China macro weekly: policy setting, stocks and bonds rising together

Ping An View:

Real economy: the number of new confirmed cases in China has fallen, the operating rate has been divided, the land market has cooled down again, and the price of pork has fallen. 1) The epidemic situation in China has improved this week, From Monday to Friday (December 6 to December 10), 252 new cases were diagnosed in seven provinces and autonomous regions, including Inner Mongolia, Zhejiang and Heilongjiang, down from 319 new cases in the same period last week. Overseas Omicron continues to spread, and China will adhere to the overall strategy of "external anti import and internal anti rebound" and "dynamic clearing" , Omicron is expected to have less impact on China. 2) Industrial operating rate differentiation. The operating rates of national blast furnaces and petroleum asphalt plants fell month on month, and the operating rates of automobile tires, semi steel tires and coking enterprises rose month on month. The central economic work conference relaxed the assessment of energy consumption, and the time when green transformation had the greatest impact on industrial production has passed. 3) Raw materials are accumulated in the warehouse, and finished products go to the warehouse. This week, rebar social inventory and electrolytic aluminum inventory continued to go, while port iron ore inventory and coking coal inventory increased. 4) The property market continues to cool. This week, the transaction area of commercial housing in 30 large and medium-sized cities decreased by 24.7% month on month; Last week, the land transaction area of Baicheng decreased by 58.6%. Although it is a seasonal decline, it is far lower than that in the same period of 2019 and 2020. This week, the subway passenger volume in 9 major cities fell month on month, and the film box office and congestion index in most first tier cities rebounded. In terms of external demand, China's export container freight rate index rose this week, and the spread of overseas epidemic may continue China's export resilience. 5) Black commodity futures mostly fell, and pork prices fell. This week, the futures of thermal coal, coking coal and rebar fell, while the futures prices of iron ore and coke rose. After the policy turns to steady growth, the policy of ensuring supply and stabilizing price may be further overweight, and the price of black commodities may not have bottomed out. The wholesale price of Shenzhen Agricultural Products Group Co.Ltd(000061) fell by 0.9% this week. The most noteworthy thing is that after the national wholesale price of pork bottomed out in mid October and rose for eight consecutive weeks, it fell by 1.2% month on month this week. This round of pork wholesale price rebounded in the short term or has come to an end.

Capital market: the capital level has tightened this week, with stocks and bonds rising and the US dollar and RMB falling. In the money market, dr007 and R007 closed at 2.14% and 2.28% respectively on Friday, up 9.41bp and 12.28bp respectively compared with last Friday. This week, the net payment of government bonds was 211.4 billion and the net withdrawal of 180 billion by the central bank. In the stock market, driven by monetary easing and steady growth expectations, most of the main A-share indexes rose this week, with a net capital inflow of 48.83 billion in the north, and risk appetite may remain high in the short term. In the bond market, the shortage of funds drove the yield of one-year treasury bonds to rise 2.17bp month on month this week, the yields of other main term treasury bonds fell, and the term spread narrowed. We believe that the current bond market has fully priced monetary easing. In addition, there is little probability of short-term reduction of Omo and MLF interest rates. It is more likely to reduce LPR interest rates and pay attention to the risk of low yield rebound. In the foreign exchange market, the US dollar index closed at 96.05 on Friday, down 0.13% from last Friday. This week, the central bank announced to raise the foreign exchange reserve ratio by 2 percentage points, and the onshore and offshore RMB depreciated by 0.02% and 0.05% against the US dollar respectively. From the daily data, even if the central bank releases the intervention signal, the trend of RMB against the US dollar is still strong, and more policies may be needed in the future to reverse the situation that the RMB is too strong.

Risk tip: the implementation of the policy of ensuring supply and stabilizing price is less than expected, the overseas epidemic is out of control again, and the geopolitical conflict is escalating.

 

- Advertisment -