The two sessions set the GDP growth target for this year at about 5.5%
The situation in Russia and Ukraine has led to a surge in global commodity prices
Us non farm payrolls exceeded expectations in February
New highlights: 1) Russia Ukraine War: on March 6, Russian President Vladimir Putin said that the war would continue unless Ukraine accepted his request and stopped resistance. UNHCR said that more than 1.5 million refugees had fled Ukraine since Russia invaded Ukraine, and warned that the refugee surge had become the fastest refugee crisis in Europe since World War II. On Sunday, US Secretary of state Blinken said the United States is actively discussing with its European allies the prohibition of Russian oil imports. 2) The two sessions in 2022: the main expected targets set in the government work report this year include: GDP growth of about 5.5%; More than 11 million new jobs were created in cities and towns; The unemployment rate in urban survey shall be controlled within 5.5%; Consumer prices rose by about 3%; The target of energy consumption intensity shall be comprehensively assessed during the 14th Five Year Plan period, and appropriate flexibility shall be reserved. In terms of macro policy, the deficit ratio is arranged at about 2.8%; The scale of central to local transfer payments was nearly 9.8 trillion yuan, an increase of about 1.5 trillion yuan or 18%; Special bonds of 3.65 trillion yuan will be arranged for local governments. Tax reduction and tax refund should be carried out at the same time, and large-scale tax refund should be implemented for the amount of tax retained. Among them, the amount of tax retained for small and micro enterprises should be refunded at one time before the end of June. It is estimated that the annual tax rebate and tax reduction is about 2.5 trillion yuan, of which the tax rebate is about 1.5 trillion yuan. 3) Fed monetary policy: on March 2, Fed chairman Powell said he was inclined to propose and support a 25 basis point interest rate increase at the FOMC meeting in March. He said that “if inflation is higher or continues to be high”, the Fed is also prepared to raise interest rates by 50 basis points at one or more meetings for the rest of this year. As a result of Russia’s invasion of Ukraine, Powell said the Fed “will proceed cautiously” to “avoid adding additional uncertainty at an already challenging and uncertain time”.
Macroeconomic data: China: 1) the official manufacturing PMI in February was 50.2, higher than expected (January: 50.1); Non manufacturing PMI was 51.6, higher than expected (January: 51.1). 2) In February, the PMI of Caixin manufacturing industry was 50.4, higher than expected (January: 49.1); The PMI of Caixin service industry was 50.2, lower than expected (January: 51.4). Us: 1) ism manufacturing PMI recorded 58.6 in February, higher than expected (January: 57.6); Ism non manufacturing PMI was 56.5, lower than expected (January: 59.9). 2) Factory orders in January increased by 1.4% month on month, higher than expected (December: 0.7%); Excluding transportation, factory orders increased by 1.0% month on month, higher than expected (December: 0.5%). 3) In February, the number of non-agricultural employment increased by 678000, exceeding expectations (January: 481000), the highest since July 2021; The unemployment rate fell to 3.8%, lower than expected (January: 4.0%); The labor participation rate rose slightly to 62.3%, higher than expected (January: 62.2%); The average hourly salary was 5.1% year on year / 0.0% month on month, lower than expected (January: 5.5% year on year / 0.6% month on month).
Stock Market Overview: the Hang Seng, MSCI China and CSI 300 index fell 3.8%, 4.3% and 1.7% respectively in the past week. MSCI China Index: the energy (+ 6.7%) sector outperformed the market, while the optional consumption (- 6.9%) and information technology (- 6.4%) sectors performed poorly. The valuation of Hang Seng / MSCI China / CSI 300 index is 10.3x / 11.2x / 13.7x forward-looking P / E ratio respectively (median over the past three years: 11.2x / 13.1x / 13.9x). Due to the high uncertainty of the external environment and multiple headwinds (including the situation in Russia and Ukraine, the epidemic in Hong Kong and the monetary policy of the Federal Reserve), we expect the Hong Kong stock market to continue the bottom volatility in the short term. The positive catalyst of the steady growth policy proposed in the government work report of the two sessions this year may be difficult to ferment in the Hong Kong stock market in the short term. The positive boosting effect of the steady growth policy and China’s economic bottom recovery on the Hong Kong stock market is expected to gradually appear in the next few months. We expect that the local epidemic in Hong Kong will usher in an inflection point around late March and boost the recovery of investor confidence. Main risks and catalysts: 1) global epidemic; 2) The situation in Russia and Ukraine has further deteriorated, and the sanctions measures of western countries have exceeded expectations; 3) The accelerated pace of the Fed’s interest rate hike may lead to a correction in US stocks, which is difficult for the Hong Kong stock market to survive; 4) China’s economic recovery is weak, but the policy strength is less than expected; 5) China US relations continued to be tense and even deteriorated.
