Guojin Securities: Switch is not the core, active defense is the main idea

The Zhitong Finance App learned that recently, Guojin Securities released a research report saying that due to the extensive suppression of the AI investment cycle in terms of fundamentals, the order in which the next events occurred: AI-related investment chain stock prices peaked — fundamentals peaked — global real interest rate suppression lifted — fundamentals in the non-AI sector were repaired. Therefore, objectively, the market does not support direct and effective high/low switching. However, you can't use this as an excuse to run wild in the face of strong assets. For institutional investors who must stay in the market, active defense is recommended.

The configuration recommendations are as follows: First, the low energy price level is gradually determined, and the petroleum and petrochemical sector is a good absolute profit combination, and the petroleum and petrochemical sector ushered in valuation restoration; second, controlling positions in the field of technology and improving sharpness is the main policy. Semiconductor/AI materials, semiconductor equipment and manufacturing are important ways to invest in “inflation” and an effective defense during the first half of the “stagflation” period; third, during the wandering period where high real interest rates are still being suppressed by high real interest rates, you can consider the left-hand layout to focus on the direction of industrial metals, construction machinery, power grid equipment, refining, etc..

Guojin Securities's main views are as follows:

The tail effect of deleveraging on the trading side is the direct cause of the sharp decline in the market

Recently, the A-share market fell sharply and technology stocks led the decline. The Science and Technology Innovation 50 Index fell 3.4%; the Japanese and South Korean stock markets fell simultaneously. The Nikkei 225 Index fell 1.9%, and Korea's KOSPI Index fell nearly 9%. In the previous report “Observations after Deleveraging Transactions”, the agency indicated that tradable fluctuations in technology stocks may continue for some time. The direct trigger for the drastic adjustments in A-shares and overseas technology stocks is that the overseas trading side is deleveraging, and A-shares are also indirectly following: Korean stocks have been the best performing market in the world since mid-March, but the market financing balance has dropped from 64.9 trillion won to 60.8 trillion won in the past two weeks, and the amount of Japanese stock financing has also declined markedly. The implied volatility of the options market has declined rapidly compared to actual volatility, which is also a sign of the withdrawal of leveraged capital. Previously, South Korea's financing ratio had reached its historical extreme, and overly optimistic expectations and slightly loose fundamentals triggered this process. The downturn and deleveraging process in overseas markets was also transmitted to A-shares: as of July 10, the balance of loans fell by 88.20 billion yuan from the high point at the end of June, and the share of financing purchases in total turnover also declined to a low during the year; looking at the options market, the one-month implied volatility of the Science and Technology Innovation 50 Index widened to -2.8% compared to the realized volatility, which in itself was a sign of deleveraging.

The global financialization expansion process is being blocked, and fluctuations in stock games are being amplified

Deleveraging on overseas trading in the last two weeks has caused significant market fluctuations. The background is that the process of global financialization expansion is slowing down. Since April, although the US stock market has rebounded strongly since the conflict in the Middle East began to ease, the performance of the European and Hong Kong stock markets has been relatively weak, and Bitcoin and gold prices have continued to decline. The share of the world's major financial assets in global M2 has continued to decline in the last two months, from a high of 91.6% to the current level of 88.6%, slightly below the historical average +1.5 times standard deviation. The pressure to fall back from a high level is obvious. Considering the critical views of the new Federal Reserve Chairman Walsh on the Federal Reserve's previous tools to drive the government's balance sheet, the period since 2020 when the Fed promoted the simultaneous upward trend of various types of financial assets may have become a thing of the past, and the performance of major global assets has also clearly diverged since March of this year. The slowdown in the expansion of global financialization means that global assets will compete more intensively for stock liquidity, which has also amplified fluctuations caused by deleveraging overseas transactions in the last two weeks. The financing needs of the US AI chain itself and the investment value in the secondary market are forming new sources of financial surpluses in addition to US bonds. In the future, there will also be contention for liquidity between the US market and the non-US market within the AI chain, which will become a potential source of volatility.

Fundamental trends are the final observation of whether the technology market has peaked

This round of technology stock adjustments is more similar to the decline in mobile internet in June 2015, core assets in February 2021, and new energy in November 2021. Transactional fluctuations triggered the first round of market adjustments, but there was not much fundamental evidence, and they all rebounded after transactional fluctuations. Currently, the fundamentals of the AI industry are relatively stable. Token prices and usage have rebounded steadily in the last week, and are expected to rebound within 1-2 months. However, it is worth noting that the decline in mobile internet profit margins and ROE in the 2016 Q4, the Mao Index ROE peaked in the 2021 Q3, and the decline in the revenue and profit growth rate of the Ning Combined in 2022/Q4 will all occur after a decline and rebound in what appears to be trading fluctuations. Corresponding to the current round of the technology industry, if there is a slowdown in the growth rate of token consumption and semiconductor shipments, it will be a characteristic of the stagflation period of the current round of technology investment cycles proposed by us, and the perfect downward logic will be verified at that time.

Risk Alerts

Domestic economic recovery fell short of expectations; overseas economies declined sharply.