The strategy of private equity gold rush small and micro cap stocks has become a key factor

Mondo Finance Updated on 2024-01-23

Since November, A-share small and micro cap stocks** have continued to be hot;However, in recent days, it has shown a downward trend of resistance at a high level. The reporter of China's ** newspaper learned from the research of the private equity industry that in the face of the rapid development of this round of small and micro cap stocks, the private placement of "gold rush" small and micro cap stocks has a positive attitude. Among them, more than half of the private equity institutions have optimistic expectations for the sustainability of this round of small and micro cap stocks, and in addition to the investment and research optimization work at the first level, the transaction impact cost and the liquidity problem of entering and exiting have become the "key points" for private equity institutions in the investment strategy of small and micro cap stocks.

A number of private placements are actively deployed

In the recent A-share "new way" of small and micro cap stocks**, many private equity is increasing investment research coverage and "position building action" in related investment directions. The research director of a medium-sized private equity firm in Shanghai with a long-term brokerage background revealed to a reporter from China ** Daily that the institution has "focused on trading several strong Beijing Stock Exchange with good liquidity in the past two weeks, and has added subscriptions to small-capitalization ETFs such as CSI 1000 and CNI 2000 over-the-counter". Among them, the new Beijing Stock Exchange*** is mainly in the high-end manufacturing and pharmaceutical sectors**, and the subscription scale of related small-capitalization ETFs has reached "tens of millions".

At the same time, the private equity person said that at present, the investment and research coverage of the Beijing Stock Exchange and the small market capitalization of the A-share main board in the private equity industry is generally weak, and at this stage, private equity institutions may be able to dig out more efficient "gold rush clues" from the dimension of "seller-side customized investment research services".According to its understanding, this is also the "core work" of private equity institutions to strengthen the layout of small and micro cap stocks.

In addition, compared with the abundant liquidity of medium and large market capitalization on the main board, some private equity institutions have also increased their attention to the "transaction impact cost" and the difficulty of entering and exiting from the perspective of small and micro cap stocks. Bao Xiaohui, chairman and investment director of Changli Assets, said that the value of small and micro caps is small, and in the construction of investment portfolios, "it is necessary to focus on solving the impact cost of small and micro cap stocks and the problem of low liquidity", and the key is to "control" and "find the target". "The control is easy to understand, as long as the control is to a certain level, there will not be much impact cost;Finding a good target is the key to solving liquidity, as long as you find a high quality ** with high market recognition, even if the market fluctuates to a certain extent, there will be no extreme liquidity problems." Bao Xiaohui said.

Huo Dongjie, chairman and chief investment officer of Hexi Investment, said that the low liquidity and high impact cost of small and micro cap stocks are their inherent attributesDue to the low liquidity of small and micro cap stocks, "when actually trading, a large number of small and micro cap stocks often struggle to outperform the small and micro cap index compiled without considering transaction costs". As a result, the institution will focus on security in the development and implementation of the strategy of small and micro cap stocks, and at the same time, the requirements for position diversification and risk control are significantly stronger than those of the small and micro cap stock index, and the trading time will be extended as long as possible and the trading frequency will be reduced. Huo Dongjie also revealed that the institution is "actively looking for various market opportunities such as small and micro cap stocks" in the near future.

**Qualitatively "positive".

Recently, the A-share small and micro cap stocks represented by the Beijing Stock Exchange have attracted the attention of all parties in the marketThe current view of the private equity industry is more "positive" on this issue.

Xi Peng, manager of Mingze Investment, believes that according to historical laws, from 2009 to 2016, the A** field was in a small-capitalization style cycle;From 2016 to 2021, the market was in a large-cap style cycle;Since 2021, it has generally entered the small-capitalization style cycle. In a period of abundant liquidity and uncertain economic fundamentals, the market tends to be dominated by small and mid-cap, micro-cap, and thematic investment stylesAt present, the economy is still in the stage of active destocking, and the market risk-free interest rate continues to remain low, which provides sufficient conditions for the continued improvement of small and micro cap stocks.

Bao Xiaohui further said that the strong performance of this round of small and micro cap stocks cannot be completely classified as "concept speculation". After the preparation period in September and October, since November, a number of institutional arrangements such as investor suitability, listing conditions, transfer board, and market-making transactions have been gradually implemented, providing investors with convenient investment channels. In addition, the "one-click online opening of the Beijing Stock Exchange for investors on the Science and Technology Innovation Board" also gives many qualified investors convenient investment channels, which is expected to be conducive to the medium-term performance of the Beijing Stock Exchange to a certain extent.

Huo Dongjie believes that for this round of Beijing Stock Exchange** and small and micro cap stocks**, it is necessary to "look at them separately". The Beijing Stock Exchange is more concentrated and more volatile, and from the current point of view, it may be closer to the theme concept hype;The strength of small and micro cap stocks is likely to be more of a market style.

It is worth noting that the reporter of China's ** newspaper found through an exclusive questionnaire survey conducted by a third-party private placement network this week that the "**qualitative" of this round of small and micro cap stocks accounted for as much as 5778% of private equity institutions said that this round of ** is not a "pure theme or theme speculation", but a reflection of the market's own style, and superimposed with "possible positive policy expectations";There are 3111% of private equity institutions are "relatively cautious" that the relevant ** may be a small number of funds to seize the hype of the theme;Another 1111% of private equity institutions said that they need to "look and see" for the qualitative of **.

Sixty percent of private placements "continue to be optimistic".

The aforementioned questionnaire further showed that there were 6000% of private equity institutions believe that the current trading congestion and bubble degree of small and micro cap stocks are not very prominent, and the strength of related themes and sectors may continue for a period of time22.22% of private equity firms believe that "sustainability still needs to be observed".Only 1778% of private equity firms said that the risk of a bubble in small and micro cap stocks has become very prominent, and it is expected that it will be difficult to go far.

Zheng Yanxin, manager of Quanjing***, said that only as far as the Beijing Stock Exchange is concerned, "it is difficult to assess the extent of the current bubble". The reason for this is that, on the one hand, the market adjustment of the Beijing Stock Exchange in the past two years has been large, and there is objectively a need for valuation repairOn the other hand, some companies on the Beijing Stock Exchange do have unique characteristics, especially scarce targets that cover concepts such as "specialized, special and new" and "little giants". Even if the stock prices of some companies have been significantly higher in the early stage, the future expansion of liquidity in the Beijing Stock Exchange market and the "reasonable valuation" of high-quality assets in it remain to be further observed.

Hao Xinming, manager of Fangxin Wealth Investment, told a reporter from China ** Daily that from historical experience, the strategy of small and micro cap stocks is based on the unique style investment strategy under the A-share ecology, which has been proven to be suitable for A-share investment methods in long-term practice, and it is currently the stage when this strategy is re-recognized by the market. On the one hand, in the case of the relatively unsatisfactory overall performance of the white horse blue-chip sector in the early stage, it is completely logical for the market to choose small and micro cap stocks as a "breakthrough".On the other hand, the fundamentals of small and micro cap stocks are uneven, and the investment risk and stock price volatility of individual companies are relatively greater.

Original**: China** Daily.

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