Authors: Dong Zhongyun, Fu Yang, Wang Yuqian (Dong Zhongyun is a director of the China Chief Economist Forum and the chief economist of AVIC).
Summary:
Economic data released positive signals and supported the market upward. The growth rate of manufacturing investment in November 2023 will be higher than that in October, ranking 17th in the past 60 months (2021 is a two-year compound growth rate). The trend of upgrading China's manufacturing industry is more obvious, and the growth rate of high-tech manufacturing investment in the first 11 months of this year was +105%, significantly higher than the overall growth rate of manufacturing investment in the first 11 months +63%。From the perspective of specific industries, the cumulative growth rate of investment in emerging industries such as pharmaceutical manufacturing and aerospace from January to November was higher than that from January to October, and the growth rate of investment in automobile manufacturing, electrical machinery and equipment manufacturing industry also remained high. Looking ahead, after the December interest rate meeting, the Fed's interest rate hike cycle has ended, and it is further clear that the probability of another interest rate hike has been small. Under the soft landing of the U.S. economy and the improvement of international relations, the follow-up external demand is expected to gradually recover, which is conducive to stimulating the overall demand of the manufacturing industry. China's high-tech enterprises have a large development space, favorable policies will provide support, ** economic work conference proposed next year's nine key work, to scientific and technological innovation to lead the construction of a modern industrial system in the first place, further highlighting the important role of scientific and technological innovation in China's economic steady growth, structural adjustment, promote transformation, and achieve high-quality development. We believe that the digital economy, artificial intelligence, biomanufacturing, commercial aerospace, low-altitude economy and other related fields explicitly mentioned by the conference deserve special attention.
At the end of the year, with the intensive implementation of the steady growth policy, **style is expected to usher in valuation**, and the market trading style may return to equilibrium. We observe the rotation of A-share large and small caps through the ratio of the Shenwan Small Cap Index to the Shenwan ** Index, and a total of 6 style switches have occurred since 2010. Among them, the period of balance between the large and small cap style: December 2010 to January 2013 and July 2015 to December 2015, at this time, it is in the transition of bull and bear switching, and the market's expectations for fundamentals are still in the transition, and the volatility in the switch of large and small cap stocks is more violent, which is reflected in a period of more balanced style. Except for the equilibrium period, GDP growth slowed from 2010 to 2015, and the year-on-year PPI increased from July 7, 2011The 54% high fell back into negative territory and reversed the downward trend at the low** until January 2016, during which **stocks** were suppressed while this phase of web2The rapid development of mobile Internet in the 0 era, web30 The rise of decentralized technology supports the strength of small-cap stocks. The supply-side structural reform proposed in November 2015 guided the optimization of the industrial structure, driving the strengthening from January 2016 to January 2021. At present, the PB ratio of small cap to ** is much higher than 1 standard deviation and close to 2 times standard deviation. Real estate is deeply linked to the aggregate economy, and with the continuous efforts of policies, it is expected to bottom out and rebound. On December 20, the Ministry of Housing and Urban-Rural Development said that it would successively introduce supporting policies for the reuse of idle land, involving land, finance and taxation, finance, etc. On December 21, the National Housing and Urban-Rural Construction Work Conference systematically deployed the key tasks in 2024, and the Ministry of Housing and Urban-Rural Development said that it would make greater efforts to implement it. In addition, a number of state-owned banks and a number of national joint-stock banks will cut their deposit rates in the near future. This is the second time since September 1 that a number of large commercial banks have lowered deposit interest rates less than four months later, which will help increase the willingness of enterprises to invest and residents to consume, thereby promoting the activation of funds.
Investment Advice:
Counter-cyclical regulation has injected vitality into the market, and the actions of the active capital market have been implemented one after another, and we believe that there is still room for policy force. At present, the "extreme speculation" style is close to the extreme, and the market style may gradually return to equilibrium in the future. Historically, the Fed's monetary policy has turned loose and the domestic policy has also adopted a loose monetary policy, and the growth style has performed strongly. With the convergence of interest rate differentials between China and the United States, the current domestic monetary policy space may have been opened, in the context of the demand for easy money to easy credit transmission, domestic monetary policy is expected to increase easing, and the Federal Reserve is at the end of the interest rate hike cycle.
This week's market review
This week, the market as a whole**, the Shanghai Composite Index, the Shenzhen Component Index, the CSI 300, the STAR 50, the ChiNext Index, the CSI 500, and the CSI 1000 respectively**66%。In terms of industry style, the performance of the growth style this week was weak,**269%。From the perspective of industries, the performance of coal, power equipment and household appliances in Shenwan's first-class industry is stronger66%；The performance of media, computers, and social services was weak, respectively39%。In terms of market sentiment, market activity has decreased this week, with an average daily turnover of 71932.4 billion yuan, down 82.9 billion from last week8.8 billion yuan. In terms of valuation, the overall price-to-earnings ratio of A-shares is 16.43 times, down 1 from last week30%。Northbound funds showed a net outflow this week, with a net selling amount of 223.6 billion yuan.
Body
Economic data released positive signals and supported the market upward. In November 2023, the growth rate of manufacturing investment was +71%, +09pcts, driving the overall growth rate of fixed investment in November +46pcts。The growth rate of manufacturing investment in November was higher than that in October, ranking 17th in the past 60 months (2021 is a two-year compound growth rate). The trend of upgrading China's manufacturing industry is more obvious, and the growth rate of high-tech manufacturing investment in the first 11 months of this year was +105%, significantly higher than the overall growth rate of manufacturing investment in the first 11 months +63%。From the perspective of specific industries, the cumulative growth rate of investment in emerging industries such as pharmaceutical manufacturing and aerospace from January to November was higher than that from January to October, and the growth rate of investment in automobile manufacturing, electrical machinery and equipment manufacturing industry also remained high. Looking ahead, after the December interest rate meeting, the Fed's interest rate hike cycle has ended, and it is further clear that the probability of another interest rate hike has been small. Under the soft landing of the U.S. economy and the improvement of international relations, the follow-up external demand is expected to gradually recover, which is conducive to stimulating the overall demand of the manufacturing industry. China's high-tech enterprises have a large development space, favorable policies will provide support, ** economic work conference proposed next year's nine key work, to scientific and technological innovation to lead the construction of a modern industrial system in the first place, further highlighting the important role of scientific and technological innovation in China's economic steady growth, structural adjustment, promote transformation, and achieve high-quality development. We believe that the digital economy, artificial intelligence, biomanufacturing, commercial aerospace, low-altitude economy and other related fields explicitly mentioned by the conference deserve special attention.
At the end of the year, with the intensive implementation of the steady growth policy, **style is expected to usher in valuation**, and the market trading style may return to equilibrium. We observe the rotation of A-share large and small caps through the ratio of the Shenwan Small Cap Index to the Shenwan ** Index, and a total of 6 style switches have occurred since 2010. Among them, the period of balance between the large and small cap style: December 2010 to January 2013 and July 2015 to December 2015, at this time, it is in the transition of bull and bear switching, and the market's expectations for fundamentals are still in the transition, and the volatility in the switch of large and small cap stocks is more violent, which is reflected in a period of more balanced style. Except for the equilibrium period, GDP growth slowed from 2010 to 2015, and the year-on-year PPI increased from July 7, 2011The 54% high fell back into negative territory and reversed the downward trend at the low** until January 2016, during which **stocks** were suppressed while this phase of web2The rapid development of mobile Internet in the 0 era, web30 The rise of decentralized technology supports the strength of small-cap stocks. The supply-side structural reform proposed in November 2015 guided the optimization of the industrial structure, driving the strengthening from January 2016 to January 2021. At present, the PB ratio of small cap to ** is much higher than 1 standard deviation and close to 2 times standard deviation. Real estate is deeply linked to the aggregate economy, and with the continuous efforts of policies, it is expected to bottom out and rebound. On December 20, the Ministry of Housing and Urban-Rural Development said that it would successively introduce supporting policies for the reuse of idle land, involving land, finance and taxation, finance, etc. On December 21, the National Housing and Urban-Rural Construction Work Conference systematically deployed the key tasks in 2024, and the Ministry of Housing and Urban-Rural Development said that it would make greater efforts to implement it. In addition, a number of state-owned banks and a number of national joint-stock banks will cut their deposit rates in the near future. This is the second time since September 1 that a number of large commercial banks have lowered deposit interest rates less than four months later, which will help increase the willingness of enterprises to invest and residents to consume, thereby promoting the activation of funds.
Investment Advice:
Counter-cyclical regulation has injected vitality into the market, and the actions of the active capital market have been implemented one after another, and we believe that there is still room for policy force. At present, the "extreme speculation" style is close to the extreme, and the market style may gradually return to equilibrium in the future. Historically, the Fed's monetary policy has turned loose and the domestic policy has also adopted a loose monetary policy, and the growth style has performed strongly. With the convergence of interest rate differentials between China and the United States, the current domestic monetary policy space may have been opened, in the context of the demand for easy money to easy credit transmission, domestic monetary policy is expected to increase easing, and the Federal Reserve is at the end of the interest rate hike cycle.
Risk Warning:Domestic policies have not been implemented as expected;Geopolitical events exceed expectations;Overseas liquidity tightened more than expected.