Key takeaways:
Market Performance Review:The China CITIC Bank Index for December was **05%, outperforming the CSI 300 Index by 13 percentage points, the average PB (MRQ) of the banking sector closed at 049x, the average PE (TTM) closed at 44x。The first combination monthly arithmetic average rate of return is -44%。Important industry developments:The People's Bank of China released the results of the central bank rating of banking institutions for the second quarter of 2023. Judging from the rating results, the overall operation of China's banking financial institutions is stable and the risks are generally controllable. Among them, there are 337 banks in the "red zone" with assets of 663 trillion yuan (accounting for 1.).72%), which is nearly half of the peak in 2019.
Key Earnings Drivers Tracking:(1) The year-on-year growth rate of asset scale remained stable. The total assets of commercial banks in November 2023 increased by 113%。(2) Interest rates remained stable. 1) The monthly average of the 10-year Treasury yield last month was 262%, down 5bps month-on-month;Shibor3m monthly average of 257%, up 12bps month-on-month. 2) Last month's LPR** was stable, and the latest LPR was a one-year term**345%, 4 for five years20%。(3) The solvency of industrial enterprises continued to decline, and the asset quality of the industry remained under pressure. In November 2023, the interest protection ratio (12-month moving average) of industrial enterprises above designated size fell slightly to 784% month-on-month, while the loss of industrial enterprises continued to rise. We thinkThe overall NPL generation rate of banks will remain at a high level.
In terms of industry,At present, the valuation of the banking sector is at a low level, and after experiencing real estate risk exposure and the adjustment of existing mortgage interest rates, the potential negative impact of the sector has been significantly reduced, and the downside risk of valuation is very small. A positive macroeconomic recovery is expected to drive valuation recovery in the banking sector, so we maintain our 'Overweight' rating on the sector. **In terms of aspects, grasp the three main lines of stock selection:First, it is recommended that in the case of low valuation of the industry as a wholeDeploy banks with excellent long-term prospects, including China Merchants Bank, Bank of Ningbo;The second is to recommend small and medium-sized micro customers with distinctive characteristicsSmall Rural Commercial Banks, including Changshu Bank, Ruifeng Bank;Third, it is recommended to pay attention to funds that pursue low volatility and absolute returnsA large state-owned bank with a high dividend yield and a stable dividend record, which is expected to continue to benefit from its integrated service capabilities in the future
Key takeaways:
Let's talk about strategic allocation:Timeless mean-variance model. This paper reviews the strategic allocation methods in previous reports, and discusses the differences in the mean-variance model, the risk budget model, and the constant hybrid strategy in the context of target risk. This paper continues to adopt the stock and bond portfolio with a target volatility of 3% as the strategic allocation benchmark, in which the bottom position is represented by Wind All A, and the bottom position of bonds is represented by the China Bond Total Wealth (Gross Value) Index.
Let's talk about tactical timing:It is necessary to have both a sense of location and a sense of direction. Starting from the perspective of cycle judgment, this paper forms a new timing system that takes into account the odds and winning rate based on the chip structure and characteristics of A-shares. Thanks to the addition of the winning rate signal in terms of direction, the performance of the OPTI portfolio after integrating the new timing system has been significantly improved compared with the previous one. Since 2009, the annualized return of the OPTI portfolio has increased from 4 to 499% to 583%, with a return fluctuation ratio from 180 to 194, the earnings drawdown ratio from 109 to 121；Since 2014, the annualized return of the OPTI portfolio under the aggressive signal is 776%, the return fluctuation ratio and the income drawdown ratio were recorded respectively84。
Key takeaways:
In common industry rotation studies, the industry portfolio is usually rebalanced on a monthly basis, that is, the holding period of the recommended position portfolio for each period is usually one month, which is biased towards the short term. We try to set the rebalancing interval of industry rotation to 1 year (or 12 months) to explore the law of industry rotation in the medium cycle. Under this time constraint, after retrospection, the faster the profit growth of the industry, and the greater the ROE improvement of the industry, the return rate in the next 1 year tends to be better. Sectors with low absolute returns in the past 1 year, as well as sectors with low valuation quantiles, will not have a good return in the next 1 year.
We put the volume and price factors that have been confirmed to be effective in the short cycle (monthly rebalancing frequency) in the previous report to the medium cycle (12-month frequency rebalancing) to test. The results show that most of the volume-price factors are still valid under the medium-term position constraints, which are positively correlated with the future return rate of the industry. Combining each factor into a composite momentum factor, and constructing a backtest portfolio based on this, can significantly outperform the industry equal-weight portfolio.
According to the comprehensive model, we stand at the end of 2023The recommendations for the industry configuration in 2024 are: electronics, agriculture, forestry, animal husbandry and fishery, communications, building materials, light manufacturing, medicine, and home appliances.