“Exploring and establishing a valuation system with Chinese characteristics” Elephant dances “Chinese prefix” stocks carry the banner of leading the rise
For a long time, the “Chinese prefix” stocks have given the impression that they are huge in scale, more than stable, and insufficient in “shares”. Entering this week, however, that perception has been challenged.
In the case of the A-share market as a whole oscillating and consolidating, the elephants of stocks with the “Chinese prefix” danced and carried the banner of leading the rise. Leading stocks such as Zhongcheng shares and China Science and technology transmission have shown a trend of continuous daily limit in a short period of time, and such a situation only appeared in a bull market in the past.
Why did the “Chinese prefix” stocks soar?
“In the past, the huge ‘Zhongzi’ stocks would only rise sharply during the bull market.” An old stock investor in Hangzhou told reporters, “There was a bull market in 2007 and a bull market in 2014, but most of the other times, It is very difficult for stocks with a “Chinese prefix” to rise sharply. To put it bluntly, it is because the market is so large that existing funds cannot move it. Therefore, compared with smaller stocks, the trend of stocks with a “Chinese prefix” appears to be very “lukewarm.”
So, what are the reasons for the recent frequent changes in the “Chinese prefix” stocks? The most direct connection is the statement made by Yi Huiman, chairman of the China Securities Regulatory Commission, at the 2022 Financial Street Forum Annual Meeting this Monday. Yi Huiman mentioned: “It is necessary to have in-depth and systematic thinking about the basic connotation, realization path, and key tasks of a modern capital market with Chinese characteristics. It is necessary to grasp the valuation logic of different types of listed companies, explore and establish a valuation system with Chinese characteristics, and promote The resource allocation function of the market is better played.”
Explore the establishment of a valuation system with Chinese characteristics, which has generated relatively large repercussions in the capital market. This is an excellent opportunity, especially for those stocks with a “Chinese prefix” that have not been favored by the market for a long time and whose valuation is at a historically low level. The undervalued large-cap blue-chip stocks represented by Zhongcheng and China Science and Technology have seen a four-board trend in a short period of time, with gains of 43% and 44% respectively within the week. China Construction, China Communications Construction, China Unicom, China Railway and other super large-cap stocks that investors are familiar with have also shown a trend that is significantly better than the broader market.
At the level of public funds, from November 22nd to 23rd, a number of state-owned enterprise theme funds, including GF CSI Infrastructure Engineering ETF, Prudential CSI Infrastructure Engineering Index (LOF) A, Huaxia CSI Infrastructure ETF and other infrastructure funds rose Both exceeded 5%, and some FTSE China state-owned enterprises opened up a win-win ETF also rose by more than 4%.
Shenyin & Wanguo Securities believes that there are two reasons why the management proposed to “explore the establishment of a valuation system with Chinese characteristics” at the current point in time: first, to promote the reform of state-owned enterprises and accelerate capital operation; second, to optimize the layout of state-owned capital. Prepare. Focus on central enterprises. In the coming period, national security will be the main line, and technological innovation will be the top priority. Central enterprise groups will be the best starting point, and listed central enterprises will be the core platform. However, there are also some fund managers who have different views on the current “Chinese prefix” market: “Currently, the valuation of many state-owned listed companies is at a historically low level, and the value is expected to be revalued in the future, but the short-term rise does not rule out the theme hype factor .”
Focus on “value revaluation”
Is the main line of state-owned enterprises sustainable?
SASAC central enterprises play a pivotal role in my country’s economy and are mainly distributed in key industries related to the national economy and people’s livelihood. They are not only the key targets of the current market-oriented reform, but also the vanguard of a series of reforms in my country in the future. The latest research report of CITIC Securities pointed out that historically, state-owned enterprises listed on the State-owned Assets Supervision and Administration Commission have been more resilient in bear markets, but their valuations have been weaker in bull markets; their performance has been stable and growing, but the market is unwilling to give high valuations. The broker believes that under the background of the current weak market environment and the continuous advancement of state-owned enterprise reform, listed central enterprises will usher in an opportunity for allocation.
Shenyin Wanguo Securities added that the three principles for stock selection of central enterprises include: 1. Undervaluation and high dividends; 2. In terms of corporate behavior, actively communicate with the market and have high transparency; 3. In terms of industry direction, focus on two main lines: Big energy (petroleum, coal, electric power, chemical industry, transportation), big science and technology (military industry, telecommunications), etc.
In terms of specific investment opportunities, Guosen Securities recommends that investors re-examine the valuation of central state-owned enterprises based on the price-to-book ratio. Guosen Securities pointed out that the main assets of construction companies are cash and other financial assets, accounts receivable, inventory and contract assets, and their liquidity is relatively strong, and the price-to-book ratio valuation has practical economic significance. Since the beginning of the year, the downstream fundamentals of the construction industry have continued to slump, real estate sales data has deteriorated, local government debt pressure has increased, and the market is generally pessimistic about the sustainability of orders from construction companies. However, even if you look at construction stocks from the perspective of static asset value without considering the future revenue growth of construction companies, the price-to-book ratio of construction companies has reached historically low levels.
The broker pointed out that the current downward pressure on the economy is still there, and the government has a strong willingness to strengthen infrastructure investment to stimulate the economy. It can be expected that the finance will continue to promote tax cuts and fee reductions and infrastructure investment. The main line of steady growth in infrastructure is expected to continue until 2023. Leading construction central state-owned enterprises have high-quality projects, stronger ability to pay back, and sufficient provision for impairment. Their asset quality is seriously underestimated. The valuation of construction central state-owned enterprises is based on the price-to-book ratio. The current position has a relatively strong security Pad and larger valuation regression space. In terms of investment targets, Guosen Securities recommends focusing on China State Construction, China Communications Construction, China Metallurgical Corporation, China Railway Construction, and China Railway Group.