CICC said that the market rose first and then fell today, which represents a difficult style change. The large-cap banking stocks in the market had already seen some changes last Friday, rising sharply in heavy volume. The market opened on Monday morning and continued to rise, driven by financial and other weighted sectors. However, in the afternoon, the gains in financial stocks narrowed sharply. In particular, bank stocks rose by about 3% and closed at the end of the day. The average decline was more than 1%, which led to a significant correction in the blue chip index. From the market perspective, the market style continues to shift from growth to ultra-low valuation financial and cyclical sectors, but it is more tangled. Hong Kong stocks fell sharply under the energy and technology sectors. The decline in the energy sector may be related to media reports that the United States may continue to impose restrictions on some Chinese companies.
Three major reasons lead to poor style switching
CICC’s quick review pointed out that since August, the A-share market has been “balanced between old and new”, and the cycle has slightly outperformed the growth trend. The direction of style rebalancing is basically consistent with expectations, but the overall performance of the A-share market is weaker than expected, and the style conversion is more tangled.
Many investors have compared the recent rise in financial stocks with the fourth quarter of 2014. CICC believes that the style transition is not smooth and the two are not comparable. At the same time, it said that this There may be three major reasons behind this:
1. The investor structure of A-shares has become institutionalized in recent years: Our communication with investors shows that most institutional investors are not firmly interested in short-term opportunities, but pay more attention to those that can be seen. At the same time, due to the reduction in the proportion of retail investors, the partial pull-up of the cycle has obviously not attracted as much financial attention as before. This has resulted in the cycle-leading rise being obviously not as sharp as in previous market rotations.
2. Impact of policy tone: Recent policies have emphasized the "main gate" and "risk prevention". These policy tone make the market still have concerns about the impact of policy withdrawal next year, and the performance of cyclical sectors. There is some doubt about the sustainability.
3. Institutional risk bias has declined at the end of the year: After two consecutive years of structural bull markets and generally good institutional returns, market risk appetite has also been restrained, especially near the end of the year.
Institutional View
CICC believes that it is still necessary to stick to the bottom line of fundamentals and valuation and pay attention to the gradual changes in policies.
According to China’s recently released PMI data for November, manufacturing activities continue to improve, and recently released industrial enterprise profit data also show that corporate profits continue to recover; from a global perspective, recovery transactions may Still the general direction.
Taken together, CICC believes that China’s market recovery trading may still be the short-term main line, but the actual process may be more tangled, and we must beware of unexpected market fluctuations at the end of the year. Style conversion may also continue to be more tangled. The "balanced allocation of new and old" strategy is still applicable. It should firmly adhere to the fundamentals and bottom line of valuation amid market changes, and focus on factors such as low valuation and positive catalysts.
In the general direction, a few new economic fields that have seen a lot of adjustments recently can consider buying at low prices gradually; continue to pay attention to several directions: 1) automobiles, which are not highly valued in domestic consumption and whose prosperity is still improving, Home appliances, home furnishings, etc.; 2) Pay attention to the photovoltaic and new energy automobile industry chain, especially upstream raw materials such as lithium; 3) Low-cost chemical industry leaders, leading securities companies and insurance companies, etc. We will pay close attention to the tone of the Central Economic Work Conference in the future, pay attention to overseas epidemics and policy progress, Sino-US relations, China's growth and the pace of policy withdrawal to judge the short-term rhythm of the market.