- 2024-07-27
- News
Spring Market Prep: Asset Allocation Strategies Now
In the blink of an eye, 2024 has quietly approached its end, once again ushering in the season of year-end and year-start. For the stock market, this is undoubtedly a sensitive period.
On one hand, expectations for industries and companies will shift to the perspective of the new year. If a company performs well this year, this is certainly good news for this year; but for next year, the previous glory serves as a base, and the pressure to achieve greater growth in the new year will naturally increase. Conversely, if the "performance is not good" this year, starting light, the difficulty of achieving growth in the following year will also be lower.
On the other hand, the "spring rush" is a frequently discussed topic. According to Ping An Securities, from 2010 to 2023, the A-share market's spring rush has a high rate of realization (absent only in 2022), with the market often starting in January but achieving better average returns in February, lasting an average of about 65 days; the index's upward elasticity varies greatly in each round, with the Shanghai Composite Index's increase ranging from 5% to 33% (with an average increase of 12.4%).
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Taking advantage of the period between the end of the year and the beginning of the new year to re-examine one's asset allocation is undoubtedly a very necessary task.
01
Hotspot Review
Before discussing specific configurations, we will sort out the recent hot events and review the macro environment as a whole.
The first major event is debt resolution.
The "debt resolution" plan announced by the Standing Committee of the National People's Congress on November 8 can be divided into "6+4+2" three parts, including arranging a debt limit of 6 trillion yuan and 4 trillion yuan of additional special bonds totaling 10 trillion yuan for debt resolution, and the implicit debt of 2 trillion yuan generated by shantytown renovation to be repaid after 2029.
The introduction of debt resolution measures with the greatest intensity in recent years mainly benefits two directions.
Firstly, companies directly related to debt resolution, such as AMC and local urban investment companies, correspond to listed companies with a high proportion of urban investment holdings; secondly, companies with a high proportion of ToG revenue and a large amount of capital advances. These companies will benefit from the improvement of accounts receivable collection, mainly concentrated in the construction materials, environmental protection, computer, military, and equipment manufacturing industries.
If we look from a higher-dimensional perspective, debt resolution is beneficial for resolving the risks in the current economic operation and has the opportunity to boost the overall risk preference of the capital market.
Moreover, the purpose of debt resolution is to achieve higher-quality development, and "new quality" assets cannot be ignored as a medium-term market main line. After debt resolution, local governments can free up the space and energy originally used for debt resolution and risk prevention, and invest more in planning and promoting high-quality development. The policy space for this round of mergers and acquisitions is opened, focusing on the optimization and integration of scientific and technological resources, and reorganization events will become one of the trading clues for the "new quality" market for a long period.
The second major event is the possible style switch.
Generally speaking, a large bull and bear cycle in the A-share market requires 5-8 years, and the cycle of market style is about 3-5 years.
Annual changes in various styles since 2005
It is not difficult to find that since 2005, no style can "sit firmly on the fishing platform", and "the city head changes the big king flag" is the eternal main melody of the market. In other words, each style has its own home field and "retrograde period", alternating every few years, constantly cycling.
For example, from 2016 to 2018, the large-cap value style performed the strongest for three consecutive years, winning the championship.But from 2019, the wheel of fate quietly turned. Large and small cap growth styles took over and took the lead. Large-cap value became the taillight in 2020 and 2021. And since 2022, large-cap value has once again risen from the low tide, performing the strongest for three consecutive years. Small-cap value follows closely. Since 2022, the A-share market belongs to the value style. And the growth style, after the last round of climax, is relatively low.
And now, things have become very subtle. In terms of time, the large-cap value style has been strong for nearly three years. If according to historical patterns, the node of style conversion may be approaching.
History, while not simply repeating, always has the same rhyme. If the "fortunes轮流转" rule continues to be effective, the small-cap growth style may be worth more attention.
02
How to configure more scientifically?
After clarifying the macro background of the market, looking at the current investment, there may be three asset allocation strategies worth our close attention.
One is based on debt resolution as the starting point of
Event-driven strategy
The so-called event-driven strategy, also known as thematic investment, often relies on certain events or expectations to trigger investment hotspots. Although this strategy has great risk, under good expectations, it can stimulate market sentiment, drive the stock prices of related companies to rise rapidly, achieve quick returns, and therefore can attract widespread market attention. It has become an investment that many investors are willing to participate in.
As we said before, debt resolution is the event that is most concerned about the market at present. The directly benefited urban investment and toG sectors will have a certain potential in the short term. However, the improvement of risk preference and the direction of high-quality development in the medium and long term are good news for "new quality" assets.
After debt resolution, mergers and acquisitions may completely open up space and become the main line of the market.
On this point, Guoxin Securities believes that the new round of mergers and acquisitions will take "boosting expectations" as the key, and will be the core focus on invigorating the capital market, promoting supply and demand balance, and cultivating new quality productivity. The science and innovation industry, including listed and to-be-listed semiconductors, artificial intelligence, and other strategic emerging fields, is one of the clues.
Second, based on core assets as the bottom
Satellite assets to win elasticity of the "core-satellite" strategy
The "core" serves as the basic position of the portfolio, accounting for most of the position, striving to obtain relatively stable long-term returns under controllable risks. The "satellite" serves as an ancillary position of the portfolio, accounting for a small part of the position, generally configured with high-elasticity assets to win higher returns.
Using the "core-satellite" strategy, there are defensive assets to hold back the drawdown when the market falls, and offensive assets to win elasticity when the market rises. When the market is indecisive, the "core-satellite" strategy is a rational configuration plan.
Generally speaking, bond assets, fixed income assets, high dividend assets, and value style assets are the options for the "core" position.
And the satellite position demands a higher expected return rate, requiring a strong offensive, and showing strong elasticity when the market rises. From this perspective, growth style, small market value style, technology style, and the 20cm fluctuation system of the Science and Innovation Board and ChiNext may be factors to consider when selecting "satellite assets".
Third, using the cyclical rotation law of the stock market
Style rotation strategy
We introduced the cyclical rotation law of the stock market before, and the cycle of market style is about 3-5 years. At present, when the large-cap value style has been dominant for three consecutive years, the small-cap growth style may hope to take over and become the dominant style of the stock market for a period of time.
03
This track is very versatile
After the previous analysis, it is not difficult to find that at this point in time, assets with labels such as technology, growth, small cap, new quality production, domestic substitution, independent control have good configuration value and can be compatible with various asset allocation strategies. At present, there are not many indexes that can both have growth attributes and small and medium market value, let's narrow down the range bit by bit.
Firstly, because the traditional industry companies on the Shanghai and Shenzhen main boards are more, indexes with high growth attributes often appear on the Science and Innovation Board and ChiNext. Secondly, there are still large market value companies on the Science and Innovation Board and ChiNext, and the leading indexes of the two boards need to be eliminated. Finally, the industry of the index needs further screening to ensure a high concentration of new quality production.
Integrating the above three points, the Sci-Tech 100 ETF Huaxia (588800) tracked by the Sci-Tech 100 Index may be a good choice.
Firstly, the Sci-Tech 100 Index is a series of indexes on the Science and Innovation Board, and the Science and Innovation Board is a board serving high-tech industries and strategic emerging industries, which itself has the attributes of high precision, high growth. Wind data shows that the Sci-Tech 100 Index's forecasted profit growth rates for 2024 and 2025 are 101.13% and 47.29%, respectively.
Secondly, the Sci-Tech 100 Index is composed of 100 securities with medium market value and good liquidity on the Science and Innovation Board. The average market value of the index's constituent stocks is only 17.7 billion yuan, and the median market value is only 13.8 billion yuan, relatively small, and full of elasticity.
In addition, the Sci-Tech 100 also has a high concentration of new quality production.
Zheshang Securities believes that new quality production corresponds to the tracks of big technology, big health, and big manufacturing. Corresponding to the stock market, big technology includes computers, electronics, communications, etc., big health includes pharmaceuticals and biology, etc., and big manufacturing includes power equipment, mechanical equipment, national defense and military, automobiles, etc.
Among many broad-based indexes, the Sci-Tech 100 Index has a higher new quality production, reaching 98.97%. Among them, the three major weighted industries of electronics, pharmaceuticals and biology, and power equipment have a higher proportion.
Therefore, the Sci-Tech 100 ETF Huaxia (588800) may be one of the important assets worth paying attention to at present. With the right asset allocation strategy, the offensive potential of the Sci-Tech 100 may be fully explored.
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