Text/Chen Kangliang

  Farewell, 2022.

  On the last trading day of 2022, China's major A-share stock indexes closed with a bang.

However, from the perspective of the whole year, affected by internal and external factors such as the "black swan" of international geopolitical conflicts, the "grey rhinoceros" of global liquidity crunch, and the "blockers" of the new crown pneumonia epidemic, the performance of China's A-shares is not satisfactory. The Shanghai Composite Index has fallen by more than 15% for the year.

2022: Global stock markets lackluster

  As of the close on the 30th, the Shanghai Composite Index was at 3,089 points, an increase of 0.51% on the day, and a cumulative decline of more than 15% for the year; the Shenzhen Component Index was at 11,015 points, an increase of 0.18%, and a cumulative decline of more than 25% for the year; 2346 points, down 0.11%, with a cumulative drop of more than 29% for the year.

  Compared with the world's major stock markets, China's A-shares performed relatively poorly, outperforming only a few stock indexes such as the Nasdaq Index and Russia's RTS.

  According to data from the financial data service provider Flush, as of 3:00 p.m. Beijing time, the three major stock indexes of the United States, the Dow Jones, the Nasdaq and the S&P 500, recorded declines of 8.58%, 33.03% and 19.24% respectively for the whole year; in the European market, The British FTSE 100 index rose by more than 1% for the whole year, while the French CAC40 index and the German DAX index fell by more than 8% and 11% respectively. After the 225 index fell by more than 9%, the Korea Composite Index fell by more than 24%.

  Looking back on the performance of the past year, the A-share market has shown an overall trend of falling first and then rising, with multiple shocks.

On the whole, in the overall weak market environment, the value sector performed relatively better than the growth sector; benefiting from factors such as the optimization and adjustment of domestic epidemic prevention and control policies, tourism hotels, aviation airports and other sectors achieved impressive growth in the fourth quarter, driving The annual increase reached 52.94% and 17.57%, respectively, leading the rise of A shares; in contrast, the battery, semiconductor and other sectors suffered adjustments, with a cumulative decline of 30.39% and 26.57% respectively throughout the year, leading the decline.

  Huang Hongwei, an analyst at Casin Securities, said that in 2022, under multiple shocks such as weak performance, pressure on valuations, and declining risk appetite, most of China's major A-share indexes will underperform major global stock indexes.

Compared with the global stock market, the Shanghai Composite Index is currently in a valuation depression, and there is a greater possibility of valuation restoration in the future.

  Qin Peijing, an analyst at CITIC Securities, pointed out that since 2022, the risk of external geopolitical conflicts combined with the contraction of global liquidity has led to a downward trend in economic growth expectations, and major global stock markets have weakened significantly.

At the same time, China's domestic economy has been operating at a low level and vulnerable due to repeated epidemics and the impact of the real estate industry. The overall valuation level of A shares has dropped sharply, and it is currently at a relatively low level in the past 10 years.

2023: A shares will gather strength to rise

  Looking forward to 2023, Qin Peijing analyzed that multiple factors that have been suppressing A shares since 2022 will usher in a turning point in 2023:

  Since November 2022, China's anti-epidemic policy optimization and real estate support policies have clearly defined the turning point of policy expectations, and the economy is expected to gradually stabilize and recover, improving market risk appetite; it is expected that major European and American countries will end interest rate hikes in March 2023, and the RMB exchange rate The inflection point will appear and gradually appreciate, opening up room for the repair of RMB asset valuations; the inflection point of A-share profits will appear in the second half of 2023, further consolidating the foundation for mid-term restoration.

With the gradual emergence of the above three inflection points, A shares will gradually gather strength to rise in 2023.

  Huang Hongwei believes that in 2023, the risk of a hard landing in the economies of European and American countries is expected to increase, and there will be greater uncertainty in China's foreign demand.

However, considering the optimization of China's epidemic prevention and control policies and the gradual emergence of new real estate financing policies, it is expected that China's economy will lead the global recovery, the RMB exchange rate will stop falling and rebound, and Chinese assets including A shares will also lead the global rise.

  Analysts pointed out that reform will also be an important booster for China's A shares next year.

Looking back on 2022, China's capital market will deepen reforms "fast and steady".

  On the one hand, continue to develop the multi-level capital market, make preparations for the comprehensive registration system, successfully launch the market maker system for the Science and Technology Innovation Board, and promote the implementation of the transfer system of the Beijing Stock Exchange.

  On the other hand, continue to expand high-level opening up to the outside world, expand the scope of stock interconnection targets between the mainland and Hong Kong, start trading open-end funds (ETF) transactions under the interconnection, and promote the internationalization of China's capital market.

In addition, the reform of the investment side has been vigorously accelerated, and the personal pension system has been introduced to bring long-term capital "flowing water" to the stock market.

  Fei Xiaoping, an analyst at Dongguan Securities, believes that China's capital market reform will be vigorously implemented again in 2023, especially the comprehensive registration system is expected to be implemented next year, which will further improve the operating efficiency of the capital market.

With the advancement of the personal pension system, after the official launch of pension investment public offering funds in the future, it is also expected to bring new development opportunities to A shares.

International investment banks are bullish on China's stock market

  In addition to domestic research institutions being optimistic about A-shares next year, some international investment banks also hold similar attitudes.

Recently, Morgan Stanley raised the Chinese stock market from "standard allocation" to "overweight allocation".

This is the first time since January 2021 that Morgan Stanley has adjusted the Chinese stock market to an "overweight" rating.

At the same time, Goldman Sachs, JPMorgan Chase, Nomura Orient International and many other foreign institutions have also maintained an "overweight" rating on China's stock market.

  Recently, Wang Yajun, co-head of equity capital markets in Asia (excluding Japan) at Goldman Sachs, said that since November this year, the Chinese stock market has seen a relatively strong bull market signal, and it is expected that this round of market will continue.

  In Wang Yajun's view, the impact of the epidemic on the economy, the supervision of the Internet industry, and the audit supervision of China and the United States have eased the three factors affecting A shares. Recently, the pace of foreign capital increasing their holdings of Chinese assets has accelerated again.

  The increase in foreign capital holdings of A shares is not an isolated phenomenon, but represents a trend.

The logic behind it is that A-shares provide a relatively safe haven during times of global market turmoil.

Although the overseas market will recover to a certain extent next year, it is expected that the good momentum of foreign capital inflow into A shares will continue.