Overseas: Omicron rolls the world, and the market has changed from panic to calm
In December, Omicron virus swept the world and became a main line of capital market fluctuations. With the stronger transmission power of Omicron, the proportion of newly confirmed cases in the global population has reached a new high since the covid-19 epidemic, especially in Europe, especially the UK, which took the lead in relaxing epidemic prevention, and the United States is approaching the high point set in 2021. However, from the current clinical experience in Britain, South Africa and other places, the growth of hospitalization rate and mortality is not serious temporarily, and the data of pharmaceutical manufacturers show that their vaccines and oral drugs are effective on Omicron variants. Major countries have not tightened epidemic prevention policies in a large area, which has improved the mood of the capital market in the near future. Since late December, crude oil, US stocks and bulk commodities have rebounded rapidly, but it is still too early to make a comprehensive conclusion on Omicron. We need to be vigilant about the possibility of severe accelerated growth and countries restarting economic blockade after the high increase of confirmed cases, which will shock the capital market. In December, the Federal Reserve's interest rate meeting deleted "inflation is temporary" and announced to speed up taper, making the market count the number of interest rate increases by the Federal Reserve in 2022 and 2023 up to three times respectively. However, the U.S. bond yield is mainly reflected in the upward flattening. The long-term U.S. bond interest rate is stable at 1.45%. The Hawking of the Federal Reserve has no impact on U.S. stocks, gold, the dollar and other assets.
China: the economy continues to "warm up" and the policy space for steady growth is opened
According to China's economic and financial data for November released in December, China's economy continues to be in a "small recovery" state. Exports still have a strong impact on the economy, manufacturing investment has performed well, while the two traditional growth drivers of real estate and infrastructure are still slowing down. Under the dot rebound of China's epidemic, consumption growth is under pressure again. Although residents' medium and long-term loans benefit from the relaxation of policies, the demand for effective loans by enterprises is still weak. After the prices of bulk commodities in the upstream fell sharply, the profit growth of enterprises began to flow back to the middle and lower reaches and private enterprises. Since December, with the central economic work conference setting the tone of "stabilizing the economy" next year, the adjustment of real estate policies and the increase of relevant policies on the physical workload of infrastructure investment as soon as possible have weakened the risk of economic stall and decline in 2022. There is still a high degree of uncertainty in the overseas epidemic situation and prevention and control situation, which makes the resilience of China's exports expected to last longer. This fundamental environment with open policy space and no improvement in the economy is more friendly to the structural market of the bond market and the stock market. In December, the RMB exchange rate rose further against the trend (strong dollar), and the central bank made policy intervention to correct the expectation.
Policy: the counter cyclical policy was actively introduced, and the monetary policy "took multiple measures at the same time"
In December, the central economic work conference again mentioned "taking economic construction as the center", requiring "all parties to actively launch policies conducive to economic stability, and the policy force should be appropriately advanced". Under this setting, the central bank announced a comprehensive reduction of the reserve requirement by 0.5% on December 6, a 0.25% reduction in the refinancing interest rate for supporting agriculture and small businesses on December 7, and a 5bp reduction in the LPR interest rate on December 20; The Ministry of Finance issued a quota of 1.46 trillion yuan of special bonds approved in advance in 2022. The national financial work conference stressed that greater efforts should be made to reduce taxes and fees in 2022. We believe that in 2022, China's monetary policy will take "multiple measures" to support the real economy, and there is room for the reduction of the deposit reserve ratio by 1-1.5 percentage points. If the downward pressure on the economy increases, it may also cut interest rates by 10-15bp, focusing more on the use of structural tools.
