Economic fundamentals: Overseas inflation continues to rise, and China’s steady growth is the main task
The twists and turns of the global epidemic have resurfaced, and overseas inflationary pressure has continued to rise. The spread of Omicron virus raised concerns about the slowdown of economic repair, the imbalance between global supply and demand has not been alleviated, and the inflation level of major economies such as the United States and Europe reached a new high. In November, the US CPI rose to 6.8% year-on-year. China’s economy is relatively resilient and the inflation risk is slowing down. In November, high export growth and marginal improvement in real estate sales supported a slight marginal improvement in fundamentals, but the epidemic repeatedly dragged down the recovery of consumption; PPI fell 0.6pct to 12.9% year-on-year. Policy setting and steady growth. The central economic work conference set the tone that China’s economy is facing triple pressure, re mentioning “taking economic construction as the center” and adhering to seeking progress while maintaining stability.
Liquidity: the pace of the Federal Reserve taper has accelerated, and there is room for further easing of China’s monetary policy
The tightening of overseas monetary policy accelerated, and the pace of the Federal Reserve taper accelerated. The Federal Reserve decided to increase the reduction of bond purchase to US $30 billion / month from January 2022, and the market is expected to accelerate the pace of interest rate increase; The Bank of England unexpectedly raised interest rates by 15bp. There is room for further easing of China’s monetary policy. With the implementation of policies such as RRR reduction and structural interest rate reduction, the interest rate of 10Y treasury bond fluctuated around 2.85%; The Q4 monetary policy regular meeting of the central bank proposed to enhance the foresight, accuracy and autonomy of monetary policy and be more proactive and promising. Marginal recovery of market capital inflow. As of December 24, the net inflow of funds going north in December affected by the appreciation of RMB exceeded 70 billion yuan.
Equity allocation strategy: Policy underpinning, focus on the main line of steady growth, China’s economic toughness + marginal easing expectation of monetary policy, and the market is expected to fluctuate upward in the medium term.
China’s economy still has structural highlights in the slowdown of growth, and the market is supported by the expectation of marginal easing of monetary policy. Focus on the main line of stable growth in the short term and lay out the direction of industrial upgrading in the medium and long term. The tone of China’s steady growth policy is clear, and industry allocation suggestions are carried out around this. Attention is paid to the repair opportunities of large consumption sectors such as food and beverage, the growth potential of new energy infrastructure and the valuation repair of financial sectors. The medium and long-term layout direction is still scientific and technological innovation and green transformation; Of course, the market is disturbed by internal and external concerns in the short term, and the fluctuation risk of some overvalued sections has been amplified.
