There are various signs that the characteristics of the bottom of the A-share market have become more and more obvious in the near future. Industry insiders pointed out that the current market has entered the value investment area. From a medium to long-term perspective, China's economic recovery prospects and high-quality development trends have laid the foundation for the long-term investment value of China's capital market.
Bottom features emerge
Since 2023, the overall performance of the A-share market has been poor. As of the close on June 2, since May, the Shanghai Composite Index, Shenzhen Component Index and ChiNext Index have fallen by 2.80%, 3.00% and 3.93% respectively. Many individual stocks have experienced deep declines, and the market sentiment is relatively depressed. However, multiple indicators show that the bottom characteristics of the A-share market are emerging.
Judging from the market transactions and turnover, since April this year, the transaction value of A-shares has been declining from the highest level of 1.2 trillion yuan to the lowest level of about 770 billion yuan, and has gradually recovered to 900 billion yuan. Above, the turnover rate rose from the lowest point of 2.05% to the current 2.51%.
Judging from the level of equity risk premium, the stock and bond market has recently experienced a significant "seesaw" effect, equity assets have corrected, and the Shanghai Composite Index, ChiNext Index and other indices have fallen. At the same time, the domestic risk-free interest rate fell. On May 29, the ten-year maturity yield fell below 2.7%, and the interest rate level hit a new low recently. The equity risk premium is gradually rising and approaching the extreme value area. As of May 29, the equity risk premium of the CSI 300 Index was 5.79%, which is at the 82% quantile since 2005, which means that equity assets have a relatively high cost performance .
The fund issuance market is falling into a "freezing point." According to Wind statistics, calculated according to the subscription deadline, in April and May this year, the issuance shares of new funds were 85.684 billion and 62.951 billion respectively, falling below 100 billion for two consecutive months. The shares were 304 million and 459 million, respectively, and the average issuance shares of hybrid funds were 731 million and 394 million, both at the low point in recent years. Historical experience shows that when stock funds and hybrid funds are least popular, their allocation value is often high. The "freezing point" of fund issuance is also one of the signals that the market may bottom out to a certain extent.
In addition, the recent trend of funds borrowing through stock ETFs to "buy more and more as they fall" is also very obvious. Wind statistics show that the share of stock ETFs in the entire market increased by 48.570 billion shares in April, and a further increase of 74.057 billion shares in May. Among the broad-based ETFs, those with more share growth in May were mainly index ETFs such as the Science and Technology Innovation 50 and ChiNext 50. Among the industry themes, products including medical care, semiconductors, and brokerages increased their share more.
Since the beginning of this year, the performance of A shares has been weaker than that of the global capital market, which to a certain extent has also brought opportunities for market recovery. He said that there is often a saying in the A-share market that "the five are poor, the six are the best, and the seven are turning over." It can be said that the market has basically passed the most difficult period. signs of recovery.
Hong Kong United Securities said that from the perspective of valuation and stock-bond ratio, the current A-shares are likely to be in the bottom range. In terms of valuation, the P/E ratios of major A-share indexes are below the historical median, among which the P/E ratios of the CSI 300, CSI 1000 and ChiNext Index are at the historical 36%, 30% and 4% quantile levels respectively. In addition, Wind Quan A's stock-bond yield spread and risk premium also show that the price/performance ratio of A-shares is gradually emerging.
Statistics show that as of the close of June 2, calculated according to the overall method, the price-earnings ratio (TTM) of Shanghai A-shares was 13.71 times, that of Shenzhen A-shares was 37.58 times, that of ChiNext was 50.20 times, and that of CSI 300 The price-to-earnings ratio is 11.85 times, both of which are at the low level since 2019. From a vertical perspective, it has certain valuation advantages. In terms of horizontal comparison, the research of China National Finance Securities shows that the median PE (TTM) of Wind All A is 17.94 times, which is located at the quantile level of 49.20% since 2010. The median PE (TTM) of CSI 300 is 12.34 times, lower than the Dow Jones Industrial Index (16.51 times), S&P 500 (18.48 times), Nikkei 225 (19.64 times) and other major global indexes, also has a certain valuation advantage.
The flow of northbound funds under the interconnection mechanism also reflects that the continuous increase in the allocation of global capital to A shares is still a long-term trend. Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said a few days ago that since the beginning of this year, with the overall recovery and improvement of the Chinese economy, foreign capital has continued to flow into A-shares. From January to May, the net inflow through Shanghai and Shenzhen Stock Connect reached 170 billion yuan. In the past five years, the market value of ChiNext stocks held by foreign capital through QFII/RQFII and Shenzhen Stock Connect has increased by more than 11 times.
Statistics show that despite the impact of short-term market fluctuations, the net outflow of northbound funds in April and May was 4.553 billion yuan and 12.137 billion yuan respectively, but it has still maintained a net inflow of 176.031 billion yuan since the beginning of this year. Since its opening, the net inflow of northbound capital under the interconnection mechanism has reached 1900.629 billion yuan.
The economic recovery will continue to improve
The prospect of China's sustained economic recovery and high-quality development provides a basis for the medium and long-term investment value of the A-share market.
The executive meeting of the State Council held a few days ago pointed out that since the beginning of this year, my country's economic operation has achieved a good start, but the foundation for economic recovery is not yet solid. We must put the creation of a market-oriented, legalized, and internationalized business environment in an important position to further stabilize social expectations. Boost confidence in development, stimulate market vitality, and promote continuous economic recovery.
At the same time, the World Bank, the International Monetary Fund and other international organizations and institutions have recently raised their expectations for China's economic growth this year. The "World Economic Situation and Prospects" report released by the United Nations in May raised China's economic growth forecast in 2023 from 4.8% at the beginning of the year to 5.3%, demonstrating confidence in China's economic development prospects. In addition, foreign-funded institutions including HSBC and JPMorgan Chase have also raised their expectations for China's economic growth. The continued recovery of China's economy has become a general consensus among foreign-funded institutions.
"Now the market has entered the area of value investment." Li Huiyong, research director of Changjiang Pension, told reporters that from a macro and medium point of view, although there are still some differences in the market, with the continuous efforts of policies, China's economy The certainty of its own repair trend is constantly increasing. At the same time, the new economy represented by AI and new energy is continuously injecting impetus into the high-quality development of the Chinese economy. Therefore, from a fundamental point of view, there is no need to be pessimistic about the current market . From the perspective of corporate profitability, he pointed out that the first quarter is likely to be the bottom, and the second quarter and the second half of the year will improve significantly, further enhancing investor confidence. In addition, from the perspective of the external environment, the Fed's interest rate hike is gradually coming to an end and the debt ceiling crisis has eased, which has also eliminated some external uncertainties in the A-share market.
Hong Kong Union Securities stated that some previous economic data showed that the current domestic economy is still in the early stage of recovery, and it is expected that the "steady growth" policy will continue to exert efforts to promote further economic recovery. On the whole, after the volatile correction in May, the risks of some varieties with excessively high and fast increases have been relatively fully released. my country's economic operation has achieved a good start this year, but the foundation for economic recovery is still unstable. In the future, we will focus on the needs of enterprises and accelerate the introduction of highly targeted and high-value policy measures in batches.