China Quantitative Strategy: The vulnerability of expensive leaders appears, it is highlights to hedge with low volatility, high quality and high dividend stocks (J.P. Morgan)
JPMorgan Chase’s China Quantitative Strategy Report points out that the previous style of growth stocks significantly outperforming value stocks may be coming to an end.
JPMorgan Chase’s China Quantitative Strategy Report points out that the previous style of growth stocks significantly outperforming value stocks may be coming to an end. The key signal is that the valuation of Expensive Leadership is in an extremely stretched state, while the valuation gap of other companies in the same sector continues to widen, and the market structure is fragile. The market style has reversed in July, with value stocks and low-volatility sectors beginning to rebound. The report emphasizes that a style switch can occur without a major macro shock. Therefore, JPMorgan Chase highlights that investors use a low-volatility, high-quality, high-dividend large-cap stock portfolio to hedge risks, and provides specific long-short position targets in July to obtain a return buffer while reducing risks. One-sentence conclusion: A-share market style switching is taking place, and the risk-return ratio of chasing growth stocks is no longer good. Investors are highlights to turn to low-volatility, high-quality, and high-dividend value stocks for defensive layout. Positive/negative: Positive for Chinese value stocks and high-dividend sectors (such as banks, utilities, home appliance leaders); negative for growth stocks and theme stocks that have experienced excessive gains in the early stage. The current market is in the early stages of style switching, and the pullback of high-priced stocks and the recovery of value stocks have not yet fully begun. Catalysts: 1) The Politburo meeting at the end of July will set the tone, whether to mention "anti-involution" or new economic policies; 2) Subsequently released macroeconomic data, if not as expected, will accelerate the style switch; 3) The mid-term results of leading growth stocks (such as CATL, Moutai), if lower than expected, will trigger profit taking.