outperform the bull market

(Summary) In 2006, driven by the share reform policy, the stock market finally got out of the bear market and embarked on a bull market journey. Looking forward to 2007, the factors that cause the stock market to go bullish still exist, but the difficulty in operation will increase. Only on the basis of recognizing the essence of the bull market and grasping the context of the bull market can we obtain due benefits in the bull market.

Since July 30, 2001, the Shanghai Composite Index has once again reached 2,000 points, rejoicing stock market investors who have been tortured by the bear market for five years. However, in the face of the rise of the index, there are still many investors who will feel confused. First, is the current index too high and how much room for the broader market to rise; second, although the index has risen greatly, the stocks in hand are not How to make money and why. Let us first understand the nature of this year's bull market.

New stocks contributed a lot to the rise of the index

Although the Shanghai Composite Index has many flaws, people are most used to using this index. From the closing level of 1161 points at the end of last year to 2037 points on November 21, the increase is 75%, which can be described as a huge increase. In such a large increase, the role of new shares is very obvious. At the end of last year, the total market value corresponding to the Shanghai Composite Index was 2.31 trillion yuan. By November 21, the total market value had increased to 5.29 trillion yuan, an increase of nearly 130%.

As of November 21, the Shanghai stock market has only added nine new stocks this year, but all are large-cap stocks, especially the Industrial and Commercial Bank of China and Bank of China, which have contributed greatly to the growth of the total market value. According to the closing price on November 21, the total market value of the nine new shares (excluding the market price of H shares) reached 1.82 trillion yuan. Remove the impact of the 1.82 trillion yuan of new shares, and what remains is the increase in the original index. 5.29 trillion yuan minus 1.82 trillion yuan, leaving 3.47 trillion yuan, which is the total market value corresponding to the old index. From 2.31 trillion yuan to 3.47 trillion yuan, an increase of about 50%. That is to say, excluding the factor of new shares, the Shanghai Composite Index should increase by 50%, corresponding to 1744 points, a difference of nearly 300 points from 2037 points. Therefore, the feeling is that the index has risen a lot, but the money has not been as much.

However, whether you make money should not only look at the index or total market capitalization, but should look at the circulating market capitalization. Industrial and Commercial Bank of China has a very large market value now, close to 1 trillion yuan, accounting for 18% of the currency in the Shanghai stock market, and it is the largest heavyweight stock. However, ICBC's market value in circulation is not large, only more than 20 billion yuan, which is lower than that of China Merchants Bank. At the end of last year, the circulating market value of the Shanghai stock market was about 682 billion yuan. On November 21, it was 1,237 billion yuan. Among them, the circulating market value contributed by 9 new shares was 75.6 billion yuan. After removing the influence of new shares, the circulating market value increased by 70%. That is to say, those who participated in stock investment this year made an average profit of 70%. Among the 70%, 30% came from the share reform, which was obtained by policy, and the other 40% was obtained by skill in the market.

In this bull market, there were 285 stocks that rose more than 100% in Shanghai alone, and 724 stocks that rose more than 50%. Of the 840 stocks, 86% have gained more than 50% this year, and if you haven't made any money, it's definitely something to do with your operations.

It is not a problem to break through the all-time high of 2245 points

The index has risen so much, will it rise next? To answer this question, we have to analyze from two aspects, one is whether the current stock price is overvalued, and the other is what will happen to the future issuance of new shares.

First look at the question of valuation. As of November 21, the weighted average share price of all stocks in Shanghai and Shenzhen stock markets was around 5 yuan, the average earnings per share in the two markets in the first three quarters of 2006 was 0.199 yuan, and the average net assets per share was 2.4 yuan. The performance of listed companies this year has shown the characteristics of higher quarterly than one quarter. In the first three quarters, it is almost 0.2 yuan per share, and it is entirely possible to achieve 0.08 yuan in the fourth quarter. In this way, the annual earnings per share is around 0.28 yuan, the corresponding average price-earnings ratio is less than 18 times, and the average price-to-book ratio is about 2.1 times. This valuation level should be reasonable, even a little low.

Let's look at the issue of new shares. There are many large companies that intend to issue A shares, such as PetroChina, which is the most profitable company in China. Its net profit last year was 126.6 billion yuan, more than three times that of Sinopec, and more than the profits of Sinopec, Industrial and Commercial Bank of China and Bank of China combined. Once PetroChina goes public, the total market value of the Shanghai stock market will certainly rise substantially. In addition, major companies such as China Mobile, China Telecom, China Life, and Ping An Insurance are all lining up to list A shares. If some of these big companies can go public next year, maybe the total market value of the Shanghai and Shenzhen stock markets will be close to that of the Hong Kong stock market. Now the total market value of the two cities is 6.7 trillion yuan, and Hong Kong's is 12 trillion Hong Kong dollars. The listing of large companies will inevitably contribute to the index. This year, new shares have contributed nearly 300 points, and next year will only be more, not less. It seems that breaking the historical high of 2245 points should be a sure thing.

Three main lines for grasping the bull market

Although it means that the index will rise next year, it is more difficult to operate than this year, because there will be no preferential policies such as share reform in the future. Whether you can make money depends on the individual 's ability. Although the stock market investment made an average of 70% this year, 30% of them depended on the share reform policy, and 40% depended on their ability. In this case, there are a lot of people who don't make 70%. There will be no share reform policy next year, and it will definitely be more difficult to make money than this year.

So, how will the market develop next year? The author believes that next year's bull market will follow three main lines, the first is the institutional bull market; the second is the M&A bull market; the third is the major shareholder bull market.

Main Line 1: Institutional Bull Market

Next year's bull market depends first on the state of institutions. What is the current state of the institution? The largest institution is of course the fund, and the funds that can be used to invest in stocks at present are no less than 500 billion yuan. The second largest institution is the insurance company. The assets of the insurance company are about 2 trillion yuan, and the proportion of entering the market is 5%, which is about 100 billion yuan. The third largest institution is QFII, with a quota of US$8.5 billion, or almost 70 billion yuan. There are also about 60 billion yuan of funds owned by securities companies, more than 20 billion yuan invested in social security, and the total amount of funds is about 750 billion yuan. The total market value of Shanghai and Shenzhen A shares after the close on November 21 was 1,800 billion yuan, and the proportion of 750 billion yuan was quite large, which did not include private equity funds, financial companies, investment companies of state-owned enterprises and large companies. shareholders, etc. In addition to the funds of these institutions, the funds of institutional investors account for more than 50% of the entire market.

The scale of stock funds will be expanded next year. According to the current monthly increase of 20 billion yuan, it is not a problem to add 200 billion yuan of funds. The quota of QFII next year may be increased to 15 billion US dollars, the proportion of insurance funds entering the market may be increased to 10%, as well as the new funds of social security, the funds brought by the listing of securities companies, etc., it is entirely possible to add a total of 500 billion yuan of funds. . In this way, institutional funds may account for more than 60% of the market funds, and retail investors are gradually marginalized. This is the hallmark of an institutional bull market.

What kind of investment landscape will the institutional bull market bring? Of course, mainly to buy large-cap blue-chip stocks, there are three reasons. The first large-cap blue-chip stocks are relatively stable, and the fund holds 10 billion yuan of funds. Such a large fund must choose some larger stocks and better liquidity. Regardless of the current total market value of 6.7 trillion yuan, but There are only 19 stocks with a circulating market value of more than 10 billion yuan, and 51 stocks with a market value of more than 5 billion yuan. Since the main part of institutions is funds, they mostly choose some large-cap stocks, which is determined by the liquidity of large-cap blue-chip stocks. Second, because stock index futures will be opened next year, institutions can short the index and short the stock in the event of a stock market correction. The margin ratio of stock index futures is 10%, which is equal to 10 times magnification. To short an index, you must have stocks in hand. Because financing is relatively easy to handle now, securities lending is difficult. There is no special securities lending company in China, so you can only buy stocks yourself and sell them short. Third, the current valuation of large-cap blue-chip stocks is relatively low, and there is still a certain discount, especially some large-cap blue-chip stocks still have a certain discount relative to H shares, which is also a very important reason.

Main line 2: M&A bull market

M&A is always the hottest topic in the stock market, and next year's bull market can also be called an injection bull market. In the previous stock market, major shareholders wanted to hollow out the law, but now they want to inject the law. Why is this happening? Because there is a multiplier effect in the stock market. For example, a major shareholder injects a profit of 100 million yuan, which is 1 billion yuan at a price-earnings ratio of 10 times. This 1 billion yuan was not available before. 100 million yuan in the hands of major shareholders is 100 million yuan. After injecting it into a listed company, the major shareholders will get less than 100 million yuan, because its shares are not tradable, The multiplier effect cannot be enjoyed.

With such a good multiplier effect, major shareholders are of course willing to inject high-quality assets, because they see how many times the price-earnings ratio can be cashed out. Even if you don't cash out, the market value is there, the market value is in wealth, and wealth is in worth. You can use this wealth and this worth to go to the bank or other places to raise financing, so entering the stock market is a small amount and a large amount comes out. This is the wealth effect of the stock market. This wealth effect can only be achieved in the era of full circulation. Without this premise, hollowing out is an inevitable behavior.

Main line 3: Major shareholder bull market

Before the share reform, major shareholders did not care about the stock price because its value was not reflected in the stock price. It occupies all of the company's assets with part of its equity, and the most beneficial thing for major shareholders is to hollow out the listed company. Now, the stock price also determines the value of major shareholders, and the bull market for major shareholders is finally about to emerge. Which stocks in the major shareholder bull market can profit? I think one is a relatively high shareholding ratio of major shareholders, and the other is relatively low. Major shareholders who hold more shares must be more concerned about the stock price. There are not many people who do those scams when they actually issue new shares and go public. Because of the high shareholding ratio, all the good things are taken out. If there are no good things, they will go to the society to collect them. Therefore, the share price of a company with a high shareholding ratio of major shareholders is easy to rise. There are also major shareholders with a low shareholding ratio, such as between 20% and 30%. If the share price is low, they will be acquired, and control may be lost, so such a company will definitely maintain its share price.

In summary, under the background of reasonable valuations and the continuous listing of new high-quality companies, it is certain that the stock market will be bullish next year. But next year's bull market is very different from this year. Policy factors are gone, and the difficulty of operation has increased. Investors can grasp the market situation next year from three aspects. One is to increase their holdings of large-cap blue-chip stocks according to the ideas of institutional investors; the second is to pay attention to those companies with asset injection or M&A themes; the third is to pay attention to major shareholders who have actions to maintain stock prices. company. By grasping these three main lines, it is possible to obtain good returns in stock market investment.

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