Qin Peijing of CITIC Securities: The three major inflection points are gradually appearing, and starting in the second quarter of 2023, action on A-shares will be stronger
CITIC Securities's 2023 Capital Market Annual Conference was held recently. Chief strategist Qin Peijing said at the conference that the multiple factors that have been suppressing A-shares since 2022 will usher in a turning point in 2023. Policy expectations, the RMB exchange rate, and economic fundamentals will gradually emerge.
Based on the inflection point study described above, a summary score was made on factors such as macroeconomics, profit growth, policy environment, overseas factors, and domestic interest rates. Qin Peijing expects that after entering the second quarter of 2023, action on A-shares will be stronger.
Regarding the rhythm of the A-share market in 2023, Qin Peijing judged that it will be divided into two stages: the first stage is policy-driven, focusing on the three main lines; the second stage is performance-driven, focusing on the “four major safety”.
Three inflection points gradually appeared
According to Qin Peijing, inflection points in policy expectations, the RMB exchange rate, and economic fundamentals will gradually emerge.
In November 2022, the optimization of the epidemic prevention policy and the strengthening of real estate support have clarified the inflection point of policy expectations and improved risk appetite.
In March 2023, interest rate hikes in Europe and the US are expected to end, and an inflection point in the RMB exchange rate will appear, opening up room for valuation repair.
By the second half of 2023, the inflection point in A-share profit growth was highlighted, solidifying the foundation for mid-term recovery.
The upward movement on A-shares will be stronger after the second quarter
Qin Peijing believes that starting in the second quarter of 2023, action on A-shares will be stronger.
Starting from the analytical framework used for many years, he scored and summarized the impact of macroeconomics, profit growth, policy environment, overseas factors, and domestic interest rates on the long and short effects of each quarter on A-shares based on the inflection point described above.
Judging from the aggregated data, from the fourth quarter of 2022 to the fourth quarter of 2023, as the above three inflection points gradually appear, A-shares will gradually concentrate upward and continue the trend of comprehensive recovery in the medium term. Judging by points, the upward movement will be stronger after entering the second quarter of 2023.
The market is divided into two major stages
Qin Peijing pointed out that in the strict sense of the word, when it was mentioned in October that the A-share market had been recovering for several months in a row, this round of mid-term market correction had already begun. However, next year, the A-share market can continue to recover overall.
Specifically, Qin Peijing believes that this round of the market is divided into two stages.
The first phase of the market was policy-driven. Policy-driven risk appetite has been restored from a low level, and the market style is mainly characterized by a reversal of difficult circumstances. At this stage, Qin Peijing suggested focusing on three main lines: precise prevention and control, the real estate industry chain, and the three main lines of global liquidity inflection points.
Among them, industries benefiting from substantial relaxation brought about by precise epidemic prevention are the travel chain, COVID-19 prevention and treatment (vaccines, specific drugs, consumer medical devices, pharmacies), new medical infrastructure, and segments where early C-side demands/B-side business scenarios have been suppressed by the epidemic; the reversal of the difficult situation in the real estate industry chain has benefited industrial chain demand and asset quality improvements, and focus on high-quality developers, building materials, home appliances, and high-quality banks; focusing on Hong Kong stocks, precious metals, etc. with favorable global liquidity inflection points.
Focus on the “four major safety”
Qin Peijing believes that the second phase of the market is driven by performance, and it is recommended to focus on the “four major safety” in terms of configuration
On the one hand, after the impact of the epidemic and real estate on fundamentals has improved markedly, as A-share profit growth picks up, the market will enter the second phase. It is expected that performance will be the main driver of the market, and fundamental flexibility and long-term space in terms of allocation are more important.
On the other hand, the first year after the “20th National Congress” is expected to be intensive, and the implementation of policies in areas such as tax reform, capital traffic lights, green and low carbon, common prosperity, and national security after the national “two sessions” became an important highlight. At this stage, the market style is more towards growth. It is recommended to focus on the “four major safety” areas.
Specifically, energy resource security focuses on securing the supply of traditional energy (coal/oil and gas), expanding domestic demand for new energy sources, and tight supply and demand for key mineral resources (lithium, rare earths);
Technological security focuses on the semiconductor industry chain, Xinchuang (computer software and hardware), digital infrastructure (operators, ITC equipment, etc.);
National defense and security are arranged around autonomous and controllable requirements for aerospace equipment, engines, and components;
Food security focuses on autonomous and controllable seed sources to seize opportunities for the industrialization of biological breeding.
In addition to the “four major safety”, it is also recommended to focus on China's dominant manufacturing industries (smart cars, chemicals), where the global share continues to increase.
Based on the inflection point study described above, a summary score was made on factors such as macroeconomics, profit growth, policy environment, overseas factors, and domestic interest rates. Qin Peijing expects that after entering the second quarter of 2023, action on A-shares will be stronger.
Regarding the rhythm of the A-share market in 2023, Qin Peijing judged that it will be divided into two stages: the first stage is policy-driven, focusing on the three main lines; the second stage is performance-driven, focusing on the “four major safety”.
Three inflection points gradually appeared
According to Qin Peijing, inflection points in policy expectations, the RMB exchange rate, and economic fundamentals will gradually emerge.
In November 2022, the optimization of the epidemic prevention policy and the strengthening of real estate support have clarified the inflection point of policy expectations and improved risk appetite.
In March 2023, interest rate hikes in Europe and the US are expected to end, and an inflection point in the RMB exchange rate will appear, opening up room for valuation repair.
By the second half of 2023, the inflection point in A-share profit growth was highlighted, solidifying the foundation for mid-term recovery.
The upward movement on A-shares will be stronger after the second quarter
Qin Peijing believes that starting in the second quarter of 2023, action on A-shares will be stronger.
Starting from the analytical framework used for many years, he scored and summarized the impact of macroeconomics, profit growth, policy environment, overseas factors, and domestic interest rates on the long and short effects of each quarter on A-shares based on the inflection point described above.
Judging from the aggregated data, from the fourth quarter of 2022 to the fourth quarter of 2023, as the above three inflection points gradually appear, A-shares will gradually concentrate upward and continue the trend of comprehensive recovery in the medium term. Judging by points, the upward movement will be stronger after entering the second quarter of 2023.
The market is divided into two major stages
Qin Peijing pointed out that in the strict sense of the word, when it was mentioned in October that the A-share market had been recovering for several months in a row, this round of mid-term market correction had already begun. However, next year, the A-share market can continue to recover overall.
Specifically, Qin Peijing believes that this round of the market is divided into two stages.
The first phase of the market was policy-driven. Policy-driven risk appetite has been restored from a low level, and the market style is mainly characterized by a reversal of difficult circumstances. At this stage, Qin Peijing suggested focusing on three main lines: precise prevention and control, the real estate industry chain, and the three main lines of global liquidity inflection points.
Among them, industries benefiting from substantial relaxation brought about by precise epidemic prevention are the travel chain, COVID-19 prevention and treatment (vaccines, specific drugs, consumer medical devices, pharmacies), new medical infrastructure, and segments where early C-side demands/B-side business scenarios have been suppressed by the epidemic; the reversal of the difficult situation in the real estate industry chain has benefited industrial chain demand and asset quality improvements, and focus on high-quality developers, building materials, home appliances, and high-quality banks; focusing on Hong Kong stocks, precious metals, etc. with favorable global liquidity inflection points.
Focus on the “four major safety”
Qin Peijing believes that the second phase of the market is driven by performance, and it is recommended to focus on the “four major safety” in terms of configuration
On the one hand, after the impact of the epidemic and real estate on fundamentals has improved markedly, as A-share profit growth picks up, the market will enter the second phase. It is expected that performance will be the main driver of the market, and fundamental flexibility and long-term space in terms of allocation are more important.
On the other hand, the first year after the “20th National Congress” is expected to be intensive, and the implementation of policies in areas such as tax reform, capital traffic lights, green and low carbon, common prosperity, and national security after the national “two sessions” became an important highlight. At this stage, the market style is more towards growth. It is recommended to focus on the “four major safety” areas.
Specifically, energy resource security focuses on securing the supply of traditional energy (coal/oil and gas), expanding domestic demand for new energy sources, and tight supply and demand for key mineral resources (lithium, rare earths);
Technological security focuses on the semiconductor industry chain, Xinchuang (computer software and hardware), digital infrastructure (operators, ITC equipment, etc.);
National defense and security are arranged around autonomous and controllable requirements for aerospace equipment, engines, and components;
Food security focuses on autonomous and controllable seed sources to seize opportunities for the industrialization of biological breeding.
In addition to the “four major safety”, it is also recommended to focus on China's dominant manufacturing industries (smart cars, chemicals), where the global share continues to increase.
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