在市场共识的一片“抄底”之声中，中国市场自2014年中见底以来的上升趋势已经被明显破坏了。为遏制房地产泡沫而出台的更多房地产限购措施，以及PSL流动性收紧，使一位理性的投资者很难认同市场已“最终触底”的共识。
我们的疑虑在于，基于最公开可见的估值倍数来判断市场的底部有些太明显。因此，这样的建议可以提供的价值，可能除了安抚已受伤了的投资组合之外，其实是有限的。最近，一位知名学者撰写的一份内参报告显示，股票质押和其它形式的市场杠杆，可能已达到6万亿元人民币，与2015年股市泡沫期间的水平相当。
尽管卖方的研究观点几乎一致看涨，但买方股票仓位因突如其来的暴跌而仍然很重，剩余的、可以用于抄底的现金其实是有限的。禁止强平的规定也可能诱使散户投资者抢在大股东之前清仓。因此，市场上的抛售压力很可能是由基本面以外的因素造成的。即使市场技术超卖，市场情绪也低迷，估值也比以前便宜了，我们继续认为这种条件下产生的任何技术反弹都将是稍瞬即逝的。投资者应坚持等待以后更好的买点，并且应避开因为流动性短缺而产生的、防不胜防的抛售。
中国房地产市场已经是一个明显的泡沫，并在这个关键时刻限制了政策斡旋的余地。假设以40%的首付比例，中国家庭和企业持有125万亿的人民币存款，可以买入相当于略高于300万亿元的房地产 - 这个数字与我们对中国房地产存量的估计相近。这个简单的计算表明，中国房地产的价值已昂贵得快到极限了。我们已经见识了货币政策的局限性。财政政策，比如大规模减税，并重新规划政府税收的来源以改变社会资源的配置，应该被用来填补货币政策无法填补的空白。
这是我们20180703的报告《何处是底》的英文原版《Where is the Bottom》。感谢阅读。
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Amid a chorus call to “bottom fishing”, the Chinese market has prominently violated its uptrend since its bottom in mid-2014. With more restrictions on property purchase to curb the property bubble and liquidity from PSL retrenched, it is difficult to concur with the consensus that the market has arrived at its eventual bottom.
Our doubts have been that market bottom calls based on the most publicly observable valuation multiples are too obvious to offer value, except probably for comforting the portfolios that have been hurt. A recent report prepared by a prominent academic reveals that the market leverage by stock pledge may have amounted to RMB 6 trillion, a similar level to that during the 2015 stock market bubble.
While sell-side sentiment is almost uniformly bullish, buy-side still has high levels of stock holdings and little cash to deploy for bottom fishing. The restriction to force liquidate such leverage even if it fails margin calls may have coaxed small retail investors to front run the large stockholders to sell first. As such, the selling pressure on the market is induced by factors beyond fundamentals. Even if the market is technically oversold, sentiment is low and valuation is cheaper, we continue to believe that any rebound will be transient. Investors should hold out for better entry points later, and should dodge the ambush selling from anywhere because of liquidity.
The Chinese property market is a clear bubble, and is limiting policy choices at this critical juncture. At a 40% down payment, the deposits of RMB 125 trillion held by Chinese households and corporates can buy property worth just above RMB 300 trillion – a figure that is consistent with our estimate of the value of China’s property stock. This simple calculation shows that the valuation of Chinese property is stretched. We have seen the limits of monetary policy. Fiscal policies, such as large tax cuts, and re-planning the source of taxation to re-allocate social resources, should be applied to fill the blanks where monetary policy cannot.
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Where is the Bottom?
Shanghai Composite’s significant uptrend violation. Amid a chorus call to “bottom fishing”, the Shanghai Composite plunged through the lower bound of our trading range of 2800 forecasted last December (“Outlook 2018: View from the Peak” 20171204). More surprisingly, the SSE50 blue chip index, comprising the once so-called China’s “Nifty Fifty” stocks, has prominently violated its rising trend line since its bottom in 2014, and is firmly below the 200-day moving average (Figure 1).
Figure 1: SSE50 blue chip index has violated its uptrend, and is breaking down
The property sector weighing on the market. News flow on the property sector has been particularly negative. PSL by CDB to fund shantytown reconstruction will change to physical resettlement based, instead of cash based. These loans, totally amounting to around RMB 5-6 trillion, have been an important driver of property price bubble, especially in the lower-tier cities.
There are also data showing that only 20% of the households who received cash for the shantytown reconstruction project had opted to buy new property. If so, this cash could have been an important source for the 2015 stock market bubble. Recently, Changsha has extended the holding period to five years after property purchase. Some cities have forbidden property purchase by companies. Other cities where property price has surged could follow suit with their own curbs, in an effort to cool property speculation.
Once the expectation for further gain has turned, it is possible to see waves of property liquidations. Already in Tongzhou, a county neighboring Beijing, the list price of a property on sale has been revised down by 50%. And the mob was so furious that it surrounded the sales office to get even.
We estimated that the value of China’s property stock to be between RMB 300-350 trillion. Assuming Chinese households and corporates apply its total deposit of RMB 125 trillion to pay for all the property inventory with a 40% down payment, the total value of such hypothetical transaction would be just above RMB 300 trillion. This back-of-envelope calculation suggests that Chinese property value is indeed stretched. And regulators must act decisively now.
The property bubble has started to erode consumer confidence, as seen in Figure 2. The latest consumption growth data and consumer loan data show that consumption, one of the important pillars for Chinese growth in recent quarters, is decelerating fast. And consumer loans, too. The aftermath of the property bubble is palpable.
Figure 2: China’s consumer confidence falling from record high, auguring falling bond yields and stocks
Structural liquidity issues with the market. Even so, the rapid deterioration of the Shanghai Composite, especially the SSE50 blue chip index, suggests that something beyond the weakening fundamentals is affecting the market. Since a few weeks ago when the Shanghai Composite was lingering above 3,000, consensus has been referring to the substantially cheapened valuation as the reason for a market bottom.
Our doubts have been that the sell-side sentiment is too bullish for an eventual market bottom. And the buy side, while cautious, still has substantial stock holdings in their portfolios and has little cash to deploy, as the market has been plunging too fast for many to react. Market bottom calls based on the most observable valuation multiples tend to be somewhat hasty.
Our sentiment model suggests that, while the market has substantially scaled back its risk appetite, it is not depressed to its extremes as seen in previous bottoms. For instance, the turnover rate of the SSE50 is still too fast at about its long-term average, and is inconsistent with the typical levels of an eventual market bottom (Figure 3). If the blue chips, which make up 50% of the total market capitalization, will be struggling to find a bottom, so will the overall market. Meanwhile, the Smart Money Index has plunged further to a level that tends to augur impending market crisis (Figure 4).
Figure 3: Turnover rate of SSE50 is still too fast to suggest a sustainable rebound
Figure 4: Smart money’s continuing exodus is foreboding
Be patient for a better entry point later. As such, the sell-off is probably induced by trading structure. A recent report drafted by a prominent Chinese academic that warned of a potential financial crisis highlighted that the leverage in the stock market through stock pledge can amount to RMB 5-6 trillion, a similar level to its highs during the 2015 stock market bubble. Such observations seem to be consistent with the recent startling market movements. The concerns about stock market leverage can also explain why forced liquidation of loans backed by stock pledge was stopped by the authority at midnight a few weeks ago. Meanwhile, these trading restrictions may have coaxed the small retail investors to sell and front-run the large shareholders.
If so, even if the market is technically oversold, sentiment is low and valuation is cheaper, it is still too early to catch falling knives, as there will be further selling for structural liquidity reasons from anywhere. At times like these, technical rebounds will be fleeting, and investors should hold out for better entry points later.
Hao Hong, CFA
2018-07-03
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