While there is hot debate on whether the investment style will switch in 2018, the market has already given an answer.
As of the closing hour on January, the SSE 50 Index recorded gains for 15 days in a row. Industrial and Commercial Bank of China Limited (601398.SH) and Agricultural Bank of China Limited (601288.SH) up more than 10 percent during this period. In contrast, most medium- and small-cap stocks performed lackluster. The ChiNext Board index fell slightly since the beginning of the year.
SSE 50 index continues to see greater impact
The SSE 50 Index consists of the 50 largest stocks of the A-Shares in Shanghai Stock Exchange, which reflects the performance of the most influential group of leading companies in the Shanghai stock market.
In 2017, under the guidance of value investment, the dominance by large-cap stocks and leading stocks run through the year. As a result, the SSE 50 Index rose 25.08 percent in the year, leading the gain among all the other SSE indexes.
As some blue-chips stocks have already gained a lot, considering profit-taking factors, at the end of the year investors began worried that the investment style will rotate to small-cap growth stocks. However, the SSE 50 index gave its answer in less than one month.
During the 15 trading days from December 28, 2017 to January 18, 2018, the SSE 50 index recorded rise during this period, with a cumulative increase of 9.40 percent. The 15-day winning streak was the longest in the index’s history. On January 18, the SSE 50 index closed at 3106.55, and it will almost gain the loss after the 2015 stock market crash.
It is worth mentioning that last time the SSE 50 index saw rise in row was in the fourth quarter of 2014. From November 20, 2014 to December 8, 2014, driven by securities companies stocks, the SSE 50 index gained for 13 consecutive trading days, with a total increase of 37.52 percent. It opened up the bullish run in the first half of 2015.
As the SSE 50 index continues to rise, more and more capital, whether being actively or passively, is getting involved. The power of blue-chips in the market has been further enhanced.
On January 18, the intraday turnover of the SSE 50 index was 111.974 billion yuan, accounting for 23.11 percent of the total A-share turnover, highest ratio in nearly two and a half years. In 2016 and 2017, its daily average ratio was only 5.43 percent and 7.97 percent.
Real estate, brokerage stocks led gain
In the recent upswing of the SSE 50 index, the real estate sector was the leading winner. China Fortune Land Development (600340.SH) has risen 34.29 percent in total, ranking the first among all the 50 constituent stocks, followed by Greenland Holdings Corporation Limited (600606.SH) and Poly Real Estate Group Co., Ltd. (600048.SH) with an increase of 31.96 percent and 28.72 percent, respectively.
China Fortune Land Development Co., Ltd. (600340.SH) kept growing by the daily limit of 10 percent for five consecutive days at early April of 2017 upon the news of establishing Xiong’an new area in Hebei. Its stock price fell after hitting a new high with total turnover reaching 22.5 billion yuan on April 12, 2017. The price dropped by over 30 percent in later one month. But it climbed continuously since late December 2017 and hiked to the peak of 44.3 yuan per share on January 16 of this year, which was only 7 percent lower than the highest level of last year.
Financial sector played an important role in boosting SSE 50 Index to record gains for 15 days consecutive. Among them, stocks of securities companies showed the most brilliant performance. Huatai Securities Co., Ltd. (601688.SH) and Citic Securities Company Limited (600030.SH) have risen by 19.73 percent and 18.29 percent over past 15 trading days, ranking the fifth and the sixth among the 50 underlying stocks, respectively.
Institutions analyzed that securities industry is now at the bottom in terms of policy, performance and valuation. Market situation is expected to see marginal improvement in 2018. Under the background that industrial concentration is being improved continuously, large comprehensive securities companies with relative advantage in valuation are first recommended.
In addition, four companies whose value reaches over 1 trillion yuan including Industrial and Commercial Bank of China (601398.SH), Agricultural Bank of China (601288.SH), Bank of China (601988.SH) and Ping An Insurance (Group) of China (601318.SH) went up by over 10 percent daily in last 15 trading days. Driven by this, it is very natural that SSE 50 Index seeing the 15-day gain streak and its influence on the index is also self-evident.
Noticeably, with huge amount of capitals are invested in SSE 50 Index, many individual stocks are gradually marginalized. Without support from capitals, it is difficult for their stock prices to hike. Excluding the companies which suspended trading continuously, 2,966 individual stocks in A-share market, accounting for 89.23 percent, underperformed SSE 50 Index since 2018, and 2,657 individual stocks, or 79.93 percent, underperformed SSE Index.
Translated by Coral Zhong & Vanessa Chen
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