**: Xun Ce.
Core conclusion: Looking at 2024 with reverse thinking, the three potential expectation differences are worth paying attention to. Expected difference 1: The index amplitude is expected to amplify next year, and the market may get rid of the low and weak ** pattern and return to the upward trend. Expected difference 2: **The industry that breaks through to the upward may come from the financial weighted sector, and pay attention to the phased performance brought by policy catalysis. Expected difference three: the performance of the white horse growth in the upward period is superior, and the fundamentals may hope to support the market style from the "dumbbell"** to the growth of the white horse.
At the end of the year and the beginning of the year, the trend of the A** market in 2024 has become a hot topic of discussion in the market, and some investors are worried that the economic and market expectations for next year will still be inelastic. For the 24-year market outlook, we have made a detailed analysis in our annual strategy report "Breaking Dawn - 2024 A-share Outlook - 20231208". Based on this, this article further re-examines the investment outlook for 24 years with contrarian thinking in response to the current market hot spots, which may reveal more possibilities.
1.The market continues to operate at low volatility in 2024
Some investors believe that the market may weaken in 2024**. Looking back over the past year, the market has weakened again in 2023 after a weaker 2022**, forming a significant gap with the general optimistic expectations at the beginning of the year. In fact, the formation process of the market bottom in this round is indeed more complicated. Referring to historical experience, the general policy bottom first appeared at the end of the adjustment of the a** field, and then with the active policy to promote the economy and the fundamentals to stabilize and rebound, marking the arrival of the bottom of the performance, in this process there are two forces wrestling with the favorable policy and the downward fundamentals, so there is a market bottom between the bottom of the policy and the bottom of the performance. For this round of situation, we believe that 22 04 A-shares have been in the range of the bottom of the policy as a whole, but on the one hand, the domestic economy has been zigzag after the epidemic, the repair of macro and micro fundamentals has been significantly extended, and the cumulative net profit attributable to the parent of all A-shares in 23Q3 has been -2 year-on-year9%, which has not yet returned to positive growth;On the other hand, the overseas dollar index and U.S. bond interest rates have risen many times, geopolitical conflicts have increased, and internal and external disturbances have intertwined, resulting in a more complex bottom pattern of A-shares.
Looking forward to 2024, some investors believe that it is still difficult for the fundamentals to achieve a rapid recovery in the context of no obvious increase in policy, and the corresponding market may still be weak*** similar to the first half of 2012, after the policy bottom appeared, the fundamentals did not reverse rapidly, and then the broad-based index point hit a new low at the end of 2012. According to the current wind consensus forecast, the market expects the domestic real GDP to grow by 5 year-on-year in 240%；At the micro profit level, according to the consensus expectation of Tonglian, the market expects the year-on-year growth rate of net profit attributable to the parent company in 24 years to be 73%, that is, the market is more modest in the expectation of next year's performance recovery, so the expectation of 24 years** is cautious.
If you look at it from the perspective of amplitude, the market amplitude in 24 years may be amplified. So from the perspective of reverse thinking, is it possible for the market to get out of the weak ** in the future?In fact, from the perspective of amplitude, the operation of ** has been like a pendulum for a long time, and its fluctuations have the operation law of mean reversion. Here we measure the amplitude of the index by the highest relative lowest price increase in the past 12 months, and use the historical mean or median after excluding extreme values to measure the pivot level of the amplitude, which historical data shows that the index amplitude basically fluctuates up and down around the pivot (as shown in Figures 3 and 4). At present, the amplitude of A-shares has reached a historical low, and the Shanghai Composite Index (CSI 300) has a rolling one-year amplitude of 169%（23.7%), close to a 14-year low of 150%（19.7%), which is significantly lower than the historical pivot level of 306%（34.4%）。Drawing on historical experience, low volatility is not the norm, the future amplitude is expected to return to the center, referring to the 14-year situation, the catalyst for the amplitude expansion or from the policy, next year need to pay close attention to the scale and strength of the policy, such as debt measures and the "three major projects".
From the perspective of valuation and asset price comparison indicators, A-shares are cost-effective, that is, they have greater upward elasticity. From the perspective of valuation, as of 23 12 21 (the same below), the current market valuation level is relatively close to the historical bottom, and the PE (TTM) of all A-shares is 163 times, at the 24% quantile from high to low since 05. From the perspective of the price comparison index of major types of assets, the current risk premium rate of A-shares is 35%, which is already higher than the mean since 05 + 1 standard deviation (3-year rolling);The ratio of A-shares to bonds is 088, which has reached the average of +2 times the standard deviation (3-year rolling) since 05, close to the level at the end of October last year, which shows that the market risk appetite has bottomed. From multiple perspectives, the current bottom area of A-shares has been relatively solid, and the cost performance is highlighted. Combined with the above discussion of next year's amplitude, we have reason to believe that under the dual catalysis of policy and fundamentals, the amplitude is expected to be amplified next year, and there is a possibility of surprises.
2.2024 financial sector is difficult to see investment opportunities?
Some investors expect that the big financial sector may not see opportunities in 24 years. In addition to market trends, the big financial sector is also the focus of heated discussions in the market. In the first half of 23, under the catalysis of the theme of "China Special Valuation", some financial sectors of A-shares ushered in a more obvious ***, but since then, with the twists and turns of economic recovery, the market's expectations for the macro environment have continued to weaken, and the risks of real estate and local debt have suppressed the sentiment of related sectors, resulting in pressure on the valuation of large financial sectors, such as the current (as of 23 12 21, the same below) bank PB (LF) is only 042 times, 13 years since 00% quantile, ** is 116 times, 25% quantile. Looking ahead, the market is still worried about the progress of real estate risk clearance and debt reduction. At present, real estate-related data is still on the downside, and the current round of real estate downward cycle began in mid-2021, and the current housing prices in China have fallen from a high point for more than two years. Real estate accounts for a high proportion of China's economy, and the GDP of real estate chain-related industries accounts for 34 in 22 yearsThe importance of 1% to China's economy is self-evident, so a sustained weakening of real estate will not only put pressure on economic growth, but also be detrimental to the stability of the financial system. In addition, the scale of local ** debt is still large, and the market is worried that this may lead to risks, which in turn will increase the risk of banks. As the real estate problem and local debt problem have not yet seen a significant turnaround, the market expects that the risks faced by the large financial sector may still outweigh the opportunities next year.
Under the policy increase, the big financial sector in 24 years may see hope in the changes. So is there likely to be an investment opportunity in the big financial sector in 2024?As mentioned above, from the perspective of amplitude, the upward elasticity of the market may increase next year, and if this elasticity increases, the driving force behind it may be the big finance of the weighted sector. As of 23 12 21, the weights of the CSI 300 All A Zhongda financial sector are 216%/11.8%, accounting for 298%/17.7%。As we mentioned above, the macro economy in 24 years may recover moderately, so it is difficult for big finance to have fundamental-driven sustained opportunities, and it is necessary to pay close attention to the phased performance driven by policies. As the risk prevention policy continues to increase, big finance may find hope in the changing situation. The recent economic work conference set a positive tone, and a series of positive macro policies to prevent risks, stabilize expectations and stabilize growth are expected to be introduced in the future: in terms of banks, the first financial work conference proposed to "optimize the debt structure of local bonds", and the recent special refinancing bond issuance has gradually landed, and the current scale has exceeded one trillion yuan, focusing on areas with heavy debt burdens for stock debt replacement. In addition to debt swaps, other debt swaps may be introduced in the future, which will help to promote the valuation repair of the undervalued bank weighted sector. In terms of real estate, the ** Economic Work Conference pointed out that the real estate problem was actively and steadily resolved, and then on December 14, Beijing and Shanghai successively adjusted and optimized a number of real estate policies, including reducing the proportion of down payments for house purchases, reducing mortgage interest rates, etc., if the relevant policies to stabilize real estate continue to land in the future, it will also help the repair of the banking sector. In terms of brokers, the first financial work conference proposed to "activate the capital market" and "cultivate first-class investment banks and investment institutions", and in the future, if the relevant fields mentioned in the meeting are gradually introduced to promote the recovery of trading, the performance and future development of brokerages are expected to benefit, and related industries are also expected to usher in phased opportunities.
3.Can the 2024 "dumbbell" strategy continue?Some investors expect that the weak recovery and the stock capital game will continue in 24 years, and the dumbbell type ** may continue. Looking back on the characteristics of the market style this year, it can be found that different from the track leader and white horse growth that has prevailed in recent years, this year's market ** has a dumbbell performance with two dominant ends, and the switch of market style has aroused greater attention in the market. Looking back at the A-share structure since 2023, the style presents a dumbbell performance with the dominance of "high dividend + technology growth", and the CSI Dividend Total Return Index has risen by 6 year-to-date (as of 23 12 21).0%, and the AI index is 386%, which is significantly higher than the -7 of Wind All A in the same period1%。In fact, the dominance of high-dividend strategies and technology-themed investments in 2023 reflects the pattern of economic twists and turns and capital stock games. At present, some investors expect that the road to macro and micro fundamental recovery may still be tortuous next year, and it is difficult to significantly improve the problem of weak incremental funds of domestic and foreign capital. At present, the outflow of foreign capital is still continuing, as of 23 12 22, the largest net outflow since August has reached 210.2 billion yuan, and the cumulative net inflow of northbound funds is only 25 billion yuan, which is the second lowest value since the opening of the Mainland-Hong Kong Stock Connect in 2014On the other hand, the public offering is still low, as of 23 12 21, this year's partial stock ** issuance scale of 302.4 billion yuan, the lowest value since 2015. If the economy continues to recover weakly next year and the background of the capital stock game remains unchanged, the market structure may continue to have a dumbbell pattern with two ends dominating.
The rebound in fundamentals in 24 years is the driving force that supports the growth and repair of White Horse. We think from the opposite direction, the driving force for the reversal of the market style is in the **?We pointed out in "Dawn - 2024 A-share Outlook-20231208" that with the continuous development of the steady growth policy and the superimposed inventory cycle entering the replenishment stage, the domestic economic operation is expected to further improve next year, A-share earnings will continue to recover, and the growth sector of Baima has gradually become cost-effective. At present, the valuation of the white horse growth portfolio represented by the first heavy stocks has been at a historically low level, and the performance of the white horse growth sector in the A-share earnings upward cycle is better based on the historical white horse growth sector, so the white horse growth is expected to be more dominant in performance during the 24-year performance upward period, and the market style may be expected to gradually move closer to the white horse growth from the "two ends" of high dividend + technology growth.
In terms of subdivisions, Baima attaches great importance to hard technology manufacturing represented by electronics in its growth. **Emphasizing the need to actively cultivate strategic emerging industries and future industries, and accelerate the formation of new quality productivity, we believe that the information technology industry is expected to become a leading field for the development of new quality productivity, focusing on the following three areas: First, the semiconductor cycle rebound in the context of electronics, we expect that the growth rate of net profit attributable to the parent of the electronics industry will reach 30% in 24 years. According to the "Development of China's Data Center Industry in 2023" by the China General Service Infrastructure Industry Research Institute, it is expected that the compound growth rate of China's data center industry will reach about 25% during the "14th Five-Year Plan" period. Third, the application of AI will be accelerated under policy support and technological breakthroughs, according to the data of Huajing Intelligence Network, it is expected that the CAGR of China's intelligent networked vehicle market will be 23 in 22-25 years2%。White horses should also pay attention to medicine when they are growing. At present, the valuation and allocation of the pharmaceutical and biological sector are still at a low level. Looking ahead, the impact of medical anti-corruption on the industry has gradually passed, and in the medium term, China's aging population is deepening, medical demand will continue to increase, the valuation of medicine and the position of public offering institutions are expected to be balanced in the future, combined with industry analysts, the growth rate of net profit attributable to the parent of medicine in 24 years is expected to reach 15%, and the subdivision of sub-fields can focus on innovative drugs Blood products and high-value consumables, and the net profit attributable to the parent in 24 years is expected to reach 30% 15% 15% respectively.
Risk Warning:The progress of the implementation of the steady growth policy is less than expected, and the domestic economic recovery is less than expected.