A feature of the central economic conference in 2021 is to put more emphasis on the difficulties facing the economy and highlight the “stability” of the economy. On the one hand, this meeting rarely emphasized the difficulties faced in the front position, emphasizing “the triple pressure of demand contraction, supply shock and weakening expectation” for the first time; On the other hand, the “focus on economic construction” is mentioned again, and the word “stability” appears 25 times, which is at a historically high level, and the demand for stable growth is prominent. We believe that there may be three main lines for stabilizing the economy in 2022:
“Housing without speculation” remains unchanged, “long rent – Affordable Housing – commercial housing”, and real estate plays a more prominent role in people’s livelihood. In our previous report (what is the meaning of the new formulation of real estate in the Politburo meeting?) Although the Politburo meeting on Monday (December 6, 2021) did not mention “no speculation in housing”, this does not mean a comprehensive shift in real estate policy. It is more about overcorrection, stabilizing market confidence and pointing out the direction of real estate stabilization in the future. This meeting is basically consistent with our view, “long rent housing – Affordable Housing – commercial housing” The sequence highlights that the policy puts more emphasis on the role of real estate in people’s livelihood, and the role of stabilizing the economy is greatly weakened. We expect that the construction of affordable housing will be strengthened during the 14th Five Year Plan period, first established and then broken, so as to hedge the drag effect of deleveraging in the real estate industry to a certain extent. Since July 4, 2021, provinces and cities have also successively announced the construction and financing objectives of affordable housing during the 14th Five Year Plan period.
“Accurate and sustainable” finance is more “advanced”. More emphasis on sustainability in finance may mean that the amount of fiscal deficit and special debt will continue to decline steadily in 2022, and “resolutely curb the new implicit debt of local governments”, but this is not contradictory to the “advanced” infrastructure. After “hiding one’s capacity and biding one’s time” in 2021, Superimposed on the considerable profit growth of state-owned enterprises (the total profit in the first 10 months of 2021 has increased by 6.3% compared with 2019), the “surplus grain” of financial funds will be significantly improved in 2022. At the same time, the issuance of special bonds will be advanced, and the pace of financial development will be opposite to that in 2021. It will help infrastructure investment in 2022. When the year-on-year downward pressure on real estate is greatest at the beginning of the year, we will make efforts to stabilize the economy. We reported earlier（《 “Under real estate and infrastructure”, how to interpret it in 2022 Li estimates that the year-on-year growth rate of infrastructure investment in 2020 may be about 6.5%, and the key direction will be transportation infrastructure, wind and solar power facilities and power grid upgrading.
Without stabilizing leverage, monetary policy will play a greater role in stabilizing credit. The obvious difference from last year is that the monetary policy does not emphasize “maintaining the basic stability of macro leverage”. The monetary policy will play a greater role in stabilizing the economy and may further expand the scale of refinancing instruments, reduce reserve requirements or even interest rates again. After reviewing the previous three rounds of “real estate and infrastructure”, we found that in order to stabilize the economy and credit, the macro leverage ratio often rises periodically. Moreover, from the history since 2006, there are few cases of reducing leverage for two consecutive years. We believe that the macro leverage ratio will rise in 2022. By the end of the third quarter of 2021, China’s macro leverage ratio will be 264.8%. According to our calculation, if the leverage ratio rises to 267% in 2022, the social finance growth rate is expected to rise to about 10.9%. Structurally, the decline of leverage in the real estate industry may be more hedged by the rise of leverage in other manufacturing enterprises and residential sectors.
In addition, it is worth noting that although the meeting did not pay much attention to consumption, there were subtle changes in the wording of the policy on epidemic prevention and control – from “strict prevention and adherence” to “scientific and accurate epidemic prevention and control”. The strict control policy under the repeated epidemic in 2021 is the main fundamental reason for the repeated interruption of consumption recovery. This fundamental change will be conducive to the recovery of consumption and benefit the consumer catering, tourism and other industries that were seriously impacted by the epidemic.
Weekly market review: this week (December 6-10, 2021) value stocks outperformed growth stocks. The main stock indexes CSI 50 and CSI 300 were among the top performers, up 4.2% and 3.2% respectively, but the gem index performed poorly and closed down 0.2% for the whole week. From the perspective of the industry, the food and beverage, finance and real estate chain showed outstanding performance. The wording of stabilizing the economy and stabilizing real estate at the Political Bureau meeting had a significant impact on the market, including food and beverage Rising (6.8%), building materials (5.6%) and building decoration (5.2%) ranked among the top three in the industry this week.
Risk tip: the epidemic spread exceeded expectations, and China’s foreign policies exceeded expectations
