Financial Services Association, April 8 (Reporter Yan Jun) The cycle sector is in full swing. After the “10,000 People Conference” was held at the brokers' conference call, some brokerage analysts called out: coal surpasses Maotai.

On April 7, Cao Liulong's team, the chief strategy analyst at Fangzheng Securities, released this research report, which is optimistic about coal, pointing out that coal is going through a phase from rivaling Maotai and becoming Maotai to surpassing Maotai.

So how are the two markets performing?

On April 8, liquor ETFs plummeted by nearly 4%. Today's decline brought the “V” trend of liquor ETFs back below the surface during the year, with a yield of -2.02%; looking at coal ETFs, the annual yield was -2.02%. Looking at coal ETFs, the increase during the year was nearly 10%. The extended cycle has been extended since the second half of 2023, and coal ETFs have risen 27%.

According to market analysts, the reason for Maotai's sharp drop today is that the price of Maotai dropped due to Maotai's volume. It was previously rumored that the current transaction price of a loose bottle of Flying Moutai Liquor is 2,580 yuan, falling below 2,600 yuan. The above research report also pointed out that the sign of the end of the liquor market is that the price of high-end liquor peaked and fell.

Core view: The era is reinventing beta, and coal will surpass Maotai

Cao Liulong's team believes that coal and Maotai are both beta of the times. So why will coal succeed liquor and become the first choice for beta in the next era?

According to the above research report, it is still the force of cycles. Specifically, it is divided into two stages:

In 2010, China entered the “stock economy” era. The economic growth rate and expected return on investment declined for the first time. The main line of market trading switched from “coal flying color” cycle stocks with high ROE to TMT and consumption “core assets” with medium ROE.

By 2021, the real estate cycle was declining, and the expected return on investment declined for the second time, and the main line of market transactions was also shifting from “consumption and growth” core assets such as liquor with medium ROE to scarce assets such as coal and utilities with medium ROE.

According to Cao Liulong's team, at the beginning of the 2016 Shed Renovation Campaign, Chinese people generally expected that housing prices would continue to rise and revenue would continue to rise. However, the “three red lines” of real estate financing in 2020 broke through the real estate bubble and reversed this expectation.

Conversely, the “energy security” of coal is a long-term trend. The transformation of new energy sources is not only a “double carbon” environmental protection theme, but also the main strategic line for the country to achieve “autonomous and controllable energy”. It will lead to an increase in demand for coal (thermal power) and drive the long-term coal bubble market, which will continue until 2041.

Shout: Every coal adjustment is a window period for increasing positions and allocations

Energy stocks with “coal” flying “color” have already started. Taking individual stocks of China Shenhua as an example, they have risen by more than 180% since 2021. What stage has the current coal market reached? How many opportunities will there be in the future?

Cao Liulong's team said that judging from the characteristics of the transaction, the coal market is about to enter the “belief” and bubble phase.

First, drawing on the liquor market from 2016 to 2020, the liquor industry's valuation bubble, and leading stocks will lose relatively due to leading gains in the previous period. Beginning in the third quarter of 2023, the valuation of the coal industry has shown signs of bubble, and the relative valuations of leading coal companies have not clearly outperformed, which means that the coal market may have entered an early “belief” cycle.

Second, due to investors' inherent perception of coal as a “traditional high-polluting” energy source, public fund coal is still underallocated. The popularity of the issuance of coal-related funds is not high, which also confirms that a firm belief in “energy transformation” has not yet formed. Therefore, in the future, the perception that coal is a “traditional high-polluting energy” will gradually reverse, and beliefs about energy transformation will be established one after another. At that time, the scale of issuance of coal-related funds will surely expand markedly.

So, how long will the coal market last? Cao Liulong's team believes that unless the Sino-US cycle restarts, real estate returns to “strong incentives”, or the new AI technology cycle starts early (we still need to wait for large-scale “computing power infrastructure” investments), coal will surely start a long-term bubble. The research report emphasizes that in the face of the beta era, transaction congestion is just noise. Every adjustment due to “overcrowding” of coal is a window period where positions can be increased.