuance will be shortened, and the corresponding value will depreciate, which is the logical relationship between the decline of most small and medium-sized market value stocks.

　　In addition, there is another logical relationship that cannot be ignored, that is, the financing of the fund market has increased on a large scale. In order to hedge the impact of the rapid expansion of ipipos on the market, the regulatory authorities have deliberately increased the speed of issuance of funds. The rapid increase in fund issuance makes the savings funds quickly transfer to the stock market, but there is a clear "Matthew effect" in the fund issuance and fund raising, and the well-known fund management company or fund manager can get more full recognition from investors, while the small fund management company is very difficult to raise funds, resulting in the concentration of funds to the head fund manager. Large-scale funds generally tend to buy blue-chip stocks, and large-scale funds have emerged in a concentrated manner, forming a so-called fund "group" investment, which has further exacerbated market differentiation.

　　A brief review of the trend of various industries in the market, we can see that the hot spots in the market in the past two years are actually constantly rotating and changing, but in the process of change, some industries are relatively stable, that is, the so-called large consumer stocks, which have been at the forefront of the hot list for two consecutive years. Among them, the most prominent performance is liquor, and the winemaking industry is "thriving". Judging from the trend of valuation, the valuation of the liquor industry has reached the "ceiling" of history.

　　And the real estate industry, the current policy environment has undergone relatively large changes, the intensity of policy regulation is gradually increasing, but in 2020 the real estate industry still achieved positive growth, whether it is the sales area of new houses, or the sales amount is very beyond expectations, but at the same time, in the stock market, the Shenwan real estate industry index fell by 9.90% throughout the year, the largest decline in all industries, indicating that the market's expectations for this industry are pessimistic.

　　The first, most important and most sensitive factor in the outlook for the market in 2021 is monetary policy. From the history of the stock market, there is no doubt that every monetary easing stimulates the rise of the stock market. However, it must be noted that whenever the normalization process after the easing means that the stock market will have a long downward process, so this round of the stock market should pay special attention to the direction of monetary policy. Investors should pay attention to China's price index at the same time, but also pay attention to the US price index, if the US price index exceeds expectations, the Fed will also face a monetary policy shift, which will have a greater impact on global capital flows.

　　Second, savings money is accelerating into the stock market, so be wary of a sharp rise and fall in the market.

　　Third, the reform of the registration system will profoundly change the ecology of the stock market. According to the logic of the past year, the registration system must be completed, so the differentiation of the market will continue. However, if there is a huge resistance or risk from the market, the strength of this policy will be adjusted according to the situation. In my opinion, the pressure from the registration system from the market has emerged at the moment, for the prediction of the future market style, if in the past it was blue chip stocks rising, then the decline in blue chips in 2021 will be a high probability event, so small and medium-sized market value growth stocks are expected to obtain higher market returns than blue chips in 2021. (Zhongxin Jingwei APP)

　　(The views in this article are for reference only and do not constitute investment advice, investment is risky, and you need to be cautious when entering the market.) )

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