Policy Tightening: Why Property Market Performance Is Strong But Stock Market Performance Is Bad?

For the stock market, its trend can not get rid of the constraints of economic fundamentals.

China's economic growth has been in a slow downward process since its peak in 2010, and there has been no sign of continuous improvement in earnings growth of listed companies.

Therefore, after a brief bull market in the first half of 2015, it is at least a "adjustment period" even if it is not defined as a bear market.

The market and the stock market are divided into different stages.

Since the beginning of this year,

The performance is very stable, so many people think that China's stock market performance should be good. The reason is that the demand for foreign exchange decreases after the exchange rate stability, and the outflow of hot money will decrease. In addition, the government's regulation and control of the property market is becoming more and more powerful, and the means are increasing. Therefore, the funds that will remain in the property market will withdraw for a long time, and the stock market will naturally become a scarce place for hot money inflows, so there is reason to be optimistic about the stock market.

But the performance of the stock market has been poor recently. Even the exciting themes such as the area and the new area have failed to inject a lasting vitality into the stock market, which seems to be blind to the recovery of the global economy and the rewarming of the domestic economy.

The reasons for the weakening of the stock market are nothing more than the following points: first, the economic indicators have improved, but I am afraid they have already reached the top. The stock index is the leading indicator of the economy, not the lagging reflection of the economic data. Two, financial supervision is becoming more and more severe, leading to the upward trend in the interest rate of the financial market and the double killing of the stock debt.

From the perspective of policy regulation, the severity of the property market policy is much higher than that of the stock market. For example, the number of restricted cities is increasing, interest rates on mortgage loans are rising, the proportion of Shoufu is rising, and the price of Yishoufang is restricted.

In addition, the tightness of financial regulation policy has a negative impact on the property market. But why is the property market not as fragile as the stock market? I'm afraid this is not related to the property market still in a bull market.

Compared with the stock market, the property market has three advantages: first, in addition to investment or speculative demand, there are still rigid demand and improved demand in the property market; second, China's pition from an agricultural society to an industrial society for less than 30 years, coupled with the far-reaching impact of farming culture, has led to a preference of people to land and housing more than other investment varieties, far more people than many people, and the ancestors of the nomadic people are Westerners. Third, as a new market, A shares have various defects in the governance structure of the listed companies, so that the exercise rights of minority shareholders are limited.

From the current situation in China, the hot spot of property sales is shifting from a second tier city to a three or four tier city, which seems to be related to the reversal of the population flow. It is also related to the lower inventory of the three or four tier property market and the relatively low price to income ratio. It seems to be experiencing a "bullish market" in the bull market. However, with the experience of the stock market, "bullish" often means the bull market is coming to an end.

Thinking based on Liquidity

It was recalled that at least three times in 2016 the Central Committee referred to the "suppression of asset price bubbles". For the first time, the "suppression of asset price bubbles" was put on the topic of "cost reduction" at the Politburo meeting in July 2016. The second time was to focus on the suppression of asset price bubbles on the topic of monetary policy in the Politburo meeting of October 2016. The third time was again at the central economic work conference at the end of 2016, in order to prevent and control asset bubbles.

The "asset bubble" here clearly refers to the real estate bubble, because the stock market in 2016 was slack and sales in the property market hit a new high.

I believe that most people would think that the property market bubble is bigger than the stock market. After all, the stock market has been falling and the property market has been rising. Perhaps the average price earnings ratio of the stock market should not be high, such as the average price earnings ratio of the A stock exchange of the Shanghai Stock Exchange is only 16 times.

The price earnings ratio of the property market is comparable to that of the stock market, because both the P / E ratio and the ratio of house price to income can be regarded as the corresponding year.

At present, the national average housing price income ratio is about 21 times, which is obviously higher than that of the Shanghai Stock Exchange's A shares.

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If the Shenzhen Stock Exchange's main board, small and medium board and gem share are considered together, the average price earnings ratio of all A shares is about 35 times.

In addition, in the more than 3000 listed companies, the stock price ratio is more than 50 times that of 2000 stocks, that is, more than 2/3, and the median price earnings ratio of all A shares is about 70 times.

Housing prices and income ratio of the highest city is Shenzhen, about 45 times, ranking first in the world, Beijing, Shanghai and so on not more than 40 times, the median income ratio of all cities in China is about 22 times. Therefore, compared to the real estate market income ratio, A shares, both the average price earnings ratio or the price earnings ratio of the median, far exceeds the property market.

Someone counted the dividend payout data of 2011- share listed companies in the year of 2011- 2015, and found that only 207 companies had an average dividend yield of more than 2% in five years, and only 80 companies with an average dividend yield of more than 3%, accounting for 6.55% and 2.53% respectively in the total number of listed companies.

The dividend rate corresponds to the ratio of rent to housing, which is about 2% nationwide, and is also significantly higher than the average dividend yield of A shares.

The above analysis shows that if asset bubbles exist in the property market, the asset bubble of the stock market is even greater.

After China's stock market has experienced a sharp decline from more than 5000, why does it still have such a big bubble? This is related to the strong liquidity of the A share market, that is, liquidity determines the level of risk premium. The better the assets with liquidity, the lower the demand for risk return, that is, the lower the discount rate of the paction price.

High liquidity is an important reason for the long-term overvaluation of A shares, but since 2016, the turnover rate of A shares has decreased significantly, which is also accompanied by the fall in share prices.

At the same time, with the booming property market, the activity of second-hand housing has been greatly improved, and hot money has always been in the property market.

Since the middle of April, the margin balance of A shares has declined for three consecutive weeks. At the same time, due to the valuation advantage of Hong Kong stocks, the capital flowing into Hong Kong stocks is increasing.

Therefore, apart from the relationship between A share and the property market, the attractiveness of the A share market is also challenged by Hong Kong stocks.

Policy needs to be relaxed.

Inhibiting bubbles instead of eliminating bubbles

Policy regulation is very difficult in the actual operation process, because social and economic responses to policies are complex, far less simple than chemical and biological reactions.

The main purpose of this round of financial regulation is "deleveraging", that is, one of the five major objectives of the structural reform of the supply side.

But the problem is that the "virtual" level of China's economy has been astonishing, that is, the volume of finance is much larger than that of industry. The value added of finance is too high in GDP, which is higher than that of developed economies such as the United Kingdom, the European Union, the United States and Japan. For a newly emerging economy with a per capita GDP of only more than 8000 dollars, the financial structure is seriously unbalanced.

Therefore, to make China's financial leverage and asset valuation level return to normal, it can only be carried out step by step and phased.

Frozen feet are not cold for a day, such as a stock market bubble (high P / E), which has lasted for more than 20 years, can not be expected to disappear in the short term.

At present, there are more than 1200 listed companies in A shares with a P / E ratio of more than 100 times. Why are the P / E ratios of these stocks able to stay high for a long time? I am afraid they are related to the anticipation of merger and reorganization. This is similar to the valuation model of the school district housing in the first tier cities, that is, "the right to possession". So how to curb the bubble brought about by the "shell resources" and whether to restrict the backdoor entirely, I am afraid we need to think twice.

Similarly, the huge expansion of domestic financial scale began in 2009. At that time, in order to deal with the subprime mortgage crisis and the unprecedented economic stimulus policy, every time for the sake of steady economic growth, the cost of financial growth has led to the excessive expansion of the financial scale. For example, the scale of banking financial products began to expand in 2012. Although the traditional credit business weakened, the off balance sheet financing business soared. In 2016, the total assets of banks increased significantly under the background of the broad fiscal expansion.

It has experienced three monetary expansion cycles since 2009.

Fortunately, the central economic work conference has put the principle of "steady progress" as the general principle of governing the country and advocating the "bottom line thinking" that the economy does not fall sharply and does not erupt in the systemic financial crisis.

Therefore, financial supervision needs to be grasped well. For example, at present, the mode of financial supervision in China is mainly the "separation supervision" of the three sessions. The advantage is that each of them performs their duties and responsibilities. However, in the era of financial trend of mixed operation, it is necessary to have unified supervision and coordination supervision. For example, when the CBRC is deleveraging commercial banks, it is necessary to coordinate with the SFC's policy and the timing of its occurrence, and pay close attention to the possible impact of this move on the capital market.

If we are eager to succeed, we may lead to the financial crisis brought about by the bubble burst.

Historically, monetary expansion has been accompanied by the contraction of monetary policy since 2011, such as clearing up local financing platforms in 2011, increasing interest rates and raising deposit reserve ratio, and clearing up non-standard businesses in 2013.

However, in the past, every round of regulatory tightening would stop abruptly because of the huge economic force and the economic downturn. As a result, the volume of money is getting bigger and bigger, and now it has posed a huge threat to the economy.

This year, we put the prevention and control of financial risks in a more important position. We conduct a MPA assessment of the banks, and three actions will be taken together.

Therefore, this round of financial regulation should draw lessons from past recidivism, which is intended for the long term and needs more relaxation.

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