Look for index funds and seize long-term hot spots

In an exponential bull market, the index is often earned but not profitable. Seeing that the index is desperately rising, individual stocks remain motionless or even fall in the opposite direction. At this stage, the investment strategy should also be adjusted accordingly. Investors may wish to consider index funds, or focus on investing in long-term hot spots in the market, such as asset injection and RMB appreciation themes.

Focus on Index Funds

From August 8 to November 10, the Shanghai Composite Index rose about 23%, while only a handful of stocks rose more than 23% over the same period. In this round of the so-called large-cap blue-chip market, index funds have benefited a lot from the concentration of many large-cap blue-chip sample stocks. During the same period, the SSE 50 Index rose about 30%, and the SSE 50 ETF, which tracks the underlying SSE 50 ETF, rose about 27% over the same period. At the same time, the SSE 180 ETF rose about 24% over the same period, and the Harvest CSI 300 Index Fund rose nearly 20% over the same period.

In a so-called "index bull market," money floods into large-cap blue-chip stocks. Statistics show that in the five days from October 30 to November 3, the total turnover of the two cities was about 202.5 billion yuan, while in the same period, the total turnover of the CSI 300 index constituent stocks was about 112.9 billion yuan, a record for more than two months. new high. The total turnover of the CSI 300 Index constituent stocks during the week accounted for nearly 56% of the total turnover of the two cities during the same period, which was the first time this proportion exceeded 50%. The turnover of the constituent stocks of the Shanghai Stock Exchange 50 Index during the same period was 47.9 billion yuan, an increase of 16.77% from the previous trading week. In the case of a slight decrease in the total turnover of the two cities, the turnover of blue-chip stocks increased rather than decreased, indicating that the market capital is accelerating the flow of blue-chip stocks in the large market.

After the securities market has entered a new blue-chip era, the market concentration will be higher and higher. Industry insiders believe that the accelerated flow of market funds to large-cap blue-chip stocks shows that even active investment stock funds have recently increased their investment in heavyweight stocks, showing a tendency to index investment. For investors, the advantages of indexed investment through index funds will become more and more obvious.

It is generally believed that in a prolonged bull market, index funds are well worth investing in. In a bull market, the superiority of index investment mainly comes from the in-and-out effect of the index. Usually active funds cover a relatively small amount of stocks and maintain a relatively high cash position, so that funds sometimes cannot grasp the rhythm of stocks rising in a bull market.

Another advantage of index funds is that their costs (including handling fees, management fees) are low, which will indirectly increase the actual returns of investors. Compared with active investment funds, index funds have lower management and custody fees. At the same time, due to tracking the replication index, the turnover rate of index funds is much lower than that of common stock funds, and the transaction costs are extremely low.

Choose an index fund, and the most important thing is to choose an index. At present, the most used indexes include SSE 50, SSE 180, SZSE 100, CSI 300, and some indexes provided by foreign institutions. For example, Yinhua Fund has selected the Dow Jones 88 Index, and Huaan's index funds have selected Morgan Stanley. index, etc.

The most important thing about an index is its representativeness. For example, the SSE 50ETF tracks the SSE 50 Index. Its 50 constituent stocks include leading companies in petrochemical, banking, shipping, steel, electric power, telecommunications, automobiles, pharmaceuticals, home appliances and other industries. The number of companies accounts for 6% of the Shanghai A shares. %, the tradable market value accounts for 33%, and the tradable share dividends account for 41%, mainly including some blue-chip stocks with strong profitability, large market value and low price-earnings ratio.

The number of constituent stocks in the SSE 180 Index has increased significantly, to 180, so its representativeness may be better than that of the SSE 50 Index, and it is also less affected by the rise and fall of individual stocks. However, it is difficult to determine whether the 180 and 50 indexes are better or worse. When the stock market is in a weak bull market, large-cap stocks are usually more resilient, and once the market rebounds, it is these stocks that lead the rise. At this time, the return on the 50 index may be relatively high. In a strong bull market, individual stocks are in a state of blooming, and the 180 index is expected to exceed the market average because of its broader representation. Investors need to choose appropriate index products according to their needs.

Another criterion for the pros and cons of an index is the dynamic adjustment of the index. The fundamentals of individual stocks may change at any time, and accordingly, the index is also required to adjust its weight and constituent stocks. At present, the dynamic adjustment is more mature, but some foreign index providers, such as Dow Jones, Morningstar and so on.

Looking for long-term hotspots

In the process of market volatility, the switching of hotspots and changes in investment themes are often more difficult to figure out. For investors, the selection of industries and companies will be increasingly difficult in the next stage. Among all kinds of investment themes, the most "reliable" is to choose the hot spots that the market has been paying attention to for a long time. It is expected that the investment themes throughout next year will be "injection of high-quality assets" and the appreciation of the renminbi.

After the share reform, the cases of asset injection and overall listing will continue to increase, becoming the investment theme throughout 2007. At present, more than 300 listed companies in Shanghai and Shenzhen are formulating overall listing blueprints explicitly or implicitly, aiming to make listed companies bigger and stronger and comprehensively enhance their core competitiveness.

Undoubtedly, after the reform of the securities market system, the interests of major shareholders and tradable shareholders tend to be the same, and many listed companies regard the overall listing as an important means to enhance the company's competitiveness. At the same time, asset injection is also conducive to reducing chronic market diseases such as connected transactions, which can be described as a cure for both the symptoms and the root causes.

The imminent end of the share reform also provides a strong motivation for the overall listing of listed companies. On the one hand, full circulation makes it fair and reasonable to price according to the circulating stock price in the process of private placement to major shareholders. On the other hand, the amplification effect and wealth effect of the market value in the full circulation market will attract major shareholders to put high-quality assets into the capital market amplifier, and major shareholders are more likely to become bigger and stronger rather than hollow out listed companies.

Currently, high-quality assets are injected into listed companies in the following ways: First, through refinancing (additional issuance, placement or convertible bonds) to acquire the assets of the parent company. This is a more traditional way to go to market as a whole, and the advantage is that the scheme is simple. However, if the profitability of the newly acquired assets is weak, resulting in the dilution of earnings per share, such an overall listing is often unpopular. The most typical example is Baosteel Co., Ltd.; For some assets, this is an overall listing method that has become popular after full circulation. Since there is no refinancing behavior, it is easier to be accepted by small and medium shareholders. For large shareholders, it can also increase the proportion of their holdings in listed companies. The overall listing of Anshan Iron and Steel Co., Ltd. adopted this approach.

Third, if the holding company has several listed companies with similar business contents, one listed company can be the main one, and the mergers and acquisitions of other listed companies can be completed through stock exchange. A typical example is that the First Department Store and Hualian Commercial Building are both listed department store companies under Bailian Group. Fourth, repurchase listed subsidiaries to achieve overall listing. This type of overall listing usually occurs when both the parent company and the subsidiary are listed companies. For example, PetroChina's privatization of its three A-share listed companies is a typical example.

On November 2, the overall listing plan of Baotou Iron & Steel Co., Ltd. was released, and 3.032 billion additional shares were privately issued at 2.30 yuan per share to purchase 6.975 billion yuan of assets of Baotou Iron and Steel Group. On October 26, Tongdu Copper announced that it planned to acquire seven assets held by the major shareholder Tongling Nonferrous Metals (Group) Company by means of private placement and debt commitment to achieve an overall listing. There are also rumors that the recent overall listing of companies such as Shanghai Airport and Yangtze Power has entered a substantial stage. The profit growth and valuation improvement brought about by exogenous asset injection will become the most important driving factor for future market growth, and will also be the investment theme throughout next year.

Another theme - the appreciation of the renminbi is still optimistic about many institutional investors and is expected to continue to exert its power in the next stage. The core varieties that benefit from the appreciation of the RMB are financial stocks and real estate stocks. As long as the expectation of RMB appreciation remains unchanged, financial and real estate stocks are still worthy of long-term optimism, and their long-term investment value is obvious.

Rational allocation of value stocks and growth stocks

As the saying goes, "feng shui turns around", and the phenomenon of market hot spots appearing alternately is quite common in the securities market. Investors may wish to allocate more large-cap blue-chip stocks in the next stage and allocate assets reasonably.

Over the past few years, value stocks and growth stocks have been on an alternating rise. The emergence of this phenomenon is not unique to the Chinese market. In the past decade or so, the yields of growth stocks and value stocks in the US market have also alternated to lead. In the first half of this year, growth stocks played a major role, but after rising all the way, growth stocks are generally overvalued. So from the second half of the year, value stocks have become the main force in the market.

Generally speaking, in a strong market, growth stocks will outperform large-cap blue-chip stocks, and when the market is in a phased correction, large-cap blue-chip stocks may be more stable than growth stocks. The periodic performance of the two types of stocks is an important consideration for adjusting the allocation ratio. The best asset allocation strategy at this stage is to appropriately reduce the allocation to growth stocks and increase the investment ratio of large-cap blue-chip stocks instead.

This article is excerpted from First Financial Network (www.Amoney.com.cn) with permission