(Report Producer/Analyst: Shenwan Hongyuan Securities Lu Haochuan)
1. Preface: The times move forward, and the seas and fields are changing.
Throughout the two decades of China's stock market, my country's capital market was born at the beginning and eventually became a towering tree. From the wealthy "coal boss" to the crazy real estate, from the " Internet + " craze, to "Ning" and "Mao" being king. Every company and every industry has had its own glorious years and stood on the top of its own wave. The lucky ones sit on the giant wheel of history and roll forward when they are young and strong; the weak ones run with arms high, but they cannot escape the fate of being abandoned by the times. The details of these successful, failed, surviving, and struggling enterprises ultimately constitute history.
Learning from history can help us know the ups and downs. In "Listen! In the "Voice of the Times" series of reports, we will lead readers to review the "tide-setters" who have been in each wave of the times, and take a look at the changes in the "core assets" of A-shares over the past twenty years. When Shanghai Shenyin & Wanguo Research Institute was founded, we were committed to keeping pace with the times. For example, Zhang Hui, then a researcher in the light industry and papermaking industry, wrote in 1998 in the report "The Papermaking Industry Revitalized during Adjustment" that he envisioned the future of China. The papermaking industry has conducted a very forward-looking analysis. The historical picture is slowly unfolding. We will start from the beginning of the 21st century, from the years of China's rise from 2000 to 2007...
Judging from the proportion of the top 100 market capitalization companies in each Shenwan first-level industry, From 2000 to 2007, the capital market was dominated by cyclical stocks (see Appendix 3 for details). In 2000, public utilities were still the industry with the largest concentration of the top 100 companies by market capitalization, with steel and banks ranking second and third respectively. After China joined the WTO in 2001, transportation stocks represented by ports, airports, and highways suddenly emerged, surpassing banks in terms of market value and ranking third. With the launch of and Sinopec , the chemical industry has occupied the position with the highest market value in the next five years. It was not until 2006 that ICBC , BOC and other large-market bank stocks were listed one after another. The dominance of the three industries of chemical industry, public utilities and transportation was broken, and banks became the industry with the largest market capitalization. From 2006 to 2007, the unprecedented "coal boom" bull market started, pushing the market value share of the mining industry to second place. At the same time, securities firms also rushed to be listed in the bull market of 2007. The number of listed companies expanded from 1 at the beginning of the year to 7 at the end of the year. As a result, the market capitalization share of the non-bank financial industry also rose to third place.
2. 2000: Science and technology wakes up from the dream, the bubble bursts
On the first trading day of 2000, the Shanghai Composite Index rose 2.9%, ushering in a good start to the new millennium. When investors exclaimed "what a good sign", to the surprise of most people, what was bred under the optimism and hope was the bursting of the A-share technology stock bubble for the first time.
"519" Quote: When A shares encounter Nasdaq network myth.
This round of speculative bubble has emerged since 1995 and took the lead in the stock markets of many countries such as Europe and the United States. The stock prices of companies related to technology and the emerging Internet have risen rapidly. The myth of Nasdaq Internet stocks in the United States was later spread to Asia, affecting the restless hearts of A-share investors. In 1999, top management actively released profits to stimulate the domestic stock market, and introduced a number of policies to support high-tech industries. Technology stocks and Internet stocks became the "darlings" of the market, thus giving birth to the "519" market marked by the explosion of Internet stocks. On May 19, 1999, the Shanghai Composite Index surged 4.64%, and within the next 30 trading days, it surged 64.1%.
Bubbles in the carnival.
Since then, a high-tech storm has swept the stock market. Whenever a company's name is linked to technology or the Internet, its stock price skyrockets, and as a result, there has been a wave of name changes in the stock market. From 1999 to 2000, 43 companies changed their names to "technology, investment, high-tech, network", etc., with an average increase of 156%. Under the hype of pseudo-"high-tech" concepts that completely deviated from fundamentals, the stock prices of "tech and Internet stocks" peaked in March 2000, and the bubble burst.
Yian Technology: Fireworks in the prosperous age are fleeting.
Former "star stocks" include Yi'an Technology, Kelihua, Variety Show, Top Software, Fenghua Hi-Tech, Datang Telecom, Shanghai Merlin, Haihong Holdings, Chengcheng Culture, Oriental Electronics, etc. Among them, Yi'an Technology is the most famous.
On March 2, 1999, Yi'an Group acquired Shen Jinxing. Driven by the restructuring news and the "519" market, the stock price soared from 14.09 yuan on March 2 to a maximum of 126.31 yuan on February 17, 2000, an increase of 9 times, becoming the first 100-yuan stock in mainland China. During this period, the company continued to release good news to push up the stock price.
On June 24, 1999, the company changed its business scope and added many so-called "high-tech" businesses such as "electronic communications, digital technology, network engineering , development, production and sales of bioengineering products". On August 11 of the same year, the company changed its name to "Yi'an Technology", signaling to the outside world that it would take a high-tech route. However, as the dot-com bubble burst, Yi'an Technology's share price entered an endless decline, and by the end of 2000 the share price was halved.
On January 10, 2001, the China Securities Regulatory Commission officially announced the filing of a case to investigate suspected manipulation of Yi'an Technology's stock. On April 26, the China Securities Regulatory Commission imposed penalties on four companies involved. With this as a sign, the myth of Yi'an Technology was officially shattered, the leader collapsed, and the hype of technology stocks and Internet stocks came to an end. (Report source: Yuanzhan Think Tank)
3. 2001: China’s accession to the WTO, the rising tide from the East, activated a pool of spring water
2001: China’s economy hit the bottom for the second time, kicking off the four-year bear market. The 519 market continued until June 14, 2001, when the Shanghai Composite Index reached its highest point of 2,245 points. That day's " state-owned shares reduction " policy dealt a fatal blow to the stock market. The two-year bull market ended and began a four-year bear market journey. Affected by the slowdown in global economic growth, external demand fell rapidly, and China's economy hit its second bottom. The export growth rate dropped from 27.8% in 2000 to 6.8% in the following year. At the same time, 2001 is also known as the year with the worst performance of listed companies in history. First, the use of the new accounting standard has a greater impact on the performance of listed companies. Second, due to the 2001 Yinguangxia , Several financial fraud incidents such as Lantian Shares broke out in a concentrated manner, and supervision became stricter.
China officially joins the WTO: Difficulties and obstacles will eventually come to the WTO, and there will be times when there will be long winds and waves.
At the same time, China, the "Giant of the East", is quietly rising. After 15 years of long negotiations, China officially joined the World Trade Organization (WTO) on December 11, 2001, starting a new growth cycle from 2002 to 2007. "Accession to the WTO" marked the beginning of China's in-depth participation in the global division of labor system, and exports became the leading force driving GDP. China has also transformed from a government-led, policy-based opening to the outside world to a market-led, institutional opening-up. The "WTO accession concept" sector, represented by textiles and clothing, foreign trade, ports, and transportation, bucked the trend and performed most brilliantly.
The core assets in the era of "joining the WTO": port + shipping.
In the export industry chain, since the port and shipping sectors are resource-intensive, it has an innate geographical advantage. Moreover, the number of ports in the country is limited, and the barriers to entry in the port and shipping industry are extremely high. As a result, port shipping has become the sector that will benefit most in the long run. Among them, Yantian Port is located in the hinterland of the Pearl River Delta, which has benefited most from reform and opening up, and leads the country in the number of international routes. After joining the WTO, the company's container throughput averaged a compound annual growth rate of 30% from 2001 to 2007. Under the overall downturn of and , the company's stock price has doubled, and the excess returns are quite significant.
4. 2002-2004: Troubled times, but there are still golden bells and whistles
2002: Exports drove the economy out of the trough, but it has not yet been reflected in the stock market.
In 2002, China's stock market opened with four consecutive weeks of sharp declines and ended with a continued downward trend. During this period, although there were two short-term rebounds due to good news such as interest rate cuts and the suspension of state-owned shareholding reductions, the Shanghai Composite Index finally closed at 1357.65 points. Back to the starting point three years ago.But it is undeniable that, driven by external demand, China's economy recovered strongly in 2002, with a rebound far exceeding expectations. The actual GDP growth rate for the year reached 9.1%, the gross national product exceeded the 1 billion yuan mark for the first time, and the cumulative fixed assets increased year-on-year. The growth rate reached 18.3%, and the cumulative year-on-year growth rate of industrial added value reached 12.6%. The development characteristics of the era of heavy investment and heavy industry planted the seeds for the "Five Golden Flowers" market in 2003. In addition, the most noteworthy event is the official introduction of the QFII system on November 7, 2002, marking the official opening of the domestic securities market to foreign investors. The process of standardization, marketization and internationalization of the A-share market has been greatly accelerated, and value investment has The development of concepts is about to become a general trend.
Winter 2003: Xiaotangshan "Fights against the Epidemic".
mentioned that in 2003, the most profound thing that impressed everyone was the SARS epidemic. Shouting the slogan of "United as one, united as one" to fight against SARS, tens of millions of medical workers stepped forward to build a steel Great Wall to prevent the spread of the epidemic. In fact, the market situation that was truly dominated by the epidemic in 2003 was very short-lived (see "This time may be different - a brief review of A-share trading in 2003 and the reflection of the impact of SARS on the current situation" for details). The first reported case of SARS was admitted to hospital in Heyuan, Guangdong on December 15, 2002. During the early stages of the epidemic, the market did not realize its seriousness. Five months later, it was not until April 16, 2003, that the management fully disclosed the prevention and control of SARS, and the market began to adjust. It can be said that the correction caused by SARS only lasted for 8 trading days from April 16 to 25. With the Ministry of Health announcing on August 16 that the number of SARS cases in China has been cleared, SARS has officially come to an end, but investors’ fear has not dissipated. Under the trend of strict macroeconomic control of , the market continued to fall until mid-November.
Medical and Biological: The only “survivor” in the stock market during the SARS period.
In 2003, most A-share assets fell, but the medical sector performed exceptionally well during the epidemic. It can be said to be a world of ice and fire compared to the dismal performance of liquor, tourism and airline stocks. In the early days of SARS, it was widely spread that isatis root could be used to prevent and treat SARS. The isatis root in pharmacies in various places was sold out, and the stock prices of Baiyunshan and other isatis root production companies experienced a short-term surge. On February 26, Academy of Military Medical Sciences discovered virus particles and took clear photos, confirming them to be coronaviruses. Subsequently, Xinghu Technology , Tianyao Co., Ltd. and other antiviral drugs became the darlings of the market. On April 25, the State Food and Drug Administration announced that recombinant human interferon α-2b spray will enter the clinical trial stage in the near future. The "α-2b" concept stock represented by Neptune Biotechnology has become that wave of pharmaceutical market trends. The final glory.
In 2003, despite great economic difficulties, China still achieved excellent results.
Fortunately, the impact of the SARS epidemic on China's economy was short-lived. Investment has been booming and economic growth has been unstoppable. As Central Economic Work Conference summarized that year, "The difficulties encountered were greater than expected, but the results achieved were better than expected." For the whole year of 2003, the growth rate of real estate investment reached 29.7%, and the growth rate of fixed asset investment reached 27.7%. The economy was labeled as "overheating". As the midstream and upstream industries have not yet recovered from the overcapacity reduction cycle that began after the Asian financial crisis in 1998, the sudden investment cycle has led to a shortage of steel, cement, coal and electricity, and soaring prices, thus spawning the "Five Golden Flowers" in the stock market. "Quotes.
The core asset in the era of heavy industry and heavy investment: Five Golden Flowers.
The "Five Golden Flowers" market refers to the overall strength of large-cap blue-chip stocks represented by the five leading sectors of steel, petrochemicals, automobiles, electric power, and banks in early 2003, becoming the most beautiful scenery in the stock market. Among them, the steel stocks are led by Baosteel Co., Ltd. , the automobile stocks are represented by Changan Automobile and SAIC Group, the petrochemical stocks are led by Yangzi Petrochemical and Sinopec, the electric power stocks are led by Huaneng International and Yangtze Electric Power , and the banks are Led by China Merchants Bank .
The soil where the "Five Golden Flowers" bloom: The entry of QFII funds into the market has driven the popularity of the value investment concept.
This is also closely related to the vigorous capital market reform and the entry of long-term funds into the market at that time. On June 7, 2003, the China Insurance Regulatory Commission approved insurance companies to establish asset management companies, and insurance funds will soon enter the market. On July 9, UBS placed the first QFII order with Shenyin & Wanguo , buying Baosteel, SIPG Container, Sinotrans Development , ZTE , marking the official entry of QFII funds into the market. On July 24, the 103 and 104 combinations of the Social Security Fund appeared for the first time in the semi-annual reports of Hangzhou Iron and Steel Co., Ltd. and Lutianhua. As the number of institutional investors continues to grow, the concept of value investment has become popular in A-shares, and the concept of “core assets” has become a buzzword among major institutions. "Five Golden Flowers", as a synonym for high-growth blue-chip stocks in the past, has been vigorously pursued by institutional funds under the label of being able to "share the benefits brought by China's sustained high economic growth." On June 30, 2003, Kang Wei and Cheng Zhou, then strategic researchers at Shenyin & Wanguo, released the report "Lock-in Returns and Focus on Marginalized Assets—A-Share Market Investment Strategy in the Second Half of 2003", which clearly defined core assets. The trend of
"Five Golden Flowers" showed obvious differentiation in 2004.
Steel, automobiles, banks and other sectors followed the market and experienced significant declines, while coal, electricity and oil continued to perform well. This is closely related to the differentiation of the fundamentals of various industries at that time.
Automobile: From "profit surge" to "increasing revenue without increasing profits".
China's automobile industry has entered a cycle of rapid growth since 2002. The fundamental reason is the rapid growth of China's economy. Corporate profitability and residents' income have been greatly improved. Market demand has exploded. Annual sales of automobiles have exceeded 3.24 million units, year-on-year. An increase of 37.5%. In particular, personal consumption power has begun to be released due to continuous accumulation, and cars have entered the homes of ordinary people, with the fastest sales growth among the three major models. At the policy level, the country has relaxed industry access restrictions, and private capital has begun to pour into the automobile and auto parts industries. New car products have been launched one after another, and output has increased by leaps and bounds. The state has also promulgated a number of car purchase tax reduction and exemption policies, which has contributed to the prosperity of the automobile market. In addition, the wave of mergers and acquisitions and restructuring of automobile companies has continued one after another. FAW's reorganization of Tianjin Automobile, SAIC's investment in South Korea's GM Daewoo, Dongfeng's cooperation with Nissan, represent the first time for Chinese companies to participate in the reorganization of the international automobile industry.
Changan Automobile: the first shot of a domestic automobile brand.
Changan Automobile, as the darling of the automobile sector at the time, had the most astonishing increase. In 2002, Changan Automobile Hebei Company was established and put into production. It mainly produces Changan Star , Changan Star Card and other commercial vehicles. Its joint ventures, Changan Suzuki, Changan Ford, and its own mini-cars, are advancing hand in hand. The company's net profit attributable to the parent company in 2002 surged 520% year-on-year.
Catalyzed by the theme of foreign mergers and acquisitions and the "Five Golden Flowers" market, the stock price doubled in 2002-03. However, in 2003-04, a large number of joint venture car companies were established, production capacity was greatly expanded, and car companies faced a situation of "increasing revenue without increasing profits". Although the industry ushered in a large number of mergers and acquisitions and reorganizations of automobile companies in 2004-05, and the clearing of production capacity was accelerated, it was difficult to save the industry's overall net profit growth from negative growth. Overall, the auto sector as a whole still underperformed the market during 2004-07.
Steel: the most growing industry of the year.
After 1994, my country's economic growth declined as a whole, and the decline in steel demand led to a sharp drop in steel prices. At the same time, steel production continued to grow.
In order to maintain the interests of steel companies, relevant departments adopted measures to limit production and protect prices in the steel industry in 1999, requiring steel production to decrease by 10% for three consecutive years, to less than 100-110 million tons in 2000. In 2001, in order to protect its own steel companies, the United States triggered a global steel trade war, which caused a large amount of imported steel to flow into our country and the profits of steel companies fell sharply.
Faced with this severe situation, my country has launched an anti-dumping investigation into cold-rolled plates since 2002. The prices of steel products, mainly plates, have recovered strongly, and corporate profitability has increased significantly.Moreover, as the economy returned to growth that year, the growth rate of fixed asset investment increased rapidly. As a typical "procyclical" product, steel benefited from the real estate and automobile industries and became the benchmark for growth stocks that year.
After experiencing the large-scale expansion of the industry in 2002-03, the country had to introduce a series of measures to curb overheating of steel investment in 2004, resulting in a brief correction in the steel index . However, driven by strong demand, this round of industry prosperity lasted until the 2008 financial crisis.
Baosteel Co., Ltd.: the pearl of the steel industry.
Baosteel Co., Ltd., as one of the representative projects that China's steel industry has embarked on a new path of open development, has experienced the ups and downs of China's steel history. From 2003 to 2005, the company's ROE remained above 20%, reaching a maximum of nearly 25%.
In this upward cycle, Baosteel has become a veritable 5-fold stock. The company's stock price reached its highest value of 12.61 yuan on October 16, 2007 (before restoration of rights), and it has not yet been broken through. Sun Zhanjun, a researcher at Shenyin & Wanguo Steel at the time, published "In-depth Research on Baosteel Co., Ltd." as early as July 2002, and was optimistic about the medium- and long-term investment value.
Electricity: " power shortage " is coming.
In the 1990s, the growth rate of my country's power generation installed capacity has always been maintained at 7-10%. However, in the context of sluggish power demand, excess power directly led to the introduction of the unwritten policy of "no plant construction for three years" at that time. In 2002, my country's heavy industry suddenly took off. In 2003-04, the average annual power demand growth rate exceeded 15%. The "power shortage" problem suddenly emerged, leading to large-scale power cuts across the country. The shortage of electricity also gave rise to a round of thermal power investment peak spanning 2003-2005. Eventually history repeated itself. From 2005 to 2009, there was another oversupply of electricity. The number of power generation hours in the thermal power industry continued to decline year after year. From then on, the power industry began a long and difficult journey.
Huaneng International: Gone are the high gross profits.
At that time, Huaneng International ranked among the top ten holdings of public funds. The company's gross profit margin remained above 25% throughout the industry boom cycle from 2002 to 2004, and the asset-liability ratio continued to decline. This was closely related to the low coal price at that time and the increase in unit utilization. During the "Five Golden Flowers" market period (early 2003 to mid-2004), the stock price rose by nearly 130%. As early as 2001, Cao Yanping, a former researcher at Shenyin Wanguo Electric Power Co., Ltd., began to pay attention to the company and recognized its development potential in the context of the times. In addition to Huaneng International, Yangtze Power, now the leader in hydropower, is also beginning to show its prominence.
In addition to Cao Yanping’s early tracking, Zhang Meichai, then a researcher at Shenyin & Wanguo Electric Power Co., Ltd., released “In-depth Research on Yangtze Power (600900)” in September 2004, which mentioned that “the company’s performance has been growing steadily over the long term, with high dividend yields and low capital costs. , Investors with a long investment cycle are recommended to increase their holdings in the long term."
Petrochemicals: Stock prices are soaring along with oil prices.
The rising power of the petrochemical industry mainly comes from the rise in oil prices. Affected by the war, international oil prices entered an upward cycle since the end of 2002. Since then, the global economic recovery has driven up oil demand, and crude oil prices have been rising until the financial crisis broke out in 2008. The profitability of petrochemical companies is positively related to oil prices. During this period, the revenue and profits of Sinopec, the industry leader, hit new highs every year, and the stock price soared, becoming one of the ten-fold stocks in the past.
Bank: short-lived hype.
As a scarce resource in the market at that time, bank stocks also experienced considerable gains in 2003 due to the theme of foreign mergers and acquisitions. However, the "golden flower market" of bank stocks only lasted until the beginning of 2004 and then ceased. The real stock price rising cycle driven by the improvement of industry fundamentals did not appear until 2005. We will further explore in the next chapter.
In addition to the "Five Golden Flowers" market, in 2003, today's industry giants such as Conch Cement and BOE A also began to emerge.
Conch Cement: From a mountain cement factory to a Fortune 500 company.
Cement has entered the industry boom cycle amid the high growth rate of real estate and infrastructure investment.In 2003, due to the SARS epidemic and the "power shortage", the cement market was in short supply in the fourth quarter, and cement prices also rose accordingly. With the support of the "T-shaped development strategy", Conch Cement's sales area in the Yangtze River Delta region continues to expand, sharing the dividends of economic growth in the Yangtze River Delta region to a great extent. Cheng Zhou (2002) and Yang Ming (2003-05), then researchers at Shenyin Wanguo Building Materials, had already paid attention to the long-term growth potential of Conch Cement.
BOE A: The largest “reverse merger”.
After the reform and opening up, foreign capital entered China at an accelerated pace, and a "foreign capital M&A" theme craze formed in the stock market. However, BOE A is particularly unique in the market because of its high-value "reverse acquisition". In January 2003, BOE announced the acquisition of the thin film transistor liquid crystal display device (TFT-LCD) business, related patents and team of South Korea's Hyundai Electronics, officially entering the TFT-LCD field, becoming the largest overseas high-tech industry deal in China's history at that time acquisition. In August 2003, BOE once again announced the acquisition of 26.36% of TPV Technology's shares, becoming the largest shareholder of TPV Technology and entering the international capital market platform. BOE A's large-scale acquisition generated strong appeal in the secondary market, and the company's stock price rose by 79.6% throughout 2003.
2004: The premature bull market.
policy is a main thread of the stock market in 2004. On February 2, the "National Nine Regulations" were promulgated to encourage compliant funds to enter the market, support insurance funds to invest in the capital market in various ways, and gradually increase the proportion of funds invested in the capital market such as social security funds and supplementary pension funds. The stock market is stimulating. Rush up and down. Since April, in order to curb the "overheating" of the economy, various macro-control measures have been implemented one after another. On April 25, the central bank announced an increase of 0.5 percentage points. Strictly controlling the scale of loans and increasing the principal ratio of fixed asset investment projects in the steel, electrolytic aluminum, , cement, and real estate industries continued to be negative, and the stock market fell in response. Therefore, 2004 is also known as the "dead bull market." The IPO was suspended at the end of August, and in mid-September, senior management emphasized the implementation of ", nine national regulations, ", and the market experienced a short-term slight rebound. However, the refinancing news of Baosteel and Hua Xia Bank at the end of September once again triggered a market correction. On October 28, the central bank announced that interest rates would be even worse for the stock market. In the end, the Shanghai Composite Index closed at 1266.50 points, down 16.4% for the whole year. %.
Although the market performance is sluggish, today's leading companies such as Wanhua Chemical and Shanghai Airport have taken an important step on the road to growth and recorded eye-catching gains.
Wanhua Chemical: Started the large-scale production expansion phase of MDI.
Wanhua Chemical (formerly known as Yantai Wanhua) went through a technology accumulation stage from 1978 to 1998 and became the sixth company in the world to own diphenylmethane diisocyanate after BASF, Bayer, Huntsman, DOWS and Mitsui Chemicals. (MDI) manufacturing technology with independent intellectual property rights, becoming the only domestic enterprise engaged in MDI production and sales.
Since 2001, the company has embarked on a large-scale expansion of MDI production, expanding its production capacity from 40,000 tons in 2001 to 1.8 million tons in 2014, gradually consolidating its leading position. From 2004 to 2005, as the company's Ningbo 160,000-ton MDI project continued to advance, the company's stock price rose nearly 2 times against the market's decline. Zheng Zhiguo, then a researcher at Shenyin & Wanguo Chemicals, published "Yantai Wanhua In-Depth Research" on September 5, 2003, which provided a detailed analysis of the investment value of Wanhua Chemical. Huang Xiaojian began to pay attention to Yantai Wanhua as early as 2001.
Shanghai Airport: Benefiting from the economic growth dividend of the Yangtze River Delta.
At the beginning of the 21st century, with the acceleration of economic marketization and internationalization, China's aviation industry has ushered in historic development opportunities. As one of the three largest airports in China, Shanghai Airport has maintained rapid growth in air transport volume driven by the rapid economic growth in the Yangtze River Delta region.
From 2000 to 2003, the average annual compound growth rate of passenger throughput at Shanghai Airport reached 11.9%, and the annual compound growth rate of cargo volume reached 22.5%. In addition, in 2004, Shanghai Airport injected 40% of the equity of Pudong Airport Aviation Fuel Company held by the parent company, contributing approximately 20% additional net profit to the company.Catalyzed by this good news, Shanghai Airport rose 53.7% in 2004, ranking at the top of the list of top 100 companies by market capitalization. Zhu Anping, then a researcher at Shenyin & Wanguo Transportation, released an in-depth research report on the company in March 2003. Since then, former Shenyin & Wanguo Transportation researchers Tang Qian and Li Shurong have continued to track the company from October 2003 and August 2004 respectively. recommend.
In 2004, as expectations for 3G network construction continued to strengthen, ZTE achieved impressive gains. Although the telecommunications industry as a whole was still in an adjustment period after rapid development at that time, Zhang Wei, then a researcher at Shenyin Wanguo Communications, began to pay attention to ZTE in 2002. In addition, former Shenyin Wanguo Communications researcher Yang Dali conducted a detailed analysis of China Unicom 's business model issues in 2004. (Report source: Yuanzhan Think Tank)
5. 2005-2007: Thousands of sails have passed, but thousands of trees have come back again.
2005: The determination to reform the stock market and foreign exchange reform has been determined, and the bull market is ready to go.
On June 6, 2005, the Shanghai Composite Index fell below the 1,000-point mark, hitting a new low of 998 points. Fortunately, good news began to pour in from mid-2005. In June, the shareholding reform and the exchange rate reform were launched at the same time. In August, warrant products returned to the market, and the stock index stabilized in the second half of the year, turning the tide. The comprehensive implementation of the share reform means that my country has made breakthrough progress in solving the long-term problem of share split, and the exchange rate reform has opened up the ten-year appreciation channel of the RMB, laying a solid foundation for the bull market in 2006 and 2007.
2006-2007: The economy is overheating, which is bad news.
In 2006, under the background of smooth progress of share-holding and foreign exchange reform, good fundamentals, and sufficient liquidity, A-shares finally ushered in the long-awaited bull market. At the end of the year, the Shanghai Composite Index closed at 2,675 points, a record high. This bull market lasted until 2007. In response to economic overheating and excess liquidity, the central bank raised reserve requirements ten times and interest rates five times during this period, but they were unable to stop the rise of A-shares. On October 15, A-shares reached 6,000 points in one fell swoop, and it has not been breached again so far. 2007 also became the largest bull market in history at the time.
Bank: Reduce non-performing, Nirvana and rebirth.
When it comes to the “brightest star” in the stock market in 2005, it must be banking stocks. The banking sector topped the list with gains of 21% for the year. At the end of 1999, the total non-performing loans of the four major state-owned banks, ICBC, Agricultural Bank of China , Bank of China and China Construction Bank, were approximately 3.2 trillion yuan, ranking second in Asia. Zhou Xiaochuan, then governor of the People's Bank of China, mentioned in the 2012 article "Review and Prospects of the Reform of Large Commercial Banks" that "at that time, many international and domestic mainstream media had very grim descriptions of China's finance, such as 'China's finance is a "It's a big time bomb that could explode at any time' and 'China's commercial banks are technically bankrupt.'"
In 1999, the State Council established four asset management companies directly under the State Council, specifically responsible for solving the non-performing asset problems of the four major banks. However, as of the end of 2003, the balance of non-performing loans of my country's commercial banks was still as high as 2 trillion, and the non-performing rate was as high as 17.9%. In December 2003, the state used foreign exchange reserves to inject capital into large commercial banks, kicking off the joint-stock reform of state-owned commercial banks.
Since then, through corporate governance reforms, capital market listings and other measures, the asset quality of my country's banks has been significantly improved, and the valuation center has been lifted. In 2005, the non-performing ratio of major banks dropped to small single digits, and the reforms achieved remarkable results. Banking stocks were "reborn" and ushered in a new stage of rapid growth. In 2006 and 2007, the banking sector continued to perform well. Thanks to the unexpected expansion of credit, bank profit growth increased significantly, and both performance and stock prices soared.
China Merchants Bank: Average annual profit doubled.
Take China Merchants Bank, one of the leading banking stocks, as an example. Its non-performing ratio accelerated its decline after the reform and was only 2.58% at the end of 2005. At the same time, the company's performance rose significantly from 2005 to 2007, with an average annual compound growth rate of over 100%, helping the stock price continue to hit new highs. With Davis' double click, the company's stock price rose from the lowest price of 1.55 yuan in early 2003 to the highest price during this cycle of 21.64 yuan (before restoration), an increase of nearly 13 times.Li Yamin, then a researcher at Shenyin & Wanguo Bank, elaborated on the company's long-term growth in the "In-depth Research on China Merchants Bank" released on March 27, 2003.
The vigorous wave of urbanization created the first golden age of real estate.
The 1998 housing reform marked the establishment of China's commercial housing market and entered a stage of rapid development. In 2003, the country established real estate as a pillar industry of the national economy for the first time. As urbanization accelerated at the beginning of the 21st century, demand for real estate housing increased significantly, and housing prices began an upward cycle that lasted for several years. The continued fermentation of expectations for the long-term appreciation of the RMB after the exchange rate reform has added catalyst to the crazy real estate market, and the demand for real estate investment has also increased significantly.
Although the government has introduced intensive control policies in an attempt to stabilize housing prices since 2004, such as increasing the minimum capital ratio of real estate projects in 2004, the "National Eight Regulations" in 2005, the refinement of the "National Six Regulations" in 2006, and five interest rate increases in 2007, etc. , but it was of no avail in the face of soaring housing prices at that time. From 2005 to 2007, the real estate industry was in its golden age of rapid development. The real estate market continued to overheat. In three years, the sector rose by a cumulative 547%, achieving significant excess returns.
Chen Yuxin, then a real estate researcher at Shenyin & Wanguo, began to pay attention to Vanke in August 2003 and wrote "In-depth Research on Vanke". Since then, former Shenyin & Wanguo real estate researchers Yin Zi and Jiang Zhengyan forward-lookingly proposed in 2007 that "financial strength, land acquisition capabilities, and corporate operation and management capabilities are the three key elements for evaluating real estate companies", and they expressed their opinions on Vanke A and Poly Two leading real estate companies made key recommendations.
Home Appliances: Price war + rising raw material costs, corporate profits still need to wait for recovery.
The real estate industry is developing rapidly, but home appliances, as one of the fastest growing consumer goods since China's reform and opening up, have experienced a protracted price war. Take the air-conditioning industry as an example. During the 1980s and 1990s, Chunlan and Huabao, as the original industry founders, were the well-deserved rulers of the air-conditioning industry. In 1994, air-conditioning production capacity began to be overcapacity, and the first round of price wars broke out. No-name companies withdrew from the market, forming an industry competition pattern in which national leaders and local small and medium-sized brands coexisted.
After that, Huabao and Chunlan gradually declined due to corporate management problems. In 2002, Greco launched a second large-scale price war, and local small and medium-sized brands were forced out, forming a three-strong competition among Gree, Midea and Haier that continues to this day. .
From 2002 to 2006, under the dual pressure of price wars and rising raw material prices, the profits of the home appliance industry went from bad to worse. Fu Juan, then a home appliance researcher at Shenyin Wangan, began to pay attention to the development opportunities of Midea Electric Appliances after the turning point in the industry in 2006.
Suning.com: The power of chain.
In the 1990s, in China, which was still half a country in the "planned economy", home appliances such as air conditioners were still in short supply. At this time, Suning defeated the state-owned stores in one fell swoop with its "three axes" of door-to-door service, off-season sales and low prices. This battle between the market economy and the planned economy was once called by the newspaper "The United Fleet in front of the small sampan" Crossfire".
html In the late 1990s, China's home appliances completely said goodbye to the situation of oversupply. Under the demand of home appliance brands to skip the "middlemen to earn the price difference", Suning completed its first transformation from "wholesaler" to "chain hypermarket".On July 21, 2004, Suning was listed on the Shenzhen Stock Exchange, with an increase of 100% on that day, becoming the most expensive stock in the Shanghai and Shenzhen Stock Exchanges. Since then, Suning has embarked on a road of comprehensive expansion, acquiring store properties through leasing, and rapidly replicating and laying out channels with 38 major stores as the main axis. In the "Comments on Changes in the Pattern of the Home Appliance Chain Industry" released on July 31, 2006, Fei Kanazawa, then a retail researcher at Shenyin & Wanguo, pointed out that "Although the scale of the chain is still important, the home appliance retail industry has moved from the extensive development of horse racing in the early days to a more refined one. In the second stage of modernization and management, the key factor that determines whether a home appliance chain company can win will depend on the retail company's own management capabilities and operational quality, and Suning's leading advantage in this regard is undoubtedly obvious."
In 2008, Huang Guangyu was imprisoned and Gome ushered in a lost decade. However, Suning made rapid progress and became the number one in home appliance sales. In 2009, Zhang Jindong ranked tenth on the Hurun Report, but his "biggest enemy in the future" Jack Ma was only ranked 88th, and Liu Qiangdong has not yet made the list.
Macroeconomic growth has driven the development of the food and beverage sector with "post-cyclical" attributes, and liquor has entered its golden decade.
Between 2005 and 2007, thanks to the rapid growth of my country's macro-economy and the accelerated rise in residents' income, the food and beverage industry emerged in large numbers, among which the liquor sector was the most eye-catching. In fact, since 2003, liquor has entered the "golden decade" in which both volume and price have increased. Major liquor companies have raised prices one after another, and their products have developed towards high-end products. They have relied on the three-wheel drive of production capacity, channels, and capital to achieve channels. Rapid expansion and nationalization.
Kweichow Moutai: counterattacked Wuliangye and won the title of "national liquor".
At the end of the last century, Wuliangye was still the benchmark in the liquor industry. The company practiced OEM labeling. The number of its brands once reached thousands. The revenue of its labeling brand "Wuliangchun" surged 615% in two years.
Many liquor companies have followed its labeling strategy, and the value of high-end brands has been continuously diluted. During this period, Kweichow Moutai went against the trend and adhered to the brand focus strategy of Feitian Moutai high-end single products as the core. It also continued to enhance the brand value with the help of ultra-high-end specialty single products such as vintage wine and commemorative wine, and firmly established a high-end wine brand. image.
company has completed its counterattack against Wuliangye step by step by building exclusive stores and developing special dealers targeting political and business group buying. In 2005, Moutai's market value and net profit surpassed Wuliangye's for the first time. In 2006, Moutai's liquor price surpassed Wuliangye's for the first time, and it has grown into a "big player" in the A-share market today.
Kweichow Moutai was listed in 2001. Since then, the company has successively carried out the "10th Five-Year Plan", "11th Five-Year Plan" and "12th Five-Year Plan" Moutai projects, with a cumulative investment of more than 6.8 billion yuan and a total expansion of production capacity of 20,000 tons. While expanding production, the company has repeatedly raised the ex-factory price of Feitian Moutai, from 218 yuan in 2001 to 619 yuan in 2011, with an average annual price increase of 10%.
With both volume and price rising, Kweichow Moutai's stock price rose more than 35 times from the beginning of 2003 to the end of 2007. It can truly be called "gold in wine." Tong Xun and Han Weijun, then food and beverage researchers at Shenwan Hongyuan, have been continuously tracking and recommending Kweichow Moutai since 2007.
Summary: Review From 2000 to 2007, we saw a cyclical bull driven by demand.
Although China’s capital market is relatively immature at the beginning of the 21st century, we can still clearly feel the main tone of that era—the “golden age” of cyclical stocks driven by demand. What are the core assets of today’s era are more worthy of investors’ consideration. Under the tone of the era of "digitalization" + "dual carbon", Shenwan Hongyuan Strategy proposed in 2021 that "chips are the steel of 2004, and photovoltaics are the coal of 2004." The era of hard-core technology has arrived.
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