CSI 300 Index Valuation Anchor and Its Relationship with GDP Growth Rate

Because I have been running the put-selling strategy on the CSI 300 for over a year, the drawdowns and volatility during this period have been quite significant. Although I know that the index will eventually recover, I still feel some uncertainty when facing large drawdowns, worried that “this time might be different.”
Then I started to think about what would constitute a reasonable price for the CSI 300 index. I had AI analyze the changes in the index from when it was launched in 2005 to now, including the amplitude of fluctuations. It turns out that the amplitude has hardly ever been below 20%. I also had it run the CAGR from 2005 for every year-end, as well as the CAGR if investments were made at the beginning of each year up to now.
Since my strategy is to set the position on January 1 each year and not adjust the position, only changing the strike price, I found that since 2005, the CAGR at year-end has generally been positive, and quite a bit. However, if you start investing at the beginning of a certain year, it seems that due to bad luck, many years’ CAGRs up to now are below 3%, which seems rather low. The reason is quite simple: the index levels were high at that time. So, what constitutes a high level?

![](https://img-cdn.gateio.im/social/moments-53fe0f2def-dd951400a3-8b7abd-ceda62)

Therefore, I thought that the CSI 300 basically represents the largest batch of listed companies in China. You could even drop the “listed” part. Their normal growth rate should be comparable to GDP (assuming GDP is the average social growth rate). Interestingly, I found that starting from the beginning of 2005, the year-end points calculated based on GDP growth closely aligned with the actual year-end points. Essentially, if the year-end points of those years exceeded my set valuation anchor by too much (over 20%, or over 15% in recent years), then starting to invest at the end of the following year resulted in poor annualized data.

![](https://img-cdn.gateio.im/social/moments-de467ae83d-533cafa76c-8b7abd-ceda62)

It is even more evident when graphed.

![](https://img-cdn.gateio.im/social/moments-78539d0b46-bd97f4ad3f-8b7abd-ceda62)

Thus, I feel that setting the position strategy at year-end has become quite simple:

1. Observe the deviation of the year-end closing point from the valuation anchor. If it exceeds 15%, then be cautious, reduce equity positions, or refrain from investing until it returns to the anchor;
2. If a black swan or various gray rhinos occur during the year, do not panic. It will eventually return; manage your margin well;
3. Also, be aware that the recent year-end closing points are deviating more from the valuation anchor, even dropping close to 20% below it. Therefore, each time there is a significant rise above the valuation anchor, be patient and at least wait until it returns before buying in, and initially, the buying position should not be too large;
4. Currently, with a long-term perspective on the year-end points, also consider the relative starting points. The up and down fluctuations will likely exceed 20%, so at the beginning of the year, at least prepare for margin requirements in extreme situations that could break below 20%.

The above is a summary of my analysis and a way to secure my future strategy execution. When facing large drops or rises, it is essential to know what actions to take next, rather than panicking during declines or being overly optimistic during rises.

I hope to execute this long-term, and let’s encourage each other!