This year, Taiwan stocks will have two storms that will exert “downward” pressure on stock prices. In the first half of the year, there will be an “interest rate hike storm”, and in the second half of the year, there will be an “inventory storm caused by an economic recession.” = EPS following tax per share × price-earnings ratio multiple.
【arts/ Sun Qinglong】
Looking back at the trend of Taiwan stocks from January to August 2022, at the beginning of the year, in the optimistic atmosphere that the market believed that this year’s meeting will be 20,000 points, Taiwan stocks have quietly slipped from the highest point of 18,619 points in January, and experienced the past 32 years. The most tragic drop in the first half of the year has even fallen below Wansi on July 12, with a minimum of 13,982 points. The wave-band drop point is not only as high as 4,637 points, but also the wave-band drop of 24.9%.
It is advisable to overweight good stocks when they fall sharply
However, in the pessimistic atmosphere that market investors began to think that Taiwan stocks would continue to fall below 10,000, or even in case (edit: regarding 10 years), the market was born in despair, and the broader market index began to rebound by more than 1,400 points. .
In all fairness, Taiwan stocks will see violent fluctuations in 2022. Investors who have been following the author’s views for a long time believe that it will not be surprising at all. The tone was set at the beginning of this year. The investment trend in 2022 will neither be fussy nor anticlimactic, and even more. It’s not a bad year, but: If you don’t enter the tiger’s den, you won’t get a tiger’s son.
The good news is that in the past two months, if investors can follow the investment strategy of “If you don’t enter the tiger’s den, you won’t get the tiger’s son”, and when the Taiwan stock market collapses, they will bravely and actively increase their potential stocks, even following the first half of the year. It is believed that the current book performance of stocks has also begun to show a “substantial convergence of losses” or even a “turn from loss to profit” reversal result.
On the whole, in 2022, Taiwan stocks will have two storms that will exert “downward” pressure on stock prices. In the first half of the year, there will be an “interest rate hike storm”, and in the second half of the year, there will be an “inventory storm caused by an economic recession.” Expressed through a simple financial report formula, it is stock price = EPS following tax per share × price-earnings ratio multiple.
Rising interest rates will revise down the P/E ratio
Suppose a company with a current EPS of 10 yuan, the market is willing to give a multiple of 10 times the price-earnings ratio, then a reasonable stock price is 100 yuan = 10 × 10, but the US Federal Reserve will start a rapid rate hike, assuming that the rate hike is 15 Under the circumstance of the code, the multiple of the price-earnings ratio will be revised down by 25.2%. In other words, the 10 times the price-earnings ratio originally given by the market will be revised down to 7.5 times (edit: rounded up), and a reasonable The stock price has also been lowered to 75 yuan = 10 × 7.5.
In addition, if there is a recession in the future, it will inevitably affect a company’s EPS. Assuming that the current EPS is 10 yuan, the market is willing to give a multiple of 10 times the price-earnings ratio, and a reasonable stock price is 100 yuan = 10 × 10, but the economic recession The accompanying decline in corporate profits, under the premise that EPS is 20% discounted and revised down by 20%, the reasonable stock price will also be lowered to 80 yuan = 8 × 10.
[For the full content, please refer to “Extraordinary Business Weekly” 2022/8/26 No.1316]
