Core view
Review: on January 3, “it’s the turn of big finance” emphasized the attention to the “big finance” market, which is the winner and loser of 2022 investment. Later on January 9, “big finance is the current market” β》、 Reports such as “retreat or attack, rely on big finance” on January 16, “big finance, continue to cut” on February 6, and “what else can big finance buy” on February 20 continue to emphasize that big finance seems to be defensive, but in fact, the best attack is to cut to big Finance (bank and real estate chain).
\u3000\u30001. After the short-term disturbance, A-Shares are expected to gradually return to “focus on me” and welcome the respite period of quarterly reports. In the report “grinding, forbearance and consumption” on February 27, we stressed that the market is faced with the superposition of four periods, namely, the verification period of economic data, the policy expectation period of China’s two sessions, the landing period of the Fed’s interest conference and the fermentation period of Russia Ukraine conflict. The game of stock funds is dominated, and the market grinding, forbearance, consumption Toss mainly.
The first quarterly report season is approaching gradually. After substantial adjustment, the short-term market gradually returns to fundamentals. Taking advantage of the better direction of the first quarterly report, the market is expected to usher in a rare respite period for the first quarterly report. In the future, the sustainability and focus of the market mainly rely on the improvement of two dimensions, among which the impact of the internal epidemic weakened and the economy stabilized and rebounded. Externally, the impact of the Fed’s contraction on foreign investment behavior is weakened.
\u3000\u30002. The social finance data was less than expected, and the expectation of monetary policy for steady growth increased.
In February, Social Finance announced that the data was significantly lower than expected. Main reasons: ① weak demand and poor on balance sheet credit; ② High base in the same period last year, ③ negative increase in residential mortgage scale and other factors. Looking back, the recovery of demand is the key assessment variable for the recovery of market confidence in economic growth. In the short term, due to the spread of the epidemic in many provinces and cities, investors are more worried about the recovery of consumption. The improvement of demand requires data verification in order to regain confidence and change everyone’s pessimistic view of economic expectations. At the policy level, we think we can expect more. Monetary policy and fiscal policy are expected to strengthen, so as to stabilize and improve the expectation of macroeconomic demand and reverse the current expectation of investors under the background of epidemic spread and negative mortgage growth.
\u3000\u30003. There may be “stagflation” overseas, but it is difficult for China to “stagflation”. After short-term disturbance, it will return to the main line of steady growth.
With the conflict between Russia and Ukraine and the sharp rise in oil prices, the U.S. inflation data exceeded expectations, and many investors worried about the phenomenon of “stagflation” similar to the 1970s, which is unfavorable for equity investment.
At present, we believe that major overseas economies may face a pattern of “stagflation”. China’s economy is upward and overseas economy is downward. The economic cycles of China and Europe and the United States are misplaced, and inflation pressure is high, which may form a worrying situation of “stagflation”. However, it is more difficult for China to have substantive changes, because CPI inflation restricts monetary policy. After short-term disturbance, the market will gradually return to steady growth and the main line of the first quarter report.
First, the sharp rise in oil prices will delay the downward speed of PPI from the high level. However, due to the high base factor of PPI in 2021, the overall direction of PP is downward, and the downward slope depends on the trend of global oil prices and the progress of “Russia Ukraine conflict”. PPI runs at a high level for a longer time than expected, which may put pressure on the profits of midstream manufacturing enterprises, which is the direction we need to pay attention to structurally. Of course, the introduction of trillions of “retention tax rebate” in the government work report of the “two sessions” is to make policy support arrangements for the midstream manufacturing industry, the operation of small, medium-sized and micro enterprises and the improvement of profits, which can not be ignored.
Second, the CPI in February was 0.9%, which is difficult to restrict monetary policy. Compared with the tightening cycle from 2010 to 2011, the year-on-year growth rate of China’s CPI in the current month has exceeded 4% for 16 consecutive months since October 2010, including 8 months or even above 5%. During this time, the central bank has carried out intensive interest rate hike. In contrast, the so-called inflation expectation is between 2% – 3% in 2022, which is difficult to substantially restrict the operation space of monetary policy.
\u3000\u30004. Why worry about the risk of 1970s “stagflation” overseas.
For the specific impact and asset trend, please refer to our two in-depth topics in dialogue 1970, comparison between big stagflation and the current eight points on March 7 and dialogue 1970, deep resumption of major asset allocation on March 8.
On the whole, the conflict between Russia and Ukraine pushed up global bulk and Shenzhen Agricultural Products Group Co.Ltd(000061) prices. The impact of oil, natural gas and Shenzhen Agricultural Products Group Co.Ltd(000061) prices on global inflation and the constraints of monetary policy need to be vigilant against the risk of “stagflation” during the 1970s two oil crises. Due to the “Russia Ukraine” incident, there may be a supply shortage of global bulk energy and Shenzhen Agricultural Products Group Co.Ltd(000061) prices, driving up bulk prices. Originally, the market expected inflation to decline around March, but because of this incident, inflation may last longer than expected, inflation data may decline slower than expected, and the economy is in a downward channel, Developed economies may have to raise interest rates, and there may be a “stagflation” environment similar to the “1970s” in the world. The current market asset price response to this expectation is insufficient, and it may be necessary to reflect this change at the price level at a certain point in the future.
The main reason for “stagnation” is the lack of new growth points. In the 1970s, the driving force of the third scientific and technological revolution on the economy weakened. The United States faced economic transformation and the slowdown of traditional economic growth. The effectiveness of the expansionary fiscal and monetary policies implemented by the U.S. government in the 1960s and 1970s was also weakened, lacking new growth points.
“Inflation” two oil crises, inflation remains high. From October 1973 to October 1973, OPEC cut its oil exports, and the oil price rose for the first time. From 1979 to 1980, the second oil crisis, the revolution broke out in Iran, Iran and Iraq went to war, the oil supply contracted sharply, the price soared, and the oil price rose from $14 to $40. In these two stages, the inflation rate remained high and reached more than double digits in 1974, 1979 and 1980, so monetary tightening had to be adopted.
In terms of the overall performance of major categories of assets, the yield of gold is “unparalleled”, and it is also the only asset with positive yield after excluding inflation. If divided by the period before and after the oil crisis, we can see that gold rose as high as 76.5% and 161.9% during the oil crisis; Hedging and anti inflation are the main logic of holding gold. In addition, the depreciation expectation caused by the decoupling of the US dollar from gold has increased significantly, which is also one of the reasons behind the rise of gold. The impact of the two oil crises on stocks and bonds is different. The first oil crisis brought a significant adjustment to the stock market, while the impact of the second oil crisis on the bond market is more significant, indicating that with the continuous high inflation, investors’ inflation expectations are rising. However, considering inflation, the real yields of stocks and bonds are negative.
\u3000\u30005. The contraction of the Federal Reserve and the conflict between Russia and Ukraine have a great impact on the short-term foreign investment behavior, which will disturb the market.
In the report “what foreign capital has done in A-Shares recently” on March 9, we analyzed in detail that since 2022 and the “Russia Ukraine conflict” on February 24, 7 and 11 of the top 10 and 20 enterprises holding land shares have net capital outflow. Among them, from January 3 to March 8, 2022, only China Merchants Bank Co.Ltd(600036) , Longi Green Energy Technology Co.Ltd(601012) , China Yangtze Power Co.Ltd(600900) are net inflows among the companies with the top 10 stock market values held by land stock connect.
From February 23 to March 8, Longi Green Energy Technology Co.Ltd(601012) and China Yangtze Power Co.Ltd(600900) are still net inflow, and China Merchants Bank Co.Ltd(600036) is changed from net inflow to net outflow. The other seven enterprises with net outflow are mainly Kweichow Moutai Co.Ltd(600519) , Contemporary Amperex Technology Co.Limited(300750) , Midea Group Co.Ltd(000333) , China Tourism Group Duty Free Corporation Limited(601888) , Inner Mongolia Yili Industrial Group Co.Ltd(600887) , Wuliangye Yibin Co.Ltd(000858) , Ping An Insurance (Group) Company Of China Ltd(601318) .
This week, the net outflow of foreign capital was more than 36 billion yuan, and the larger outflow was some leading stocks and white horse stocks with heavy market value held by foreign capital in the past few years. In this context, in turn, it has an impact on the bottom position chips of some A-share investors. In addition, due to the significant adjustment of the market since the beginning of the year, many special accounts and absolute income investors have to face the pressure of “warning line”, and then forced to reduce their positions. This is an important reason for the relatively poor performance of the market this week.
\u3000\u30006. The game between the downward slope of US inflation in the second quarter and the contraction attitude of the Federal Reserve is an important consideration for the follow-up progress of the market.
On March 17 next week, the Federal Reserve will probably raise interest rates for the first time, with an intensity of 25bp. The current market price also basically reflects such expectations. The subsequent attitude towards the persistence of inflation and the contraction of the table is the focus of the market.
For the U.S. and overseas markets, the market had expected U.S. inflation to gradually decline after the first quarter, believing that the pace of the Fed’s expected contraction will slow down. However, since the “Russia Ukraine” conflict has occurred, global bulk prices have continued to reach new highs. We need to pay attention to the possibility that the downward slope of inflation in the United States is slower than expected and the time at the high level is longer than expected. Then the subsequent Fed had to increase interest rate hikes and contractions in the second quarter, which may be worse than the market expected.
This situation may make global investors unwilling to see, and it is also a risk that we need to focus on in the investment and allocation in the second quarter.
\u3000\u30007. What do you think of “big finance”? Wait for two-way catalysis of data and policy.
It is also the reason why the “big data” of real estate and social finance is not as good as the expectations of investors in February, which is also the reason why the “big data” of real estate and social finance is gradually verified.
The economic data of January and February released next week is precious. If the data is not good, in the face of the GDP target of about 5.5%, the market will expect and expect more “steady growth” policies and measures, and the interpretation of the “big finance” market will repeat the expected fermentation stage after the economic work conference.
At present, we think we can focus on big finance in combination with the fundamentals of the company. 1) we can focus on big banks with undervalued “stagflation” and urban commercial banks and rural commercial banks with good quality and performance fundamentals such as Chengdu Chongqing economic circle and Yangtze River Delta economic circle. 2) For real estate, we can focus on the improvement of real estate sales area and data, which is an important starting point for investors to correct the expectation of real estate fundamentals.
\u3000\u30008. For infrastructure construction, pay attention to the steady growth opportunities of the “new land and sea channel in the west”.
The government work report emphasizes that the focus of infrastructure construction lies in the “water conservancy project”, “comprehensive three-dimensional transportation network”, “energy base and facilities”, “urban gas pipeline renovation”, “flood control and drainage facilities” and “underground pipe gallery” of “old infrastructure”. Planning of “large-scale power supply infrastructure and wind power” infrastructure construction. On the whole, the investment direction of infrastructure construction is not significantly higher than expected, which is similar to the expectation of investors.
Specifically, what one belt, one road, is, in February 20th, “big finance can buy”, which is not exactly the same as the stock price performance. The stock market performs better. It needs capital market to see that capital investment can focus on a new field, not just spot, scattered, similar to 10-11 years of high speed rail and 14 years of “one belt and one road”. 16 years of “PPP”. The “new western land and sea channel” mentioned in the government work report of the two sessions is expected to form an important support for infrastructure construction in western regions such as Chongqing and Guangxi, and it is also an important starting point in steady growth. If focused investment can be formed, investors can pay attention to this direction.
\u3000\u30009. Where are the opportunities for growth stocks? Focus on photovoltaic, sea breeze, computer digital economy and other directions.
Referring to historical experience, the expected fermentation stage of liquidity inflection point may have great pressure on emerging markets, especially growth stocks. Second, after 2 years of growth, the new energy bull market is approaching the performance period. In this time dimension, growth stocks “squeeze bubbles”, eliminate the false and retain the true, and discern the Pearl. In the direction of growth and breathing, the core revolves around two chains.
First, focusing on the “double carbon” economy, combined with the current direction of reasonable chip structure, upward prosperity and guaranteed performance, photovoltaic and wind power.
Second, under the background of “counting from the east to the west”, build national data center clusters in Beijing Tianjin Hebei, Dawan District, Yangtze River Delta, Chengdu Chongqing, Guizhou, Gansu, Inner Mongolia and Ningxia. The digital economy will rise as a national strategy in the 14th five year plan, and we can pay attention to the infrastructure direction represented by cloud computing and data center.
\u3000\u Doushen(Beijing) Education&Technology Inc(300010) . Grasp the investment direction of the first quarterly report from the situation of listed companies that announced the operation from January to February. See Table 1 of the text for details.
Risk tip: the spread of the epidemic exceeded expectations and the tightening of the Federal Reserve exceeded expectations.
