Event: the central economic work conference was held in 2021. The conference pointed out that China's economy is currently facing triple pressures of demand contraction, supply shock and weakening expectation. It set the tone that the economy will be stable and strive for progress in stability next year, continue to implement active fiscal policy and prudent monetary policy, and clearly put forward to carry out infrastructure investment moderately in advance.
The new round of macro small cycle has entered the period of policy reversal: the central economic work conference basically defined the macro policy environment of counter cyclical and cross cyclical regulation and control in 2022. Starting from the analysis framework of macro small cycle, the policy setting of this meeting has a significant cyclical attribute. In our in-depth report "disturbance of epidemic situation to macro small cycle", we put forward that 2019 is the bottom grinding stage of a new round of macro small cycle, the outbreak of covid-19 epidemic is in the stage of transformation between old and new cycles, and 2021 is the upward stage of the cycle. From the Perspective of total amount, it has entered the downward stage, and the nature of policy shift is similar to that in 2012 In 2015, the policy game entered a continuous fulfillment cycle.
The policy game cycle is prolonged and complicated: this round of policy reversal cycle may last a long time and the level is relatively complex. First of all, due to different covid-19 epidemic prevention and control measures, China's exports continue to be strong, resulting in a long time lag between the high points of domestic and foreign demand in the downward phase of the cycle. However, due to the short-term difficulty of reversing the real estate impact, it is more likely that domestic and foreign demand will resonate downward in 2022, which is a common feature of entering the downward phase after several rounds of macro and small cycles, At that time, it may bring another opportunity for policy adjustment; Secondly, the convening of the 12th National Congress next year may bring some uncertainty to the implementation of the policy; Finally, in the context of the double carbon policy, there are constraints in the implementation of the traditional means of stabilizing growth, coupled with the current tight local finance, new capital arrangements are needed. In short, the cycle of policy game may be long and the level is relatively complex, and the essence is the urgency of steady growth.
Infrastructure investment has entered the warm-up stage: different from the continuous low expectation of infrastructure investment in the economic upward cycle in 2020, at present, the macro economy has entered the downward cycle, and there is more policy space for the rebound of infrastructure investment. The central economic work conference proposed to carry out infrastructure investment moderately in advance, laying the tone. From the financing arrangement of infrastructure investment in the past cycle, innovative funds often play an important role, such as special construction bonds. Due to the short-term constraints of land transfer fees in this round of infrastructure, new types of funds may be the decisive factor for the rebound of infrastructure investment. From the current stage of infrastructure investment cycle, the newly signed orders and investment scale are still in a downward state in the short term, while the policy is gradually entering a warm-up period, waiting for the rebound of orders and the introduction of financing portfolio.
Grasp the valuation premium during the cycle switching period: after the stimulus of RMB 4 trillion in 2008, the demand growth center of the construction industry continued to decline, and the macro small cycle became an important basis for investment. From the perspective of historical experience, architectural blue chips often show significant valuation elasticity in the process of policy reversal and cycle conversion. The policy game may last for a long time in this round of cycle conversion. It is suggested to actively grasp the valuation rebound of undervalued blue chips, and architecture should pay attention to four main lines: 1. Traditional undervalued infrastructure leaders China Communications Construction Company Limited(601800) , China Railway Group Limited(601390) , China Design Group Co.Ltd(603018) ; 2. China National Chemical Engineering Co.Ltd(601117) , Metallurgical Corporation Of China Ltd(601618) , Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) benefiting from new infrastructure and large-scale manufacturing upgrading; 3. The reform of state-owned enterprises and the recovery of overseas projects Sinosteel Engineering & Technology Co.Ltd(000928) ; 4. In the process of restructuring the pattern of the real estate industry China State Construction Engineering Corporation Limited(601668) , CNOOC real estate, etc.
Risk warning events: low expectation of policy implementation, less than expected infrastructure investment, etc
