The executive meeting of the State Council made arrangements to improve the management of special debts of local governments; This week, the central banks of South Korea, Hungary and New Zealand raised interest rates; A new variant of covid-19 virus was found in southern Africa. The order of asset allocation of major categories: bonds > stocks > bulk > currency.
Review of macro highlights
Economic data: in October, the profit of industrial enterprises increased by 24.6% year-on-year.
Highlights: the executive meeting of the State Council deployed and improved the management of special bonds of local governments; The CPC Central Committee and the State Council issued the opinions on strengthening the work on aging in the new era; The 14th five year plan for high quality development of foreign trade was issued; The general office of the State Council issued a document calling for further strengthening the rescue and assistance to small and medium-sized enterprises; A new variant of covid-19 virus was found in southern Africa.
Asset performance review
Risk aversion of major international assets is heating up. This week, the CSI 300 index fell 0.61%, and the CSI 300 stock index futures fell 0.74%; Coking coal futures rose 12.35% this week, and the main iron ore contract rose 11.61% this week; The expected yield of financial management of joint-stock banks fell 0bp to 1.92%, and the 7-day annualized yield of yu'e Bao increased 1bp to 2.06%; The yield of ten-year Treasury bonds fell 11bp to 2.82%, and the active ten-year Treasury bond futures rose 0.56% this week.
Asset allocation suggestions
Asset allocation: bonds > stocks > bulk > currency. This week, the Bank of Korea raised interest rates by 25 basis points, which is the second interest rate increase in the year after the Bank of Korea raised interest rates for the first time on August 26. The Central Bank of Hungary raised the weekly deposit rate by 40 basis points, and the Federal Reserve of New Zealand announced an interest rate increase of 25 basis points. Some emerging countries have started the process of raising interest rates since mid-2021, mainly to cope with the possible international capital outflow to their countries during the rise of the US dollar index. Although the new variant of covid-19 virus found in southern Africa has caused market panic to some extent, investors have not changed their expectations of inflation in 2022. It is expected that the global interest rate increase centered on the Federal Reserve in 2022 will continue, and the purpose of interest rate increase has not changed. It is still to cope with the pressure of international capital outflow and upward pressure of inflation, However, with the change of the global economic recovery situation, the market's concern about the impact of interest rate hike on the recovery prospect is likely to rise, or it may cause the rise of risk aversion.
Risk tip: global inflation is rising too fast; Liquidity flows back to US debt; The global covid-19 epidemic has expanded its impact
