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Haitong Strategy Yu Yugen: Why is A stock common "spike round bottom"? The current valuation is at the bottom of history

January 11, 2019 08:37
Author:Yu Yugen
source: Stock market decision

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Summary
At present, the valuation is at the bottom of history. Compared with the global and large-scale assets, A-shares have advantages and strategic optimism. The bottom of the arc is more complicated, and the policy has already appeared. The bottom of the market needs to improve the liquidity index of the liquidity, the reform tax cuts, the structural relaxation of the real estate policy, etc., and the tactics are pragmatic.

  in conclusion:1A shares have experienced 5 rounds of bull and bear cycles, and the history of the "spike round bottom". Time and space comparison is currently at the end of the fifth round of the bull and bear cycle. 2 The top tip is derived from a very high valuation, often exceeding the historical mean by 1-3 times the standard deviation. The bottom circle is derived from the continuous digesting of valuations and the repeated bottoming of profits, such as 02/1-05/6, 12/1-14/6 and so on. 3 The current valuation is at the bottom of history. Compared with global and large-scale assets, A-shares have advantages and strategic optimism. The bottom of the arc is more complicated, and the policy has already appeared. The bottom of the market needs to improve the liquidity index of the liquidity, the reform tax cuts, the structural relaxation of the real estate policy, etc., and the tactics are pragmatic.

Why is A stock common "spike round bottom"?

As the saying goes, "The disease is like a mountain, and the disease is like a silkworm." In the history of A shares, the phenomenon of "spikes and round bottoms" often appears. After the market peaked, the adjustment was very intense, and the process of grinding the bottom was very long. The history of the A-shares was often complicated, and there was a policy leading the market to lead the market.PerformanceThe bottom phenomenon. From a long-term perspective, the 16/1 Shanghai Composite Index has been in the bottom of the big shock since the 2638 points. From a short perspective, the big shock has bottomed out, and the policy has already appeared.

  1.Review: A-share common "spike round bottom"

  AThe stock has experienced five rounds of bull and bear cycles in history.We have always divided the market into three states: unilateral rise is defined as bull market, unilateral decline is defined as bear market, interval volatility is defined as shock market, and bull market is not only index increase but also incremental fund entry. Bear market not only falls with index theCash flowOut, the overall fluctuation of the index range in the shock city, the game of stock funds. Since the establishment of the Shanghai Stock Exchange in 1990, A shares have experienced five cycles of “bull-bear market-concussion city” cycle. The first round of bull markets entered the bear market on 1990/12-1993/2, 93/2-94/7, followed by a shock at 94/7-96/1. The second round of bull market is 1996/1-2001/6 (the middle contains 97/5-99/5 for 24 months of high shock), 01/6-02/1 is a bear market, 02/1-05/6 shock Bottom bottom, in which the 04/11-05/6 market experienced a last fall in the tail of the shocking bottom. The third round of bull market was in 2005/6-2007/10, and then entered the bear market on 07/10-08/10. After the market fell sharply, it did not experience the bottom shock, but it began to rise rapidly from October 28, 2008. The fourth round of the bull market was 2008/10-2009/8, followed by a high market volatility during 09/8-11/4, the market entered a bear market during 11/4-12/1, and the market fluctuated during the 12/1-14/6 period. Bottom. The fifth round of the bull market was 2014/7-2015/6. After the three rounds of the 15/6-16/1 period, the market was in a shocking bottoming stage from the 16/1 Shanghai Composite Index at 2638. Looking back at the market performance of the first four times since the bull market peak, the first round was 1993/2/16-1996/1/19, the Shanghai Composite Index fell 67% for 35 months; the second round was 2001/ 6/14-2005/6/6, a drop of 56%, lasted for 47 months; the third round was 2007/10/16-2008/10/18, a drop of 73% for 12 months; the fourth round was 2009/8/4-2013/6/26, a 47% decline, lasted for 46 months. Since the 2,618 points of the Shanghai Composite Index at the end of January 2016, the market has once again entered the mid- and long-term arc phase. This round of adjustment has been the largest decline since the 15/6/12 high point of 5178 points, and has fallen by 53% so far. It has lasted for about 42 months. The index decline and duration have been similar to the previous four rounds of adjustment, the market is already in the bottom of the fifth round of the cycle, see the report "Through the dark dawn - 2019 A-share investment strategy -20181209".

  ACommon stocks are "spikes and round bottoms".Looking back at the top and bottom of the cycle of 5 rounds of cattle, it is often the "spike round bottom." The bear market of the Shanghai Composite Index has a short period of time and a deep decline after the peak. The bear market in the five-round bull-bear cycle is about 10%, which is between 30% and 79%. In the bottom stage of the market, except for 2008, it has experienced a long-term grinding process. For example, the shocking bottoming stage of 94/7-96/1 lasted for 15 months, and 02/1-05/6 lasted for 40 months. 12/1-14/6 lasted for 31 months, and the shocking bottoming stage of 16/1 to the present also lasted for 35 months. Looking back at the background of the bear market bottoming of 998 points, 1664 points and 1849 points since 2000: the first time, in the 02/1-05/6 shock bottoming stage. After experiencing two rounds of decline from 2245 to 1330 on 01/6-02/1, the market entered a sideways volatility period of 1300 to 1780 in two years. In 2003-04, the macro and micro fundamentals improved, Hong Kong stocks opened the bull market, but after 2004, the economy showed signs of overheating. This led to the tightening of macroeconomic regulation and control policies after the 04th, the central bank raised interest rates by 04/10, and the economic growth rate fell again. The market began. Broken down. On April 29, 2005, the CSRC announced the launch of the pilot project of the share-trading reform, which triggered a market panic. The Shanghai Composite Index eventually fell to 998 points. Until 2005/6/6, the regulatory authorities frequently introduced favorable policies, and the macro and micro fundamentals gradually improved. The market gradually entered the burgeoning big bull market, rising from 998 points to 6124 points. The second time, the bear market background of 1664 in 2008 was: economic prosperity in 2007, inflation increased, resulting in the central bank continued to raise interest rates after March 2007 tighteningcurrencyAfter the policy and austerity policies continued to accumulate, they began to fall at 6124 on October 16, 2007. In the first half of 2008, domestic monetary policy continued to tighten. In the third quarter of 2008, the global financial crisis was overwhelming. Macroeconomics and corporate profits all fell rapidly. All A shares in 2008Net profitThe growth rate dropped from 49% in 2007 to -17% in 2008, ROE (TTM) fell from 15.7% to 11.9%, and the final index fell to 1664 points. After 4 trillion investment, 10 trillionCreditThe large-scale stimulus demand policy represented by the government pushed the economy to a bottom, and the stock market ushered in a bull market with a V-reversal, rising from 1664 points to 3,478 points. For the third time, at the end of the 12/1-14/6 phase, the macro economy slowed down.GDPThe growth rate dropped from 8.1% in 2012 to 7.5% in 2014Q2. The lowest point of this round of grinding stage appeared on June 25, 2013, which originated from the “money shortage” incident. The Shanghai Composite Index was the lowest at 1849 points. After that, it was grounded around 2000 points for one year, and in July of 14 years, it began to rise slowly. In November, the central bank officially lowered the loan benchmark.interest rateAfter the monetary policy turned loose, the market ushered in a round of liquidity-driven bull market, similar to 1996-2001.

  2.Cause: The disease is like a mountain, and the disease is like a silk

  The top point is due to the high valuation and the mismatch in valuation earnings. The so-called disease is like a mountain.As the saying goes, "The disease is like a mountain, and the disease is like a silkworm." The performance of A shares is similar. From the perspective of form, the market tends to be more spires and round bottoms. This is because the top of the market is sold by trend investors, and the bottom is often bought by value investors. Since the A-share market was relatively small before 2000 and the valuation was fluctuating, it is important to observe the A-share valuation of the four rounds of bull market since 2000. Since the A-share valuation center has moved down significantly after the 2008 financial crisis, we have observed the valuation of the peak of the bull market in the period before and after the 2008. During the period from 1995 to 2008, the total A-share PE (TTM, the same below) center was 41 times, the standard deviation was ±16; the PB (LF, the same below) center was 3.6 times, and the standard deviation was ±1.3. At the first round of the bull market at 2,045 points of 2001/6/14, the total A-share PE was 68 times and the PB was 5.3 times, both exceeding the valuation center by 1 standard deviation and PEG by 3.5 times (according to TTM net profit year-on-year). Speed ​​calculation, the same below). The second time is 6124 points on 2007/10/16, which corresponds to PE of 58 times and PB of 7.4 times. PE exceeds the valuation center by 1 times standard deviation, PB is close to the historical valuation center up to 3 times standard deviation, PEG is 1.2 times. After 2009, the overall valuation center of A shares moved down, the A-share PE center was 19 times, the standard deviation was ±6 times; the PB center was 2.2 times, and the standard deviation was ±0.6 times. The third round of bull market was 3478 points in 2009/8/4, which was 38 times for PE and 4 times for PB, both exceeding the historical valuation center by 3 times standard deviation and PEG 1.5 times. The culmination of the fourth bull market was 5178 points on 2015/6/15, which was 31 times for PE and 3.5 times for PB. Both of them exceeded the standard deviation of 2 times in 2009, and the PEG was 3.6 times.

  The bottom circle is derived from the continuous digesting of valuations and the repeated bottoming of profits.Looking back at the three market bottoming stages since 2000, except for 2008, the 02/1-05/6 and 12/1-14/6 two bottom stage markets all digested the valuation through long-term bottom shocks. On 02/1-05/6, the long-term bottoming of A-shares stemmed from concerns about the reduction of state-owned shares. On April 30, 2005, the China Securities Regulatory Commission officially launched the share-trading reform, causing market panic, and A-shares fell below the thousand-point mark. . The PE (TTM) and PB (LY) of all A shares continued to fall from 40 times and 3.2 times of 02/1 to 18 times and 1.65 times of the lowest of 05/6. On the other hand, it stems from the profitability of corporate W-type bottoming. From 2002 to the first half of 2004, the economic growth rate continued to rise. The net profit growth rate of all A shares rose from -17% in 2002Q2 to 47% in 04Q2. The ROE (TTM) also rose from 4.1% to 8.8% in the same period. However, after the inflation increased in 2004, the monetary policy tightened, the economic growth rate fell again, and corporate profits fell again. The net profit growth rate of all A shares fell from 47% in 04Q2 to -14% in 06Q1, and ROE (TTM) in the same period. 8.8% fell back to 7.4%. In the 12/1-14/6 phase, the market bottomed out from the A-share valuation center in the context of China's economic growth shift. From 2000 to 2011, China's real GDP growth rate center was 10.3%, and since 2012, China's real GDP growth rate has gradually decreased from 7.9% to 6.5% of 18Q3. From a profit perspective, from the period of 12Q1 to 14Q2, the growth rate of corporate net profit rebounded from -2% in 2012Q3, and maintained a small fluctuation between 8% and 14% in 2013-2014. However, the valuation continued to fall, and all A shares of PE (TTM) and PB (LY) fell from 13.2 times and 1.9 times to the lowest 11.5 times and 1.5 times of 2014/6. Even in 2008, under the strong policy background, the market bottoming has undergone a repetitive process, forming a micro-bottom. In October 2008, when the Shanghai Composite Index fell to 1664, the policy was overweight, and the 4 trillion investment plan was introduced. At the end of the policy, the index rebounded to 2100 points. However, after falling back to 1814, the bottom of the market, the main reason is that although the policy turning point appeared in this period, the policy effect has not yet appeared, and the fundamentals are still downward.Industrial added valueThe year-on-year growth rate continued to decline from 8.2% in 08/10 to 5.7% in 08/12, and the export growth rate fell from 24.6% to -2.9%.The total retail sales of social consumer goodsFrom 22% to 19%, the market is under pressure at this stage.

  3.Currently: repeatedly polishing the outsole

  16The shocking outsole in January is similar to 02-05, and is similar to the first half of 2005, similar to the fourth quarter of 2008.At present, the valuation of A shares is at the bottom of history. Compared with the bottom of the market in the past few years, the Shanghai Composite Index was 512 points on January 19, 1996, 998 points on June 6, 2005, and 1664 points on October 28, 2008. At 1849 on the 25th of the month, the top four A shares of PE (TTM, overall method, the same below) at the bottom of the market were 11.5-18.4 times, PB (LF, overall method, the same below) was 1.48-2.06 times, the previous low point SSE The 2,840 points (2019/1/4) of the KLCI is 13.2 times and 1.42 times respectively, which is already near the lower rail of the bottom area. From a long-term perspective, since 2638 points at the end of January 2016, the market has once again entered the stage of repeated bottoming. This round of market bottoming features is more like 2002-05, the fundamentals are W-shaped fluctuations, and the stock market needs to be solidified at the bottom of the fundamentals. Therefore, there are some W-shaped features in the index form. 2016-17 is similar to 2003-04, and since 2018, similar to the second quarter of 2004, the market began to construct the W-shaped right bottom in the process of making a profit. From a short perspective, it is similar to the first half of 2005, and similar to the fourth quarter of 2008. In the previous report, “Learning History: Policy Bottom”, the bottom of the market, “Bottom of Performance -20181028”, we analyzed that the historical bottom is very complicated, and the policy is leading the market at the bottom of the market. Looking back at the final stage of the market shocks of 02/1-05/6, the policy bottom is first, that is, in January 2005, the Ministry of Finance decided to adjust the stamp duty rate of securities transactions from 2‰ to 1‰, and the Shanghai Composite Index rebounded from 1200 points. Up to 1300 points, but on April 29, 2005, the China Securities Regulatory Commission launched the share-trading reform, and then appeared at the bottom of the market. On June 6, the Shanghai Composite Index bottomed out at 998 points, and the bottom line appeared in 06Q1. All A-shares returned to the mother's net profit. Accumulated year-on-year from the 06Q1 low of -14.0%. Looking back at the 1664-point bottoming process in 2008, the 1664 point of the Shanghai Composite Index on October 28 was the bottom of the policy. The background was that the central bank announced the interest rate cut on September 15, 2008, and the State Council Standing Committee meeting on November 5 launched the stimulus for the economy. The trillion investment plan. However, the index rebounded to 2,100 points and then fell back to 1814 points, which is the bottom of the market. The main reason is that although the policy turning point appeared in this period, the policy effect has not yet appeared, and the fundamentals are still downward. The final result is April 2009. This time, the policy has already appeared, that is, the Shanghai Composite Index is 2,449 points. The background is that the Central Political Bureau meeting proposed "six stables" on July 31, and the policy began to fine-tune. On October 31, the Politburo will add three more than the end of July. The content is “the downward pressure on the economy has increased”, “supporting the development of the private economy” and “promoting the healthy development of the financial market”. However, the market still needs to repeatedly bottom out, and the policy turning point appears, but the trend of corporate earnings deterioration remains unchanged, and the market is in a period of intertwined policy profit. The macro background of the A-shares in the next period of time is that the policy is not strong enough and the policy effects have not yet been reflected, which is not enough to resist the downward trend of the fundamentals, namely, “Through the Darkness to Dawn – 2019 A-Share Investment Strategy -20181209” The "dark period."

  Strategic optimism, tactical and pragmatic, waiting for the dawn signal.Looking forward to the mid-to-long term of A-shares, “Across the Dark and Dawn – 2019 A-Share Investment Strategy -20181209” analyzed that A-shares are at the end of the fifth round of the bear-bear cycle, strategically optimistic: horizontal comparison of global stock markets, A-shares More attractive, China's development of equity financing to support industrial upgrading, the allocation of resident assets will be biased towards the stock market. At present, the market policy has already appeared, and the bottom of the performance has not yet appeared. When can we see the bottom of the market? What is the signal that it appears? Looking back at the historical policy shift, the signal at the bottom of the market is that the policy has been implemented and it has begun to play a role in fundamentals. The important thing is the liquidity price index. Only when the actual financing cost of the enterprise declines can the enterprise actually promote the expansion of production, and the demand can pick up. The representative indicator is the weighted average loan.interest rateBroad-spectrum interest rates such as interest rates on loans and trust products. In addition,New creditThe increase in volume and M2 year-on-year growth rate reflects that the company has actually obtained funds for production and operation. In 2008, the market started to rise again from 1814 points to 3,478 points, mainly because the new RMB loans in December 2008 and January 2009 rose sharply to 770 billion and 1,620 billion, indicating that the fundamentals have not yet been reversed. However, the effects of the previous policy have begun to appear. On December 21, the Central Economic Work Conference was held, proposing that “the economy is facing downward pressure” and “the macro-policy should strengthen the counter-cyclical adjustment”, and the fiscal policy “implements a larger scale of tax reduction and fee reduction, and greatly increases local government special bonds. "Scale", monetary policy "stable monetary policy should be tight and moderate, and maintain a reasonable and sufficient liquidity", which is more positive than the previous "stable neutral" description. This shows that the macroeconomic policy in the future will be overweight. Waiting for further over-emphasis of future macroeconomic policies, such as interest rate cuts, tax cuts, and structural relaxation of real estate policies. If the monetary policy is further loosened, as the policy gradually falls, the liquidity-related volume and price indicators will eventually improve. In terms of tax reduction, such as the reduction of the VAT rate, it is expected to increase the net profit of A shares in 2019 by 0.5-0.9 percentage points year-on-year.

(Article source: stock market decision)

                (Editor: DF078)

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