Quietly, 2023 has come to an end. This year, A-shares rose first and then fell, the overall performance was poor, and the effect of investors making money was poor, but there was also a little red in the green bushes, and the CSI 2000 Index was one of the few major broad-based indices that recorded positive returns this year.
Periodicity: The odds advantage is reduced, but the style is expected to continue
Small and micro caps are a very hot topic this year, just as the large market capitalization style was hot from the end of 2020 to the beginning of 2021. At this point, why the small-capitalization style is no longer a topic that needs to be discussed, and whether it can continue in the coming year is a question that many investors are more concerned about.
In fact, the so-called style is often said in investment, so it also has a certain cyclical nature. Generally speaking, when in an upward cycle, there is a high probability of a downward cycle in the future;And when it is in a downward cycle, there is a high probability of an upward cycle in the future. The same is true of history.
According to the 2024 strategic outlook of China Securities Construction Investment, the four major logics of relative performance, stock price elasticity, liquidity and capital and valuation will affect the style of small **. From a relative performance perspective, ** stocks are more correlated with the overall economy;From the perspective of incremental funds, foreign capital, insurance funds and ** stocks are more related.
Throughout history, the over/under market has often had the characteristics of switching every 3-4 years. The small market capitalization cycle that flourished at the beginning of 2021 and bursting the Mao Index bubble has been strong for nearly 3 years, and it is indeed possible to enter the end. However, the switch between the small-cap and small-cap styles still needs to be seen in the context of the economic recovery and relative valuation levels. At a time when the inventory cycle is weak, the incremental funds are insufficient, and the theme rotation is frequent, it is difficult to say that the small cap will definitely end. However, it is undeniable that the valuation cost performance of the ** style is gradually emerging, and the valuation of ** indices such as the ChiNext Index and the CSI 300 is at a historical low, so the odds advantage of small caps is gradually decreasing.
Diversification: 2,000 constituent stocks, full of momentum
In 2023, there will be more than 5,000 listed companies in Shanghai, Shenzhen and Beijing, and a total of more than 10,300 daily limits will be recorded throughout the year.
For example, Hongbo shares, one of the leading enterprises in China's lottery printing industry, was once the largest constituent stock of the CSI 2000 Index, and it is also the company with the most days of daily limit in 2023, with the largest increase of 594% during the year, and was eliminated when the index was adjusted in November 2023.
For example, Tonghua Jinma, a "dark horse" company in the innovative drug and medical industry, has independently developed succinate octahydroacridine tablets, (succinate octahydroacridine tablets are small molecule chemistry with completely independent intellectual property rightsClass I national new drug for mild to moderate Alzheimer's disease) is now the largest constituent stock of the CSI 2000 Index, with a total of 23 days of daily limit in 2023, with a maximum increase of 441% during the year.
Small market capitalization and big energy are the most eye-catching and appropriate labels of CSI 2000. The CSI 2000 Index provides in-depth coverage of small-capitalization companies in the manufacturing and technology sectors. Among the industries covered by the index, machinery and equipment have the highest weight, reaching 1088%, with a total of 242 animals;The electronic weight is up to 862%, with a total of 184 animals;The weight of medicine and biology is 836%, with a total of 188 animals. The constituent stocks of the index are not only diversified, but also full of "specialized, special and new" content, which can more effectively reflect the growth attributes of small market capitalization.
In addition, the CSI 2000 Index constituents are highly profitable. In the first three quarters of 2023, the ROA of the CSI 2000 Index was 192%, ahead of CSI 300, CSI 500, and Wind All A. 85% and 119%。Gross sales margin also remained at a high level.
Combined with the long-term earnings performance and the high Sharpe ratio
The CSI 2000 Index has led the long-term return performance with a high Sharpe ratio. According to the statistics in the figure below:
1) From the end of 2013 to the end of 2023, the annualized return of CSI 2000 is 94%, which is better than the main broad-based indices. And in terms of risk-adjusted returns, the CSI 2000 has a Sharpe ratio of 045%, which is also the first among the major broad-based indices.
2) From the perspective of the risk-return characteristics of the past five years, CSI 2000 has continued the characteristics of high annualized return and high Sharpe ratio, which are respectively. 45%, ahead of the major broad-based indices.
Perhaps, as CICC has repeatedly reiterated, the downside risk of the current position is very limited, and there is no need to be overly pessimistic about the subsequent market performance, and the medium-term opportunities of the A** market still outweigh the risks. In terms of allocation, combined with factors such as the current macro environment and liquidityWe believe the small-cap style of A-shares is expected to continue to dominate, but we need to pay attention to the degree of valuation divergence of the small-cap style.
Underlying Index Opportunities:
Exchange ETF: CSI 2000 ETF ChinaAMC (562660).
OTC Connect**: ChinaAMC CSI 2000 ETF Connect**(A:019891;c：019892）
2023 turn the page CSI 2000 Index 2018-2022 full fiscal year results. 89%、-14.77%。
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