Recently, small-cap stocks , which have been ignored for a long time, are returning to the attention of institutional investors. Judging from recent performance, from the low point on April 27 to July 4, the two small-cap stock representative indexes, CSI 1000 and CSI 2000, increased by 34.36% and 31.07% respectively. This increase was significantly higher than the market during the same period. CSI 300 and CSI 500 index are 18.81% and 24.63% respectively.
Industry insiders said that there has always been a rotation of large and small caps in the A-share market . Judging from the market performance in previous years, small-cap stocks performed better from 2013 to 2015. After 2016, due to leverage reduction factors, small-cap stocks entered a period of adjustment. In recent years, with abundant capital liquidity, the A-share market has gradually moved closer to a small-cap style.
Many fund managers believe that small-cap stocks currently have a greater advantage due to liquidity and optimism. As the small-cap style continues to be strong, various public fund companies are also actively deploying such products.
Public equity institutions intensively issue small-cap stock funds
Compared with mainstream broad-based indexes such as the CSI 300 and CSI 500, the small-cap stock representative indices such as CSI 1000 and China National Securities 2000 are little known. However, at this point in time, the market is optimistic about the investment opportunities in small-cap stocks, believing that investment in small-cap stocks is highly cost-effective and is one of the more mainstream styles in the market. At present, the valuation of China Securities Index 1000 is relatively low and is at the low quantile level since the index was released. At this low valuation level, more and more fund companies are deploying small-cap stock products. According to wind data, as of the end of June, a total of 10 small-cap stock funds have been issued in the market since 2022, while only 4 were issued in the same period last year; there were even zero in 2020.
Source: wind
Specifically, Huaan Fund , China Asset Management, Invesco Great Wall Fund , Xingyin Fund , CITIC Construction Investment Fund and many other fund companies have issued CSI 1000 Index related products; Some companies have focused their attention on the more small-cap style National Securities 2000 Index - on June 14, Wanjia Fund launched the market's first product tracking the National Securities 2000 Index, and Shenwan Lingxin Fund also launched This type of product was released on June 29.
In addition, E Fund , Harvest Fund , Guotai Junan Asset Management and other institutions have also reported the CSI 1000 Index Fund. It can be seen that many public offering institutions have raised and deployed such products.
Yang Kun, the fund manager of Wanjia National Securities 2000ETF, said, “From the perspective of style rotation, the rotation of large and small cap styles tends to last longer: 2012~2015 is the small cap style, and 2016~2020 is the large cap style. style, and after the collapse of the group stocks in 2021, they returned to the small-cap style. Behind this phenomenon is the relative performance changes brought about by changes in the macro environment or industrial structure. From 2021 to now, we have found that the market style has returned to the small-cap style. Come on. "The wave of industrial upgrading will bring investment opportunities in emerging industries. From the perspective of medium and long-term development trends, the small-cap style is indeed at the forefront of the market.
Taiping CSI 1000 Index Enhanced Fund Manager Zhang Ziquan believes that the layout of small-cap stocks funds by fund companies will improve the low proportion of public funds in small-cap stocks trading, and will help satisfy the general investors' investment in small and medium-sized stocks. need, on the other hand, it will also help to improve and give full play to the market value discovery function of the capital market for small-cap stocks.
Harvest Fund Enhanced Style Investment Director Liu Bin believes that the current macro environment is more conducive to the small-cap style, and the deployment of small-cap funds by fund companies will also drive incremental funds into small-cap stocks, thus forming a self-circulation of funds and further promoting Strength in small-cap stocks.
The period of strong investment in small-cap stocks has arrived
Why are many public equity institutions intensively deploying small-cap stock funds? Regarding the intensifying style of small-cap stocks in the market, various fund companies explained their relevant views to Hexun Finance.
Huaan Fund believes that the current valuation quantile of CSI 1000 is around the 15% quantile in the past 10 years, which is still at the relative bottom of history, and the valuation security is relatively high. Historically, may be relatively dominant in small-cap stocks under the background of wide currency and wide credit.
Yang Kun believes that when we look back at some situations in history where small-cap stocks have been dominant, we seem to be able to find some patterns. We found that after the crisis, small-cap stocks were more likely to dominate . Because when a crisis occurs in the market, the macroeconomy will be negative, and industries with a high proportion of large-cap stocks tend to have a higher correlation with the macroeconomy. In the period just after the crisis, the economy has not yet improved significantly, and it will take longer for large-cap stocks to recover. Small-cap stocks, under the protection of policies and liquidity, have relatively greater performance and emotional flexibility.
On the one hand, the country’s demands for technological transformation and industrial upgrading are very clear. In the long run, under the incremental economic model, small-cap stocks may dominate in the long term; on the other hand, we are in a short-term situation of post-epidemic crisis recovery. , with the continuous introduction of macro policies and the protection of liquidity, hot spots frequently emerge, and the performance and flexibility of small-cap stocks will be relatively dominant. Combined with the current relative valuation of the National Securities 2000 Index and the absolute valuation of and levels, both are at low levels. Therefore, small-cap stocks are currently more favored by market investors. Xie Yi of
Nord Fund said that the current stage of small and medium-sized caps may be better, perhaps because small and medium-sized caps benefit from more liquidity under the domestic monetary easing environment. It is also possible that the current support policies for industries such as automobiles and home appliances will benefit these industries more, and the targets of industries themselves are , which belongs to the small and medium-sized market value range.
talked about the reasons why the market switched from focusing on large-cap stocks to small-cap stocks. Liu Bin said that the essential reason for the change in style was the change in the macro environment . Historically, with loose money, wide credit, and in the early stages of macroeconomic recovery, small and medium-sized enterprises have higher flexibility in performance recovery and greater sensitivity to liquidity than large enterprises, so the stock price performance of small and medium-sized companies is also more elastic. At present, the domestic economy is in the post-epidemic recovery stage, and the market liquidity is very abundant, so small-cap stocks currently have the conditions to rise. At present, the overall market valuation is still low, but there are internal divisions, and the valuation of large-cap growth stocks is still relatively high. The switch of market attention from large-cap stocks to small-cap stocks is conducive to the spread of sentiment and the convergence of valuations among industries.
Shenwan Lingxin Fund Manager Wang Jian regards the phenomenon of large-cap stocks switching to small-cap stocks. He believes that the willingness behind it may be funds actively choosing to buy stocks with reasonable valuations. As investors' attention to non-track stocks continues to decrease, the investment enthusiasm for small-cap stocks has decreased in the past two years. This may lead to larger pricing deviations in such stocks, making it easier to mine at the transaction level. To develop effective pricing deviation factors, such as the high-frequency data mining and low-frequency volume and price factors that have been popular in the past two years, deep learning mining factors, etc., all use transaction-level data to mine effective factors.
Xingyin CSI 1000 Index Enhanced Fund Manager Li Zhetong said that the market bottom style can be divided into three stages: a decline period, a bottom period, and a recovery period. At present, no matter from the perspective of market valuation, financial or emotional indicators, the market as a whole is in the transition from the second stage to the third stage, leaning towards such a position at the beginning of the third stage.
In the first half of the year, the international situation was not very stable, the domestic economy was under great downward pressure, and the overall inflation level fell from a high level. However, it was still suppressed by overseas factors, so the market and value styles became more resistant. However, as the impact of systemic risk factors such as the Russia-Ukraine war has weakened, the domestic epidemic has been effectively controlled, the resumption of work and production has been carried out in an orderly manner, and the month-on-month improvement in economic conditions has been gradually verified in May and June. In addition, monetary policy and fiscal policy have been exerting force since the end of last year, and the market is now in a very relaxed state. small cap and growth styles have the foundation to achieve high elastic performance. In the future, if the economy recovers as expected or exceeds expectations, credit indicators can be improved, and smooth credit transmission will be more conducive to the performance of small caps and growth styles.
Most institutions hold a positive attitude
When it comes to the future market development of small-cap style, most fund managers are optimistic.
Yang Kun believes that taking the National Securities 2000 Index as an example, from the perspective of profit growth, the National Securities 2000 has indeed significantly shown the characteristics of high growth.From an absolute valuation level, the current valuation of the China National Securities 2000 Index is at a historically low level; from a relative valuation level, the China National Securities 2000 Index is also at a low valuation level relative to the CSI 300 and CSI 1000.
Therefore, the current safety margin of the National Securities 2000 Index is relatively high, and it also has the characteristics of high growth.
In the short term, because we are in the post-epidemic recovery stage. Compared with large and medium-sized companies, small-cap companies have significant advantages in the flexibility of profit repair, sensitivity to policies, and sensitivity to on- and off-site flows.
In the long term, the country's current demands for technological transformation and industrial upgrading are very clear. Under the incremental economic model, combined with the historical law that the rotation of large and small stocks is a cycle of 3 to 5 years, we feel that both in terms of space In terms of both market and time, the relatively strong trend of small-cap stocks is expected to continue.
Wang Jian said that , when the valuation of small-cap stocks is reasonable, it is expected that small-cap stocks may perform better than large-cap stocks ; correspondingly, the performance of small-cap broad-based indexes such as CSI 1000 and China National Securities 2000 may be worth looking forward to. Superimposed on the alpha income of quantitative stock selection , it is expected to create better investment returns in the future.
Liu Bin also holds the same attitude. He believes that, in general, we believe that small-cap stocks will still have advantages in the next six months. The core reason lies in the abundance of liquidity and corporate vitality. But the internal structure of small-cap stocks will also gradually change. In the early stages of economic recovery, small-cap stocks with stronger fundamentals and better industry trends have the opportunity to rebound first. However, as the economic recovery deepens and the liquidity environment continues to be abundant, the market for small-cap stocks may have the opportunity to spread to other sectors such as the real estate chain and consumer chain.
Some fund managers hold a neutral attitude and remind investors to pay attention to risks, keep a calm mind, and never chase the rise or fall.
Zhang Ziquan said that from a quantitative perspective, the market capitalization style has become one of the most important styles in the A-share market. The biggest feature of the style factor is that its future short-term strength is difficult to predict. But whether it is an overseas mature market or an A-share market, because small-cap stocks contain more liquidity risks than large-cap stocks, small-cap stocks have a higher risk premium than larger-cap stocks in the long run. and returns. Small and medium-cap funds can use portfolio investment , diversified investment and other means to help ordinary investors invest in small and medium-cap stocks under the premise of controllable risks.
Overall, the main background for the rebound since the end of April is the improvement of the epidemic and economic recovery. The biggest impact of this round of epidemic is on private enterprises and small and medium-sized enterprises. Therefore, these enterprises have also become the direction of intensive policy protection and support, and there are relatively strong expectations for improvement in the future. Li Zhetong said frankly to Hexun Finance that it can be said that small and medium-sized private technology enterprises, specialized special new , will be the core of the A-share market in the next 5-10 years. If the A-share market develops in a healthy way in the future along with the development of the national economy, then these companies must have contributed important forces, and their market performance will most likely be better. Investors can layout this part of the market opportunities through the CSI 1000 Index.
"Looking backward, we also believe that we have the foundation for such a long-term bull market. Therefore, we recommend choosing excellent small and mid-cap growth stocks from a fundamental perspective, and we also recommend that the impact of valuation should be properly considered. In terms of layout time , maybe when the mood is very optimistic, you need to wait a little. Due to the elasticity of small and medium-sized stocks, many stocks may reach the premium range within a few weeks, and following the trend may require higher buying costs. On the contrary, if you buy when the style suffers periodic setbacks, the certainty of returns may be greater," Xie Yi said.
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