Macro communication and Thinking: residents add leverage or make a comeback
Ensuring goals requires policy efforts. The market is divided on whether the annual economic goals can be successfully achieved. In terms of various economic kinetic energy indicators in the past two months, the recovery is not sufficient, let alone the recent rise of the epidemic in China. However, since the government has fully considered the challenges of economic work in the whole year when formulating this goal, and there are few years in which the economic growth rate has not reached the standard in the past, we have reason to believe that in order to ensure the smooth completion of the economic growth goal, the policy has the will and appeal of sustainable development.
The macro leverage ratio may need to be further improved. We found that every year since 2008, the decline of China’s macro leverage ratio corresponds to the significant deceleration of GDP, which previously appeared in 2008, 2011 and 2018 respectively. Therefore, the level of macro leverage may continue to improve this year.
Government leverage is expected to be consistent. The prime minister has placed expectations on this year’s fiscal policy, which is also more consistent with the market expectations. The government’s leverage can be said to be the most clear direction. We expect that the leverage ratio of government departments at the end of this year may be about 2 percentage points higher than that in 2021, which is why the market is optimistic about the recovery of infrastructure growth.
Residents leverage or make a comeback. It is difficult to complete the economic task of the whole year only by relying on the government and leverage. From the empirical law of the change of leverage ratio of various departments, no matter how the government’s leverage ratio is adjusted, it is difficult for enterprises to add leverage alone, and residents must add leverage to cooperate. Therefore, the most probable policy combination this year is “the government, enterprises and residents increase leverage at the same time”, while the less likely policy combination is “the government, residents increase leverage and enterprises reduce leverage”. The last time this policy combination appeared was in 2018. Of course, we hope to avoid this situation as much as possible, There is no precedent for “the government and enterprises increase leverage and residents reduce leverage”.
Consumption is waiting for the expected turn of real estate. The improvement of residents’ leverage ratio needs to be matched with the improvement of the operating conditions of the real estate industry. In February, the new medium and long-term loans of residents’ departments turned negative for the first time, which is the embodiment of the extreme downturn of financing demand under the reduction of purchase intention. We believe that if we observe the improvement of sales and land acquisition data in the future, it will be an important sign of the expected shift of real estate, and for the equity market, it may be a good opportunity to switch backward cycle varieties, such as some optional consumer goods.
One week scan:
Epidemic situation: the epidemic situation in China has been repeated, and the epidemic pressure in surrounding countries has not decreased. In the past week, the number of newly diagnosed cases in Chinese mainland and Hong Kong, Macao and Taiwan has exceeded 900 cases and 128 thousand cases respectively. There are 178 medium and high risk areas in China. At present, the epidemic situation in China is multi-point and local. In the last week, about 10.7 million new cases of covid-19 pneumonia were recorded worldwide, up 1.1% from the previous week. New diagnoses in South Korea and Vietnam are still rising. There were about 46000 new deaths from covid-19 pneumonia worldwide, down 20% from last week. New death toll rises in Germany and Thailand. Who has reported cases of deltacron strain. The risk of covid-19 epidemic in South Korea was raised to the highest level. The United States, Europe and some Southeast Asian countries cancelled most covid-19 epidemic prevention and control measures this week. The total amount of global vaccination this week decreased significantly compared with last week, recording 140 million doses. The global booster vaccination rate was 18.3%, and Chile became the first country in Latin America to launch the fourth vaccination.
Overseas: the CPI growth rate of the United States reached a new high, and the monetary policy of the European central bank turned eagle. The outlook for the US economy is optimistic and the expectation of raising interest rates is clear. The Fed beige book shows that the overall economic outlook for the next six months remains stable and generally optimistic. This week, a number of Fed officials expressed clear expectations for raising interest rates. The European Central Bank‘s interest rate meeting in March decided to speed up the withdrawal of the asset purchase plan. The Bank of England has entered the stage of shrinking its balance sheet and will no longer reinvest its maturing treasury bonds. In contrast to European and American countries, the Bank of Japan maintained monetary easing. Bank of Japan governor Haruhiko Kuroda said that the Japanese economy has not fully recovered from the impact of the pandemic and needs to continue the current monetary easing policy. The United States embargoed Russian oil, and international oil prices rose sharply. In February, the CPI of the United States hit a 40 year high year-on-year, with the growth rate of energy, food and other sub items ranking the top. The Michigan confidence index hit a 10-year low in March, indicating that the American people are further worried about inflationary pressure.
Prices: Shenzhen Agricultural Products Group Co.Ltd(000061) wholesale prices rose and international oil prices rebounded. This week, the Shenzhen Agricultural Products Group Co.Ltd(000061) wholesale price index of the Ministry of agriculture rose month on month, pork prices continued to fall, while the average prices of 28 key monitored vegetables and 7 key monitored fruits fell. This week, the average price of Brent crude oil and WTI crude oil continued to rise month on month, the average price of China Shipbuilding Industry Group Power Co.Ltd(600482) coal remained stable, and the average price of rebar rose.
Liquidity: the issuing interest rate of certificates of deposit rose, and the US dollar index continued to rise. The interest rate of short-term funds differentiated this week. The weekly average of dr001 rose by 12.7bp month on month, and the weekly average of dr007 rose by 1.6bp month on month; The weekly average of 3-month Shibor interest rate decreased month on month, and the weekly average of 3-month certificate of deposit issuance interest rate increased. The interest rate of bills is divided. The weekly average of one-month rediscount interest rate of state-owned shares and silver bills is slightly upward, while the six-month and one-year rediscount interest rates are both downward. This week, the central bank conducted a total of 50 billion yuan of reverse repo in the open market, and a total of 380 billion yuan of reverse repo expired in the open market of the central bank this week; Next week, the central bank will have 50 billion yuan of reverse repo and 100 billion yuan of MLF maturing in the open market. The US dollar index continued to rise this week and the RMB remained slightly lower.
Performance of major categories of assets: Hong Kong stocks fell significantly and treasury bond yields rose. European stock markets rebounded this week, most of the other major global indexes corrected, and Hong Kong stocks fell significantly. All sectors of China’s stock market fell this week. The industries with the smallest decline were comprehensive, power equipment and food and beverage. This week, the weekly average yield of 10-year Treasury bonds rose by 1.7bp, and the weekly average yield of 10-year CDB bonds rose by 2.4bp.
Risk tip: policy changes, economic recovery is less than expected.
