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From singing short frequently at the end of last year to singing more A shares this year, the strategy of foreign institutions is changing.
Foreign-funded institutions sing more A-shares
A few days ago, the research department of Goldman Sachs released the latest stock strategy report, saying that the economy is resilient and policy support factors such as macro, housing and capital markets have contributed to the strong performance of the Chinese stock market. Meanwhile, Goldman Sachs raised its 12-month target for the MSCI China index to 70 from 60, raised its 12-month target for the CSI 300 to 4100 from 3900, and maintained an "overweight" rating on A-shares.
In addition, JPMorgan also maintains an optimistic outlook on the A-share market. Liu Mingdysi, chief Asia and China equity strategist at JPMorgan Chase, said that the basic scenario expectation for the target level of the MSCI China index is 66 points, while that for the CSI 300 index is 3900 points.
It is not groundless for foreign investors to sing more A shares. Historical data back tests show that A-shares are often in the early stages of a phased upswing after institutions dominated by Goldman Sachs have made positive statements. For example, on April 14, Goldman Sachs rarely sang long A shares, which was the second day after the release of the new "National Nine articles". From April 15 to the end of April, the CSI 300 index rose by more than 3%.Realslots.5%.
There are many reasons why foreign investors such as Goldman Sachs and JPMorgan Chase are optimistic about A shares.RealslotsFirst, the dividend yield of A-shares is still not high, and there is still a lot of room to improve the dividends of listed companies; second, delisting will be accelerated, and good retention of companies can improve investor returns; third, various policies to support economic growth are gradually coming into force and will produce positive results.
According to Securities Times data Bao, as of May 24, the CSI 300 index closed at 3601.48 points, while the MSCI China index closed at 60.83 points. According to Goldman Sachs, the CSI 300 index has room for growth of nearly 14% or close to 15%.
Since its low on February 5 this year, Chinese assets have led the world in terms of growth as of May 24. Hong Kong's Hang Seng Index led the world's most important index with a rise of nearly 20%. The A-share gem Index, Shenzhen Composite Index and Shanghai Composite Index rose 17.3%, 16.99% and 13.14% respectively, while the CSI 300 Index rose 13.27%.
Over the same period, related stock indexes in Brazil, Australia and the United States rose at the bottom, while Australia's S & P 200 index rose less than 1%, while the Dow Jones Industrial average rose only 1.07% and the S & P 500 index rose 6.98%.
Goldman Sachs maintains TMT Industry "overweight" rating
On the industry side, Goldman Sachs also maintained an "overweight" rating on the TMT (technology, media, communications) industry. Since the beginning of this year, there have been many major events in the field of TMT. Based on the current situation of "space, prosperity and valuation" in the TMT industry, many domestic institutions also believe that the development space of the industry is still strong.
For example, Cathay Pacific Fund said at the 2024 summer strategy meeting that it is a good time to invest in the technology sector, the current demand for AI is strong, domestic models such as Kimi are coming to the fore, and AI helps the technology sector get back on the growth track. In addition, the valuation of the TMT industry is still at the bottom, and the price-to-book ratios of some companies have reached historically low quantiles. If the industry becomes better after that, there will be more room for growth in the future.
According to Databao statistics, from February 5 to May 24 this year, the TMT index rose 12.06%, compared with the rise and fall of Shenwan 31 industries, the former is in the middle and lower level, according to Goldman Sachs forecast, the TMT industry may have some room to rise.
As of May 24, the rolling price-to-earnings ratio of the TMT index was just 38.41 times, compared with the average price-to-earnings ratio of 56.64 times over the past decade, the current price-to-earnings ratio of the TMT index is more than 30 per cent lower.
As of May 24, there were 1103 companies in the TMT industry, mainly in computer, communications, electronics and media, with a total market capitalization of 13.85 trillion yuan, accounting for nearly 16% of the total A-share market capitalization. Among them, there are only 265 companies with a rolling price-to-earnings ratio of less than 35 times earnings, including 21 companies with a market capitalization of more than 50 billion yuan, including Haikang Visa, Lixun Precision, North Huachuang and so on.
Judging from the market, as of May 24, the performance of the TMT industry was clearly divided, with 20 companies rising by more than 30 per cent this year. Wall Nuclear Materials, Shenyu Co., Ltd., Xinyisheng, Chunzhong Technology, etc., have increased by more than 70%, among which Chunzhong Technology is the world's leading supplier of professional video and audio display and control products and solutions. By contrast, companies that perform poorly are dominated by risk warning stocks.
Judging from the comprehensive rating, 62 TMT companies have been upgraded to the latest "overweight" rating from the "buy" at the end of last year, including 29 in the electronics industry and 21 in the computer industry. The share prices of only 9 companies rose during the year. Rice Information, Igor, thinking Control, and Business Electronics rose more than 30%, of which the share price of Rice Information rose more than 95% this year. The company is the overall solution provider of civil command information system. Shares of Zhucheng Science and Technology and Wanxin Media rose less than 5%.
An excellent TMT company with low valuation and performance growth
According to historical experience, the allocation of foreign capital usually tends to undervalue and the direction of industry logic is stable, and this is also the direction of domestic institutions and ordinary investors to follow.
According to Databao statistics, according to the company profile, its related business (products) is in a leading domestic (global) position, and the latest valuation is less than 35 times (positive). There are only 17 shares of TMT that the agency predicts that net profit is expected to continue to grow in 2024 and 2025, including trillion-dollar China Mobile, China Telecom, USI and ZTE.
In terms of valuation, ZTE, Dongshan Precision, China Mobile, Abyson and other seven shares have a price-to-earnings ratio of less than 20 times, while Dongshan Precision has a price-to-earnings ratio of 15.09 times. the company is the second flexible circuit board company in the world and the third printed circuit board enterprise in the world. the agency forecasts that its net profit will increase by 19.15% in 2024 and 25.5% in 2025.
From the perspective of profitability and growth, the agency forecasts that its net profit will increase by 60.98% in 2024 and 33.43% in 2025, respectively, and the company's gross profit margin has exceeded 35% since 2021.
Abyson, the world's leading provider of true LED display applications and services, expects its net profit to grow by 40.67 per cent in 2024 and 36.35 per cent in 2025, respectively, and its gross profit margin has exceeded 25 per cent since 2022.
Chongda Technology, the world's leading printed circuit board service company, predicts that its net profit will grow by 39.04% in 2024 and its gross profit margin will continue to exceed 25% since 2021.
The stock prices of these three companies have all fallen by more than 10% so far this year, of which Abison has fallen by more than 20%.
In addition, Viteou and Walter Gas, with market values of less than 10 billion yuan, are also on this list. Viteou is one of the leading companies in microelectronic welding materials in China. The agency predicts that its net profit growth in 2024 and 2025 is expected to exceed 25%, and its share price has dropped by nearly 20% this year. Walter Gas is the first to break the constraints of gas materials in high-end fields such as very large-scale integrated circuits and new display panels. The agency predicts that its net profit growth in 2024 and 2025 is expected to exceed 30%, and the latest valuation is about 33 times.
Statement: All information content of Databon does not constitute investment advice. The stock market is risky and investment needs to be cautious.