Home >

Li Xunlei: Three Thoughts On The Capital Market In 2011

2010/12/29 12:49:00 49

Li Xunlei 2011 Capital Market Investors

In 2010, China's performance in both the stock market and the debt market was poor. Although the economy in 2010 was pretty good, the GDP growth rate was over 10% and the inflation rate was only 3.3%.

High growth, high employment and low inflation do not know which countries in the world can match the economy of China.

However, China's stock market is very poor. In the emerging markets such as Argentina and Indonesia, the Shanghai stock index still shows a downward trend.

What is the main reason for the decline? I think it is the reason why the policy is tightening. A shares have always been a heavy policy, and its correlation with policy cycle changes is higher than that of the economic cycle.

Policies tend to be counter cyclical, which is why in the past many years, the stock market has often seen the real economy go bad and the stock market deteriorating.

However, the pattern of A shares at the end of 2010 is the dynamic price earnings ratio of large cap stocks, which has fallen to about 15 times, almost the lowest in history, while the price earnings ratio of gem is 70-80 times, and the price earnings ratio of small and medium board is about 38 times.

The good performance of small and medium capitalization stocks is not supported by earnings, though the future performance elasticity is relatively large.

The deceleration of China's economic growth in 2011 is inevitable. The profit growth of listed companies is expected to drop from around 30% in 2010 to around 20%.

Therefore,

Capital market in 2011

There are at least three aspects of confusion: first, the decline in earnings growth resulting from the economic slowdown. What is the market prospect of a slow growth? Second, although the valuation level of large market cycle stocks is very attractive, but in the context of tight policy in 2011, will it cause negative growth in future earnings, which will make them lose the advantage of valuation? Third, if only choose new industries with strong policy support and strong defensive ability, then, in the face of the overvaluation of the valuation level, and the future growth is not too sure of the stock market value, are you not worried about the bubble burst?

On these three issues, my thinking is that, first of all, the era of China's rapid economic growth has entered the late stage, because the rapid growth of the economy is mainly driven by investment and not sustainable.

In the future, the pace of economic growth will gradually slow down. China has entered the era of capital surplus. The proportion of corporate profits in GDP will decline. The number of listed companies with "profiteering" will decrease, and the volatility of the stock market will converge. Therefore, it is not realistic to expect the 2011 index to rise significantly.

But because of the stock index futures and margin trading instruments, the charm of the market is not diminished, but investment requires more professional skills to get excess returns.

But even if the profit growth has dropped, it is still at the level of medium and high speed growth. China's stock market is still one of the most attractive markets in the world.

Secondly, many stocks in the financial, real estate, steel, coal and other industries are obviously underestimated. The price level of many large cap A shares with H-shares is even lower than that of H-share 20-30%.

But why are investors reluctant to buy such undervalued stocks in 2010? The main reason is that our investment preferences in such an emerging market are different from those in the mature market, and the former's risk appetite and return expectations are relatively high.

However, it is obviously insufficient to think that these stocks can only be given lower valuations because of national macro-control or traditional industries or sunset industries.

Because China's urban rate is higher than 47% of the consensus, but it is equivalent to the level of Japan in the late 60s. A lot of infrastructure, real estate and so on all need support from traditional industries such as steel, cement, machinery and equipment, and all banks need to provide financial services.

Therefore, the rise of new energy, new materials or other emerging industries does not mean the turning point of traditional industries.

As far as banks are concerned, the central bank has raised the proportion of direct financing as early as 15 years ago, but the proportion of direct financing has not yet improved significantly. Its background is that most of the financing in the process of urbanization can not be realized through direct financing.

Therefore, although the Chinese economy will have a short period of fluctuation, the probability of 7%-9% growth for more than 5 years is relatively large. The probability that the average growth rate of listed companies will increase by more than 10% a year is also relatively large. This is a long-term support for the A share of the traditional industry with a market value of more than 70% of the total market value.

Therefore, in 2011, we should increase the allocation of undervalued traditional stocks in large market capitalization and regard investment as a collection, and we should not lose M2 growth.

Third, in the face of the fact that the small cap stocks have been strong for two years and deviated from the large share market, I do not think that the rise of the so-called emerging industries is still determined by the speculative preferences of the emerging market participants.

For the so-called growth industries, it is necessary to distinguish which growth is just a flash in the pan, which are sustainable, and which enterprises in the growth industry only increase the scale of financing and not bring about profit growth.

At present, the bubble of small cap stocks is no less than the age of Internet stocks. But whether there is a style change in 2011? I don't think so. The reason is that the tightening of macroeconomic policy in the first half of 2011 will continue. Only when the current half year policy is relaxed, will the cyclical industry get out of the trough, which is the turning point of style pformation.

The chance of being neglected in 2011 may lie.

Investor

The collective miscarriage of justice, which is the panic of tightening policy, is actually not the case, because the economy in 2010 was not overheated and the overheated price was just the price.

Perhaps the potential opportunity for 2011 is to return to normality, just as monetary policy shifts.

That is, price returns to value, and market returns to rationality. Is it an opportunity for the launch of the international board in 2011? The rise of mutual funds and the entry of QFII have brought the style conversion of value investment to the market, but it has not lasted for a long time.

It is a long process to mature China's capital market, but 2011 must be a year of progress in this long process.

While pursuing growth in 2011, we should not forget valuations and stick to valuations but not be stifled by static valuation levels.