The undervalued blue chips we recommended before the festival continued to be relatively dominant, but the continuous sharp decline in the market did exceed expectations. According to our exchanges with institutions, there are two main reasons for the sharp decline: 1) overseas, the Fed’s interest rate increase and contraction exceeded expectations; 2) In China, the market believes that there is no more than expected easing policy or strong stimulus to restart the new real estate cycle, so it is more pessimistic about the economy.
As we clearly pointed out in the “cherish the adjustment window of the market in the first quarter” in December last year and the annual strategy for 2022 “where does water flow”: after the pressure of the mid-term election and Powell’s re-election, the hawks of the Federal Reserve will certainly exceed expectations, but China’s currency will continue to be loose; The real estate cycle will probably not restart, but the probability of steady growth in the first quarter is high. However, the market’s response to these two factors is still underestimated.
As for the post holiday period, we believe that: in terms of style, we do not rule out the possibility of rising together after the market oversold, but the undervalued blue chip is still the main line of potential benefits, while the high valuation sector, especially the high and small market value stocks that we have been suggesting risks, still faces potential risks
On the whole: after the festival, in the empty window period of “substantial interest rate increase” by the Federal Reserve, China’s steady growth policies such as RRR reduction, savings force, social finance and other indicators stabilize, the market may open the “spring market”. At the same time, considering the benefits of comprehensive registration system and steady growth on undervalued blue chips, the potential suppression of high valuation by the “hawks” of the Federal Reserve, and the strength and non record low of undervalued blue chips such as SSE 50 during the adjustment in January, we believe that the market after the Festival is still the main line of blue chips. In terms of specific configuration, undervalued blue chips still adhere to three lines: 1) securities companies; 2) Central enterprises with high dividends related to national reform, especially the development direction of central finance such as railway and electric power; 3) Green electricity. At the same time, some drugs related to the epidemic, such as ventilator and vaccine, have also entered the allocation range.
Combing the highlights at home and abroad during the Spring Festival
Overall, the downward pressure on the global economy remains and the recovery momentum slows down. Global inflation rose sharply, the epidemic repeatedly disrupted the supply chain and seasonal factors suppressed. The market generally showed weak supply and demand. Although countries strengthened their efforts to promote growth, the effect of policies transmitted to the real economy in a short time was limited. In addition, the market expected the central banks of various countries to conduct financial market correction to combat inflation. Therefore, although the global economy continues to recover, the momentum has slowed down.
In January 2022, China’s manufacturing PMI fell, and the US ism manufacturing PMI showed “three consecutive declines”. Although the final value of UK manufacturing PMI exceeded expectations, it was still lower than the previous value. It can be seen that the global manufacturing expansion has weakened. The overall economic recovery rate of the eurozone was lower than market expectations. The economic performance of Germany, the largest economy, continued to lag behind the average level of the eurozone in the fourth quarter of last year.
Performance of major global assets: the external market rebounded as a whole, and the commodity market continued to dominate. Before and after the Spring Festival holiday, major stock indexes in the world generally rose, the Asia Pacific stock market performed better, and the Hang Seng Index led the rise; Global bond yields rose; The dollar index fell; The prices of major commodities in the world are mainly rising.
Inventory of international events: inflation remains high, and the Fed’s expectation of raising interest rates in March is heating up. On February 1, Daley of the Federal Reserve said that the Federal Reserve is expected to raise interest rates as soon as March. On February 2, Huck of the Federal Reserve again gave the signal of raising interest rates, supporting the Federal Reserve to raise interest rates by 25 basis points in March. On February 4, the US federal funds rate futures showed that the probability of raising interest rates by 50 basis points in March rose to 44%. The UK and the European Central Bank continued to show hawkish positions by raising interest rates and stopping bond purchases respectively.
China event inventory: the main line of “steady growth” is clear, and the principle of prudent austerity is adhered to. On February 2, Ning Jizhe, director of the National Bureau of statistics and Secretary of the Party group, wrote in seeking truth that we should actively introduce policies conducive to economic stability. In view of the downward pressure on the economy, we should take practical actions to implement the party’s line, principles and policies, implement sound and effective macro policies, carefully return to policies with contractive effect, and keep the policy force ahead appropriately. We will strengthen the coordination and linkage between fiscal and monetary policies and organically combine cross cyclical and counter cyclical regulation. Accelerate the construction of a green economic ecosystem, and new energy vehicles may become the starting point. In 2022, the Ministry of industry and information technology will fully promote the development of new energy vehicles to a higher level. Favorable policies have promoted the rapid development of the Shanxi Guoxin Energy Corporation Limited(600617) automobile industry, and new energy vehicles have ushered in a wave of sales boom.
China Spring Festival transportation data tracking: the overall number of passengers has increased, and the total passenger flow is still at a medium low level. As of February 4, the cumulative number of Spring Festival passengers sent in 2022 was 460 million, an increase of nearly 50% over the same period in 2021, but it only reached about 38% of the passenger flow in 2020. On the whole, the passenger volume during the Spring Festival transportation this year has been significantly repaired compared with last year, but it is still at a medium low level in recent years.
Risk tip: the implementation of the capital market deepening policy represented by the comprehensive registration system is less than expected, the Omicron epidemic in China broke out more than expected, the liquidity of the Federal Reserve’s monetary policy and China’s monetary policy tightened more than expected, and the public information used in the research report may be delayed or not updated in time.
