Recently, affected by the situation in Russia and Ukraine, global commodity prices fluctuated violently, and the fluctuation range of some varieties has reached or close to historical records. For example, the price of Brent crude oil hit US $139 / barrel, a new high in recent 14 years; LME nickel price doubled within one day and once exceeded the historical extreme value of US $100000 / ton. Gold, coal and many Shenzhen Agricultural Products Group Co.Ltd(000061) prices fluctuated sharply.
Commodity price fluctuations gradually affect the stock market. At the macro level, the rise of bulk commodities pushed up global inflation expectations, which in turn affected the direction of monetary policy in some economies; At the micro level of enterprise profits, although the rise in raw material prices can be transmitted downward, the poor transmission will affect the profits of middle and downstream enterprises. In addition, severe supply chain problems will also affect the profit prospects of enterprises.
However, for the trend of stock markets in different countries and regions, analysts suggest specific analysis, focusing on comparative advantages. For example, China’s inflation pressure is much lower than that of some major overseas economies, and has the world’s largest and relatively complete industrial chain. Therefore, in the process of global asset fluctuations, the economic and corporate fundamentals are more uncertain.
global inflation expectations rise
Although the GDP volume of Russia and Ukraine accounts for a relatively small proportion in the world, the economic structure of the two countries determines that this conflict will have a significant impact on the global commodity supply. Specifically, Russia’s crude oil production accounts for about 13% of global crude oil consumption. Russia is also a major supplier of metals such as aluminum, nickel and palladium; The area of influence in Ukraine is dominated by Shenzhen Agricultural Products Group Co.Ltd(000061) and Ukraine’s wheat exports account for about 10% of global wheat exports.
Gf Securities Co.Ltd(000776) chief economist Guo Lei believes that “increased global inflationary pressure – tightening of overseas monetary policy – convergence of overseas liquidity” in 2022 is one of the main clues in the macro aspect. Recently, with the escalation of the conflict between Russia and Ukraine, crude oil prices have risen faster than expected, and grain prices have also risen faster. The superimposed epidemic risk has not been eliminated, and multiple factors have exacerbated the uncertainty of global inflation.
In Guo Lei’s view, on the one hand, there is a positive correlation logic between the prices of crude oil and other bulk commodities and equity assets, that is, the continuous repair of the economy is mapped on the oil price and equity market at the same time; On the other hand, there is also a negative correlation logic, that is, oil prices more represent the rise of inflationary pressure, leading to the convergence of liquidity expectations worried by the equity market. In reality, since the second half of 2021, it has been a typical “negative correlation period”, which shows that “the characteristics of inflation have raised the investment cost of growth assets”.
Huaxi Securities Co.Ltd(002926) chief strategist Li Lifeng reviewed the two oil crises in the 1970s. He believes that the two oil crises have exacerbated the stagflation risk of the U.S. economy. Accordingly, the Federal Reserve has adopted tightening policies such as shrinking the money supply and raising the interest rate level, which makes the equity market funds seek refuge in stages to a certain extent.
industry chain profit affected
There is a transmission mechanism for the rise of raw material prices to the middle and lower reaches, but sometimes the poor transmission will lead to the significant differentiation of profits of upstream and lower reaches enterprises.
China International Capital Corporation Limited(601995) overseas strategy team said that the conflict between Russia and Ukraine has impacted the supply of some commodities, and the shortage of raw materials may affect some industrial chains.
Supply chain problems can not be ignored China International Capital Corporation Limited(601995) believes that what is known and confirmed at present is that the supply chain disturbance caused by the blockade of Russian and Ukrainian ports or poor transportation has been formed, but it happens that the supply shock that originally disturbed the market due to factors such as epidemic and extreme weather has not completely subsided, and the contradiction in the short-term supply chain continues to increase, which naturally exacerbates the market’s concern about the future global price pressure.
Whether investing in upstream cyclical stocks can avoid supply chain disturbance? The answer may not be satisfactory.
Founder Securities Co.Ltd(601901) strategy chief Yan Xiang recently released a report. Reviewing the market performance of global cyclical stocks in the past few decades, it can be found that whether it is the US stocks in the two oil crises in the 1970s or the A-share coal sector in recent 10 years, after the energy price peaked, even if the subsequent energy price showed a “factory” trend, It is also difficult for the corresponding energy stock prices to have excess returns.
A-Shares are expected to show “relative toughness”
Analysts generally believe that China has certain advantages over other economies in terms of inflation pressure and the risk resilience of the industrial chain. In the context of controllable inflation as a whole and sustained efforts of the “steady growth” policy, China’s equity market may show relatively stronger resilience.
China International Capital Corporation Limited(601995) chief strategist Wang Hanfeng said that the short-term sharp rise in commodity prices and the potential sustainability of high prices have exacerbated the risk of global inflation, and the risk of economic downturn in major overseas economies has increased in the second half of the year. However, China’s market inflation is generally controllable and the reserve space for the “steady growth” policy is relatively sufficient. With the follow-up “steady growth” policy continuing to work, the economy will maintain a momentum of steady progress.
Wang Hanfeng stressed that although the supply risk caused by short-term geographical conflicts and other factors is still likely to continue to ferment, aggravating the market’s concern about global economic stagflation. However, China is an important manufacturing country in the world and has the world’s largest and relatively complete industrial chain. As long as China continues to pursue scientific and technological innovation and the trend of industrial upgrading remains unchanged, China is likely to show relative resilience in the global supply risk.
Li Lifeng said that this year’s government work report proposed that China’s GDP growth target is about 5.5%. It is expected that the follow-up policies in new and old infrastructure, consumption and other fields will be intensively introduced, which will help to build the bottom range of a shares. In the medium and long term, we are not pessimistic about the A-share market, and the main line of “stable growth” in the short term is still the main idea of allocation.
