Shen Wan: A brief review of A shares in 2003 and the current mapping of the impact of SARS

For stocks, please read Jin Qilin analyst research report, authoritative, professional, timely, and comprehensive, to help you tap potential potential opportunities!

  Source: Shenwan Hong source of: Fu Jingtao (Kirin analyst), Wang Sheng (Kirin analyst), Wong letter, Cheng Xiang (Kirin analyst) current investment tips: In our view, the real in 2003 by the SARSThe leading market is very short.

  The impact of SARS on A shares in 2003 has the following three basic facts: (1) The market that was truly caused by SARS in 2003 was very short-lived.

After the market became aware of the SARS epidemic, the SARS was publicly announced on April 16, and the market began to adjust. This was 80 trading days after the first SARS case occurred (December 15, 2002).

However, the verification and improvement of the SARS epidemic data in Beijing on May 9 improved, leaving only 11 trading days remaining.

We believe that there are two reasons for this phenomenon: first, there is no widely known historical experience to be embedded at that time; and second, before mid-April 2003, the strategy of adopting anticipatory management is more conservative.

(2) The epidemic statistics improved, and the market’s pessimistic expectations only eased.

Various precautionary measures were implemented, and no positive feedback from the market was observed.

(3) There is a certain trade-off relationship between the outbreak of the epidemic and the restoration of economic growth. The policy of restoring economic growth has gradually come into effect after the epidemic has basically stabilized.

  Two important clues to the 2003 A-share market: 1.
Capital market reform, Q1 concentrated fermentation is expected to meet expectations; Q2 long-term capital entering the market; Q3 bearish concentration; Q4 bearish fading, the 16th Third Plenary Session will adjust the reform.

2.
The macro is gradually tightening, suppressing the real estate bubble before August; suppressing the excessive growth of money and credit in June-November; tight inter-bank liquidity in August-November, which hit the bond market.

When all issues were resolved in mid-November, the rebound was justified.

  According to the main contradictions, we can divide the 2003 A-share market into five phases: (1) the first 4 months and 15 days: the expected spring market for capital market reform.

At this stage, optimistic expectations such as relaxing financing channels for brokers, reforming commercial banks, opening securities to the outside world and entering long-term funds into the market, and reforming the issuance system for new shares have concentrated on fermentation.

In addition, the March 20 US-Iraq war started, uncertainty was eliminated, and strong fundamental data verification also helped the spring market.

(2) April 16-April 25: Atypical model-led market replacement.

(3) April 28th to June 13th: Long-term funds come into the market (QFII, Social Security Commission, enterprise annuity) and the economic recovery policy fulfills the rebound driven by cash.

(4) June 16-November 18: Trending consequences caused by repeated tightening of macroeconomic expansion and expected improvement of capital market reform.

Beginning in mid-June, curbing the real estate bubble and curbing the excessive growth of money and credit became the main tone of the macro-division, and the margins were not eased until the end of the year.

The benchmark was raised on August 25, and continued inter-bank liquidity tensions emerged between August and November.

(5) November 19-the end of the year: The negative factors have gradually subsided, and the steady growth and reform and transformation are expected to be driven by the re-heating of the spring 2004 market ahead of schedule.

  This time may not be the same: the logic of improving the fundamentals driving the second stage of the spring market failed.

It is difficult to predict in advance when the epidemic situation improves, and A shares will move forward with uncertainty.

The main contradiction between waiting for easing hedging and the economic transition to overweight transfer of A shares.

  In the current mapping of the impact of SARS on A-shares in 2003, we suggest three main points: (1) To analyze the impact of the epidemic, we need to grasp the main contradictions in the market at that time.

The capital market reform was the main contradiction in 2003, and the fundamental verification is more important now.

The newly released coronavirus infection pneumonia epidemic has a high probability that the verification of fundamentals after the Spring Festival will improve the logic that drives the second phase of the spring market.

Therefore, the short-term adjustment is essentially the early end of the spring market, and the money-making effect needs to be fully contracted and patient.

(2) The improvement of epidemic data is a signal of a rebound, but it is difficult for the market to ferment optimistic expectations in advance, and the market will move forward with uncertainty.

(3) Another way to transfer major contradictions is policy hedging.

We believe that the restoration of economic growth policy and the improvement of epidemic data may be synchronized.

Formally, targeted stimulus to the service industry and small and medium-sized enterprises in 2003, so we recommend that we do not expect too much of a comprehensive stimulus such as a cut in interest rates and interest rates.

Another path of policy hedging is to accelerate the conversion. The “two sessions” in early March is an important time window, which is weakly related to the epidemic situation, and the market may then rise again.

  In terms of structural choices, whether the follow-up will be accommodative hedging or economic transformation will accelerate the catalysis. In the end, the market will break through in the direction of technological growth with a high probability.

We mainly recommend investment opportunities in medical information technology, 5G, new energy vehicles and games. These directions can be replaced in the short term.

  First, in our opinion, the market that truly belonged to SARS in 2003 was very short-lived.
  In the memory of many people, 2003 seems to be a year when the SARS epidemic has risen, the rise is ameliorated by the SARS epidemic, and the fall is the aggravated SARS epidemic.

In our opinion, this memory may be partial, and the market that was truly triggered by SARS in 2003 is very short-lived.
After the market became aware of the SARS epidemic, the SARS was publicly announced on April 16, and the market began to adjust. This was 80 trading days after the first SARS case occurred (December 15, 2002).

However, the verification and improvement of the SARS epidemic data in Beijing on May 9th has improved, and the focus of the tandem work has gradually returned to steady growth (May 7th National Congress), with only 11 trading days remaining.

The real market driven by SARS may only be April 16-25, which is just 8 trading days.

  The impact of SARS on A-shares in 2003 requires us to understand the following three basic facts: (1) In the early and middle stages of SARS fermentation, the market fully recognized the severity of the epidemic and the market response was lagging.

This was related to the fact that there were no widely known comparable cases at the time (the current market’s rapid response to the new coronavirus pneumonia, but the experience of SARS), and also to the then expected management strategy (April 19)Wen Jiabao, then Prime Minister of the State Council, warned officials who concealed underreporting would face severe punishment).

  (2) Market pessimism is expected to ease and based on improved epidemic statistics.

Except for the SARS preventive drugs entering clinical research on April 28, the market rebounded significantly (we believe that the rebound on this day was mainly catalyzed by the establishment of the CBRC, and the impact of SARS preventive drugs was limited). No positive feedback from the market was observed for other measures.

  (3) There is a certain trade-off relationship between the outbreak of the epidemic and the restoration of economic growth. The policy of restoring economic growth has gradually come into effect after the epidemic has basically stabilized.

  We believe that the market that was truly involved in SARS in 2003 is very short-lived.

Through the re-examination, we can divide the 2003 A-share market into five stages with different main contradictions: (1) Early-April 15: the spring market that capital market reform is expected to enter.

At this stage, optimistic expectations such as relaxing financing channels for brokers, reforming commercial banks, opening securities to the outside world and entering long-term funds into the market, and reforming the issuance system for new shares have concentrated on fermentation.

In addition, the start of the US-Iraq war on March 20 (expected to become apparent in mid-March, US stocks bottomed out), and strong fundamental data verification also helped the spring market.

  (2) April 16-April 25: Atypical model-led market replacement.

  (3) April 28th to June 13th: Long-term funds come into the market (QFII, Social Security Commission, enterprise annuity) and the economic recovery policy fulfills the rebound driven by cash.

  (4) June 16-November 18: Trending consequences caused by repeated tightening of macroeconomic expansion and expected improvement of capital market reform.

With the implementation of the monetary policy report on June 13 as a sign, restraining the real estate bubble and restraining excessive growth of money and credit have become the main tone of the macro-scale.

From August to November, extreme interbank liquidity also appeared.

In addition, from June to August, the existing catalysts for the centralization of capital market reforms, the reduction of conventional shares, the clearance of securities companies’ treasury bond repurchases, and the replacement of Document No. 5 also impacted the liquidity of stock bonds.

  (5) November 19-the end of the year: The negative factors have gradually subsided, and the steady growth and reform and transformation are expected to be driven by the re-heating of the spring 2004 market ahead of schedule.

  In order to better present our logic of dividing the market stage and grasping the main contradictions, next, we will change the fundamental trends, capital market reform and macro diversification from three perspectives, and briefly expand the review in 2003.

  Second, the fundamental trend did not explain the rhythm of the A-share market in 2003 well: the improvement of Q1 and Q4 fundamentals helped market growth, but the improvement of Q3 fundamentals did not prevent the market from decreasing.

  The market’s review of the macroeconomic trends in 2003 is relatively sufficient. We only discuss the fundamental trends in 2003 from the perspective of the performance of listed companies.

The non-financial petroleum and petrochemical revenue gap increased rapidly in 2003Q1, Q2-Q3 fell due to the impact of SARS, and Q4 rebounded; the return of net profit attributable to mothers increased in 2003Q1, Q2 fell due to the impact of SARS, and Q3-Q4 杭州桑拿 rebounded; ROE (TTM) went up quarter by quarter(This trend continued until the third quarter of 2004, mainly reflecting the fundamental trend of improving the supply and demand layout of China’s manufacturing industry driven by the real estate and export dual-wheel drive).

It can be seen that the market growth at the beginning and end of the year has been helped by the improvement of fundamentals, but the improvement of the fundamentals of Q3 has not prevented market replacement.

Fundamental trends are not effective in explaining the rhythm of A-share prices in 2003. At least in Q3, fundamentals are not the main contradiction in the market.

  Third, the reform of the capital market is an important clue to the 2003 A-share market: eight clues, Q1 concentrated fermenting optimistic expectations; Q2 long-term capital entry into the market; Q3 bearish concentration;

  The biannual National Financial Work Conference was held around 2002. 2003 was the year when capital market reforms were gradually implemented, and it was also the first year of the term of office of the Securities and Futures Commission Chairman Shang Fulin.

The capital market reforms in 2003 may not be considered as earth-shaking, but they are indeed the fermentation of the expectations of multiple lines of reform, repeated and reheated, and have a long history.

  In the capital market reform in 2003, we can sort out eight clues, each of which has a direct impact on the trend of A-shares at a specific stage: (in order of the first event time) (1) Relaxing the financing channels of securities firms: available at the beginning of the yearOptimism is expected to ferment, and Q2-Q3 is expected to repeat. Eventually, on August 29, the Securities Regulatory Commission issued the “Interim Measures for Securities Company Bond Management.”

  (2) Reform of commercial banks: In 2003, the reform of commercial banks was still in the general keynote (capital injection and restructuring). The institutional and preparation stages were good for A shares. (Commercial bank reforms are not always good for A shares.The listing of large state-owned banks has triggered expenditures for capital diversion).

On the rhythm, there was optimistic expectations in the early stages of fermentation. The CBRC was established in April, and the adjustment of the Plenary Session of the Third Central Committee in October was an important verification of expectations.

  (3) Increase in the supply of the stock market: Yangtze Power entered the A-share market on November 18, and the market was worried about the diversion of funds before listing. After listing, it became an important force that brought the market upward.

The pressure to reduce the holding of conventional shares is accompanied by the reform of state-owned enterprises (the landmark event was the establishment of the SASAC on March 24). The pilot of state-owned shares transfer in June was one of the direct reasons for the decline in the market, and the way to reduce the holding of the A-share market has little impactDiscussions increased significantly, constituting a marginal improvement.

  (4) Long-term capital entry into the market: The first year of 2003 when QFII and the Social Security Commission invested outside A shares.

The big-cap style in 2003 significantly outperformed the small-cap style, sometimes directly related.

Rhythmically, in February, optimism is expected to rapidly ferment. In May, UBS Warburg, Nomura Securities, and Deutsche Bank became the first foreign institutions to obtain QFII qualifications. In June, Shenyin Wanguo became the first QFII domestic securities investment agent.UBS cast the first purchase of A shares in QFII at Shenyin Wanguo.

In June, the social security funds and 6 fund companies authorized long-term power of attorney.

Long-term capital entry is an important basis for the relatively strong performance of the A-share market in the first half of 2003.
  (5) Long-term and long-term reform: For a long time, the marketization of interest rates has been regarded as negative by A-share investors.

Changes in the basic system, short-term and long-term reforms, will often damage the risk appetite of securities in stages.
The two interest rate marketization expectations that can be checked in 2003 have been fermented (February 21 and December 21), and the market has responded significantly in a single day.

In addition, the core of the fifth order issued on April 10 at the beginning of the year was anti-money laundering, but because of the difficulty related to the implementation of securities-related companies, the stock market expectations were disturbed at the end of July and early August.

  (6) Construction of the stock market system: including the completion of the delisting system in March, and the tightening of the conditions for issuance and listing in September, all of which constituted a phased positive.

The reform of the issuance and placement system for new shares is expected to heat up in April and fail in June, constituting a phased negative.

  (7) Capital market basic law construction: Expected expansion of the securities law revision plan, but the final trial was finalized in December.

In December, the third review of the Securities Investment Fund Law and the promulgation of the Commercial Bank Law were the main achievements of the basic legal construction of the capital market in 2003.

  (8) Improved securities firm supervision system and norms of behavior: The collective trust investment management business of securities firms was suspended in May, and the relevant system was completed only in September.

In late June, the Securities and Futures Commission requested that securities firms with some government bond repurchase quotas submit detailed statistics on government bond repurchase, thus opening up the progress of the securities company government bond repurchase policies and regulations, which caused a certain liquidity shock in the absence of supervision.
  In general, the reform of the capital market in 2003 showed rhythm, Q1 concentrated on fermenting optimistic expectations; Q2 reform of commercial banks and long-term capital entry steadily advanced.

This is the key to the overall strength of A shares in the first half of 2003 under the influence of SARS.

The pains of Q3 policy norms overlap with the temporary failure of the previous optimistic reform expectations, which constitutes a factor that exacerbates the dividend gap; Q4 The negative factors gradually recede, and reform expectations are merged one by one. The Third Plenary Session of the Sixteenth Central Committee has adjusted and strengthened expectations. Spring 2004Quotes start early.

It can be seen that the rhythm of the capital market reform in 2003 is closely related to the rhythm of the A-share market.

  Fourth, the macro budget is another important reminder of the 2003 A-share market: restrain the real estate bubble before August; restrain the excessive growth of money and credit from June to November; tight inter-bank liquidity in August-November hit the bond market.

When all issues were resolved in mid-November, the rebound was justified.

  Although the concentrated implementation of the policy of restoring economic growth appeared in the later period of SARS, it changed the general trend of stricter macro changes in 2003.

The discussion of the real estate bubble in the early stage caused great concern. The extension of the monetary policy implementation report on June 13 identified the direction of macro changes to curb the real estate bubble and curb excessive growth of money and credit. As a result, A shares entered 6-November is trending at some stages.

In August, the stock market rose, the inter-bank liquidity tension continued into November, and the liquidity of the bond market was affected.

Macro gradual tightness is another important reminder of the 2003 A-share market.

  There are three main tips for the average macro budget in 2003: (1) Suppressing the real estate bubble: The State Development Planning Commission set a tone in the real estate market in the “Report on the Analysis of China’s Industrial Prosperity” released in December 2002.It also hints at real estate risks.

On June 13, the People’s Bank of China issued Circular No. 121 “Notice on Further Strengthening the Management of Real Estate Credit Business” to tighten real estate credit.

In the beginning of 2003, the rapid growth of the sales of commercial housing quickly cooled down, and the growth rate gradually decreased.

In mid-July, some provisions of Circular 121 eased and expected growth. In early August, Beijing encouraged foreigners to purchase houses in Beijing. The impact of the tightening of real estate policies on the A-share market only eased.

  (2) Suppressing the excessive growth of money and credit: On June 13, the latest monetary policy implementation report for the first five months was released, proposing that the money supply would grow too fast and adjust the deposit reserve ratio in a timely manner.

The increase in social financing and credit for more than a decade also reached an inflection point in June, and the trend dropped in the second half of the year.

On June 22, it was gradually stated that financial institutions with different capital adequacy ratios would be required to accrue different proportions of reserves. This was the starting point for the discussion on the differential reserve ratio policy (sunset on March 24, 2004).

On August 25, an advance of 1% will help prevent the excessive growth of money and credit.

The policy of tight currency and tight credit did not ease until the end of the year.

The Central Economic Conference on November 29 aimed to maintain a modest increase in the money supply and constitute a marginal relaxation; on December 22, the Daily Monetary Policy Committee stated that the trend of the rapid growth of money and credit was under initial control.

  (3) Tight inter-bank liquidity: The tight inter-bank liquidity during August-November 2003 was actually the result of curbing the excessive growth of money and credit, as well as the non-bank financial institution government bond repurchase business specifications.

On August 25, the yen appreciated by 1%, and on the 26th, it injected 60 billion U.S. dollars in capital. On September 11, the four major state-owned commercial banks required all branches to stop lending to the market, reflecting the lack of confidence in the interbank market.

Until October 21st, Zhou Xiaochuan focused on the comprehensive use of multiple monetary policy tools to transform the growth of monetary credit.

On October 22, a net investment of US $ 25 billion was released on the day ahead of the day, which eased the pressure on the bond market.

The short-term interest rate (the average average interest rate of the 7-day interbank pledged repo) increased from 2 on August 25th.

20%, reaching a high of 3 by November 4.

It quickly dropped after 64%, and fell back to 2 again on November 27.

20% or less.

The tightness of inter-bank liquidity has caused a certain impact on the liquidity of stock bonds, which is an important reason for the decline of stock bonds in 2003Q3 (the bond market replacement has also suffered from the upward impact).

  Obviously, the balance sheet of the People’s Bank of China was in the stage of accelerated expansion during August-November 2003, which restrained the excessive growth of money and credit, changed the trend of continuous increase in foreign exchange accounts and passive liquidity.
Under this circumstance, there are still persistent liquidity tensions in the interbank market. There are two possible explanations: First, strong physical financing needs, insufficient liquidity passive transfer and normal financing needs, then the market may underestimate the Chinese economy at the time.Raw strength.

The second is the signal effect of the RRR cut, which leads to increased friction in the inter-bank market, so the market may underestimate the effect of passive transmission of liquidity.
Therefore, in our opinion, the replacement of the 2003Q3 market that departed from the fundamental trend is oversold, giving birth to a significant rebounding force.

  Fifth, this time may be different: the improvement of the fundamentals driving the logic of the second stage of the spring market failed.

It is difficult to predict in advance when the epidemic situation improves, and A shares will move forward with uncertainty.
The main contradiction between waiting for easing hedging and the economic transition to overweight transfer of A shares.
  Each event needs to be analyzed in the context of its era and market environment. Therefore, when we review SARS, we must not only have SARS in our eyes. We must also see the fundamentals, capital market reform, and macro-scale factors.The trend of the year.

  To analyze the impact of the epidemic, we need to grasp the main contradictions in the market at that time.

The main contradiction of the A-share market in the first half of 2003 was the reform of the capital market. The SARS epidemic eased, and long-term capital entry into the market became a new major contradiction, driving the market to rebound.

To analyze the impact of the latest pneumococcal epidemic situation of new coronavirus infections, we must first realize that in the period when the driving force of the spring market is changing, fundamental verification is more important than in 2003.

The improvement of the early spring fundamentals with a high probability of the epidemic has verified the logic that drives the second stage of the spring market.

Therefore, the short-term adjustment is essentially the early end of the spring market, and the money-making effect needs to be fully contracted.

  When will there be another chance?

First of all, the improvement of the epidemic data is a signal of a rebound, but we must dare to admit that changes in the epidemic situation are not easy to predict, it is difficult for the market to ferment optimistic expectations in advance, and the market can only move forward with uncertainty.

Another major paradox of transfer is policy hedging.

We believe that the restoration of economic growth policy and the improvement of epidemic data may be synchronized.
In the form of policy hedging, we have experience in targeted stimulus to the service industry and small and medium-sized enterprises in 2003, so we recommend that we do not expect too much of a comprehensive stimulus such as a reduction in RRR and interest rates.

In addition, the acceleration of economic transformation and the new type of industrial support policy are related to the weak epidemic situation, but it is easy to get positive market feedback, so it may also be a way to transfer the main contradiction in the market.

The “two sessions” in early March is an important time window, and the market may usher in an upward opportunity again.

  In terms of structural choices, whether the follow-up will be accommodative hedging or economic transformation will accelerate the catalysis. In the end, the market will break through in the direction of technological growth with a high probability.

We mainly recommend investment opportunities for medical informatization, 5G, new energy vehicles and games. In the short-term, these directions also face the problem of insufficient cost performance, and it is difficult to absolutely defend (especially the small market value factor that damages the shrinking of the pre-money effect), and it is more likely to be the market.After the adjustment is sufficient, the direction of the attack can be at least focused on the leader in the short term.