As the year draws to a close, the A-share market is hovering around the 2,900 point mark. On December 26, 2023, the A-shares failed to hold the 2,900 point level, closing at 2,898.88 points, down by 0.68%. Market sentiment is relatively low.
The overall economic performance in 2023 has been lackluster, but major securities firms are quite optimistic about the A-share market trend for 2024.
Some securities firms believe that the macroeconomy in 2024 is expected to recover moderately, with GDP (Gross Domestic Product) growth projected to be around 5%; the issuance of trillion-yuan government bonds has symbolic significance for fiscal policy direction, and the fiscal effort is expected to expand in 2024, flowing into infrastructure projects with high comprehensive social benefits, enhancing the willingness to consume and invest across society; technology is expected to return to an upward cycle, and the A-share market will welcome a recovery trend in 2024; in terms of the securities industry itself, the reform direction is favorable for leading securities firms to grow stronger.
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Regarding the pace of recovery in the A-share market, CITIC Securities believes that the recovery trend may be divided into two stages: the first stage, the main contradiction in the stock market lies in the conflict between the moderate recovery of the domestic economy and the intensification of risks from the deteriorating overseas economy, and the stock market may show a wave-like upward trend; the second stage, the main line may lie in the joint catalysis of domestic policy support and the global liquidity shift, and the A-share rebound elasticity may be greater.
GDP growth is projected to be around 5%.
As the post-pandemic recovery is about to enter its second year, many securities firms estimate that GDP growth in 2024 will be around 5%. UBS predicted at the end of November, "The recent policy intensification will boost economic growth in 2024, and we believe that China may set the economic growth target for 2024 at around 5%."
CICC (China International Capital Corporation) judged that the economic recovery in 2024 will neither be slow nor leapfrogging, but will accelerate gradually. CPI (Consumer Price Index) and PPI (Producer Price Index) inflation may also improve quarter by quarter, but overall it is relatively moderate. With the improvement of economic growth, market interest rates may rise slightly, and the renminbi exchange rate also has room for appreciation.
At the end of October, the central government announced the issuance of 1 trillion yuan in government bonds for local post-disaster repair work, with the use of funds spanning the current and next year. Guotai Junan believes that the 1 trillion yuan government bonds have symbolic significance, and fiscal policy in 2024 is expected to enter a "new era": future fiscal expenditures will pay more attention to infrastructure projects with high comprehensive social benefits but potentially low economic benefits, and improve the level of social public services and security through government purchases of services, thereby enhancing the willingness to invest and consume across society. CITIC Securities also believes that there has been a shift in macro and capital market policy thinking, with more "real money" flowing towards stabilizing the economy and expectations. CITIC Construction Investment believes that in 2024, a loose fiscal policy will be coordinated with a loose monetary policy to reverse the market's pessimistic expectations for the economy and the market.
In 2023, urban village renovation has become an important policy direction, an important step in stabilizing people's livelihoods, promoting consumption, and driving investment, and is expected to drive the growth of two major economic pillars, the construction and real estate industries. In addition to the trillion-yuan government bonds, CICC predicts that in 2024, fiscal and quasi-fiscal policies will intensify, not only increasing support for urban village renovation but also tilting towards people's livelihoods, stabilizing growth in the short term while accelerating the improvement of the economic structure, and also playing a role in cross-cycle regulation.Huatai Securities predicts that the GDP growth will be around 4.5% in 2024. It is noteworthy that there may be two stable growth "windows" in the first quarter and the third and fourth quarters of 2024. With the issuance and use of trillion-yuan special treasury bonds, it is expected that the momentum of investment growth will pick up in the first quarter of 2024. In the second half of the year, it is anticipated that the pressure of deceleration in overseas economic growth will be greater, and the momentum of export growth may weaken. At the same time, the stimulating effect of additional special treasury bonds on infrastructure investment may also decline in the second half of 2024. Overall, the demand for counter-cyclical adjustments may rise after the third quarter of 2024.
Many securities firms unanimously judge that the growth dynamics will shift in 2024. In terms of consumption, Orient Securities believes that domestic demand will move from a post-pandemic rebound to income support. China Merchants Securities also believes that the propensity of residents to consume has basically recovered, and future policies may mainly focus on invigorating the capital market to leverage the wealth effect of financial assets, optimizing the structure of government expenditure, and increasing residents' income through multiple channels.
Regarding the future economic direction, CICC (China International Capital Corporation) judges that the marginal consumption momentum is weakening, and the economic situation may evolve from "endogenous bottoming out" to "exogenous recovery." Huatai Securities estimates that next year's macroeconomic trend will be more conducive to the growth of structural investment and high cost-performance, emotional value consumption, with the contribution of net export value to growth remaining high, and the pull of net export volume on actual GDP may further increase.
A-shares growth style is favored
The overall performance of the A-shares market in 2023 was lackluster. Many securities firms predict that with the mild repair of the macroeconomy and the upward trend of corporate profits in 2024, coupled with the end of interest rate hikes by the Federal Reserve, the pressure of capital outflows will be alleviated, and A-shares may regain global capital favor. The combination of multiple internal and external factors will boost the A-shares market.
CITIC Securities believes that market confidence will regroup in 2024, and changes in investor behavior driving valuation repair will be the main theme of the A-shares market. Haitong Securities also believes that the fundamental recovery of A-shares in 2024 will be an effective support for market growth, and structurally, technology and consumption may be the main drivers of A-shares profit growth.
Structurally, during the economic upcycle, the possibility of growth style dominance is greater; during the economic downcycle, due to its strong defensiveness, the value style is favored. China Merchants Securities believes that under the background of economic recovery in 2024, the improvement of internal and external environments will drive capital inflows to become moderate, and A-shares are expected to maintain a structural bull trend with a gentle upward trend, with the growth style relatively favored structurally. Haitong Securities also adds that in 2024, structurally, white horse growth may be favored, and attention can be paid to hard technology and pharmaceuticals. Among them, in hard technology, focus on electronics, digital infrastructure, and AI (artificial intelligence) applications; in pharmaceuticals, pay attention to innovative drugs, blood products, medical devices, and other sub-segments.
Similarly, Shenwan Hongyuan believes that the main tone of A-shares in 2024 will be structural bull, but overall, it is still a volatile market, mainly for three reasons: First, the A-shares market does not yet have the foundation for incremental game play; second, the establishment of China's new economic paradigm requires time, and the "transition period" where the old and new paradigms coexist may be relatively long, and investment opportunities from optimistic economic expectations are still relatively few; third, in the second half of 2024, the new economic capacity of investment from the United States, Japan, and South Korea will accelerate, and the pressure of external cycle competition will be great.
In terms of industries, smart and technology themes are key areas that many securities firms are optimistic about. China Merchants Securities believes that in 2024, the entry into a major innovation cycle, AI+ is driving new changes in products and business models, guiding technology back to the upward cycle, and the acceleration of intelligent construction across society will lead to an increase in spending, investment, and consumption demand in the technology sector. China Merchants Securities recommends paying attention to technology, pharmaceuticals, and some cyclical industries with clear industry trends, large improvements in prosperity, and good capacity supply and demand patterns. CITIC Construction Investment believes that in 2024, the investment in the pan-AI field will enter a stage of eliminating the false and retaining the true, the digital economy will promote the expansion of production factors, and the new type of industrialization will accelerate the landing, and it is recommended to focus on AI, going global, import substitution, automotive intelligence, robots, and other fields. China Galaxy believes that areas such as central and state-owned enterprise reform, domestic substitution of scientific and technological innovation (electronics, communications, computers, media), security fields (food security, digital economy, national defense and military industry), and green and low-carbon (photovoltaics, green electricity, new energy, etc.) are also worth paying attention to.
Looking back at the financial industry, technology will also become a key word in 2024. In recent years, the central government has attached great importance to improving the financial support system for scientific and technological innovation, promoting the integration of finance and technology, and the central financial work conference has placed financial technology at the forefront of the "five major articles," which shows the importance of financial technology. Guoxin Securities believes that AI and other technologies may reshape the financial work model, and wealth management will first be improved in terms of efficiency and customer acquisition, and future related research and development will never stop.In response to the various transformations that AI technology (AIGC) is bringing to the financial industry, Guotai Junan has made detailed predictions. In the field of financial information services, AIGC will drive customers to seek more accurate and comprehensive information as well as deeper logical analysis content, and it is expected that the demand for intelligent investment research and advisory products will significantly increase. At the same time, AIGC will also help financial information service providers to enhance their product capabilities and create more investment research and advisory products. In the third-party payment sector, the demand side, such as merchants' advertising and marketing needs, is expected to grow, and the supply side will show clear cost reduction and efficiency improvement effects. In the consumer finance sector, AIGC, with its stronger analytical and comprehension capabilities and voice parsing capabilities, can enhance efficiency in multiple stages such as marketing acquisition, risk control, and collection.
The development of the securities industry is worth looking forward to.
The 2023 Central Financial Work Conference proposed the goal of "building a strong financial country and promoting high-quality development of finance," clearly supporting the leading securities firms to excel and strengthen, promoting the implementation of the investment reform action plan, highlighting the role of the capital market as the main channel for mergers and acquisitions, and at the same time optimizing the risk control indicators of securities firms to improve the capital efficiency of high-quality securities firms.
Under the momentum of reform, various securities firms are actively predicting the development direction of the securities industry. For example, Huatai Securities believes that policies will bring benefits in all aspects: first, the third-party referral rules are expected to be further implemented, smoothing the cooperation channels between securities firms and internet platforms, other financial licenses within the group, etc., laying the foundation for the increase of wealth management business; in addition, the variety of derivatives is expected to further expand, providing more risk management tools for the capital market, promoting the stable development of the market, and at the same time, the restrictions on the use of derivatives by various institutional investors are expected to be relaxed, enhancing the trading activity and risk management efficiency of the derivatives market.
On the business level, CITIC Securities expects that various businesses will transition from a core focus on licenses to a core focus on professional capabilities. In investment banking, financial advisory and consulting services centered around the full life cycle of enterprises are expected to usher in development opportunities; investment trading business will actively adapt to the direction of capital market reform, serving the development of the capital market on the investment side while strengthening risk prevention; institutional service business will focus on building a one-stop PB (Prime Brokerage) service capability, creating a new type of institutional service; international business will also pay more attention to the depth and breadth of layout, enhance the influence in the international market, and promote high-level financial openness.
Guotai Junan is optimistic about the development of leading securities firms such as CITIC Securities. Specifically, the securities industry will undergo three major changes: in terms of customer demand, the entry of medium and long-term institutional funds into the market will give rise to more institutional business needs for securities firms, and leading securities firms with competitive advantages in institutional business will benefit more; in terms of business models, policies supporting high-level technological self-reliance and strength will give rise to changes in the service models of securities firms, and leading securities firms will be better able to meet the comprehensive, professional, and full life cycle service needs of technology companies; in terms of competitive landscape, policies that cultivate first-class investment banks and investment institutions are expected to be introduced, which will benefit leading securities firms and give rise to more mergers and acquisitions, and it is expected that the market concentration will further concentrate on the leading firms.
Ping An Securities also believes that leading securities firms have a leading professional strength, risk control ability, and comprehensive capabilities, and have stronger risk resistance, and are expected to further enhance their competitive advantages under the background of strict regulation and classified regulation. In terms of specific selection, it is recommended to focus on CITIC Securities and Huatai Securities. Huatai Securities adds that regulations that are beneficial to leading securities firms are expected to be further implemented, bringing new opportunities for the growth of investment banking business, reshaping the competitive landscape, and helping leading securities firms to break through the market share.