Zhaozheng international strategy weekly: Omicron variant virus causes global concern

The World Health Organization named the new variant virus Omicron and listed it as "worthy of concern"

The Bureau of industry and security of the U.S. Department of Commerce announced that 12 Chinese enterprises would be included in the "entity list"

Us durable goods orders in October were lower than expected

New highlights: 1) covid-19 epidemic update: November 26, Who announced that a new variant virus first reported from South Africa on November 24 was listed as a variant requiring attention (VOC) and named Omicron. The mutant has a large number of mutations. Researchers around the world are studying it to better understand Omicron. Preliminary evidence shows that the mutant has a higher risk of reinfection than other variants that need attention. According to the World Health Organization, it is unclear whether Omicron is more infectious than Delta strain, And whether Omicron virus causes more serious symptoms than other variants. Some countries have imposed strict travel restrictions on Southern African countries. Several countries and regions have reported the infection cases of the mutant strain, including Britain, Australia, Italy, Canada, Israel and Hong Kong. 2) Sino US Relations: on November 24, the Bureau of industry and security of the U.S. Department of Commerce announced that 27 foreign entities and individuals would be included in the "entity list", including 12 Chinese enterprises. A spokesman for China's Ministry of Commerce said the move was "not in line with the consensus of the heads of state of China and the United States".

Macroeconomic data: China: in October, the profits of Industrial Enterprises above designated size increased by 24.6% (September: 16.3%), and from January to October increased by 42.2% (January to September: 44.7%). The United States: 1) in October, durable goods orders decreased by 0.5% month on month, lower than expected (September: - 0.4%); excluding aircraft, non national defense capital durable goods orders increased by 0.6% month on month, higher than expected (September: 1.3%). 2) personal consumption expenditure increased by 1.3% month on month in October, exceeding expectations (September: 0.9%). 3) personal income increased by 0.5% month on month in October, exceeding expectations (September: - 1.0%). 4) PCE price index increased by 0.6% month on month / 5.0% year-on-year in October, both lower than market expectations (September: 0.3% / 4.4%); the core PCE price index increased by 0.4% month on month / 4.1% year-on-year, both in line with market expectations (September: 0.2% / 3.7%). 5) the savings rate decreased to 7.3% (September: 8.2%) in October. 6) the sales of new homes in October was 745000, lower than expected (September: 742000). 7) the final value of the University of Michigan consumer confidence index in November was 67.4, higher than expected (initial value in November: 66.8).

Stock Market Overview: in the past week, Hang Seng, MSCI China and CSI 300 index fell 3.9%, 3.5% and 0.6% respectively. MSCI China Index: utilities (+ 2.0%) and daily consumption (+ 1.3%) outperformed the market, while communication services (- 5.0%) and optional consumption (- 4.9%) underperformed. The valuation of Hang Seng / MSCI China / Shanghai and Shenzhen 300 index was 11.6 times / 13.9 times / 15.0 times forward-looking P / E ratio respectively (the median level in the past three years is 11.2x / 12.8x / 12.6x). Omicron variant virus has impacted investor confidence and led to the sell-off of tourism related sectors. It is still too early to talk about the real impact on the global recovery, but we believe that this headwind will bring continuous pressure to the market. Main catalysts / risks: 1) the spread of Omicron variant virus; 2) macro data; 3) American relations; 4) Government regulatory measures.

 

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