I. some key core logic:
1. The reduction of reserve requirement and interest rate is similar to the "signal bomb", which aims to summon the "big force" of credit, that is, to hope that the credit cycle (Social Finance) can eventually expand.
2. The reduction of reserve requirement and interest rate can only improve the short-term mood. The key to the medium-term trend of the market also depends on the credit cycle. Historical data show that the credit cycle (year-on-year growth of total debt) almost matches the valuation trend of the A-share market. As shown in Figure 1-2
3. The internal logic that the credit cycle affects the valuation of a shares: ① the credit cycle determines the current residual liquidity; ② The credit cycle determines the profit expectation of a shares. As shown in Figure 3-4
4. In addition to the credit cycle, the profit cycle should also be considered in the framework. Therefore, in the two-dimensional framework of credit profit, we can conclude that: under credit and profit - the market plummeted; Credit up and profit down - the market fell slightly; Credit and profit - the market rose sharply; Under credit, on profit - market shock. As shown in Figure 5-6
5. Finally, we need to consider the position of valuation, that is, the key indicator - stock bond yield difference (10-year Treasury bond - CSI 300 dividend rate). According to the historical data, every large-scale conversion of bond and stock performance price ratio occurs at the position of + - 2x standard deviation.
II. The resumption of A-share trading since December last year has verified the above logic:
1. Since the beginning of December, the central bank has reduced the reserve requirement once, MLF once and LPR twice. The "signal bomb" of reducing the reserve requirement and interest rate repeatedly appears, but the market ignores it. Behind it is the key factor determining the trend of A-Shares - the "big force" of credit expansion, which has been lower than expected.
2. It was not until the social finance data of January was released after the Spring Festival in February, which exceeded the expectation for the first time, that the market sentiment, including Ning portfolio, improved. But it was soon interrupted by the sharp rise in commodities caused by the conflict between Russia and Ukraine.
3. At the beginning of December, we proposed that the RRR reduction is a "signal bomb", and the key depends on whether the "big forces" come or not, and gave a relatively cautious conclusion. At the same time, according to the two-dimensional framework of credit profit, we also put forward the judgment that there will be great opportunities only in the first half of the year (credit first and profit second) and the second half of the year (credit and profit first).
4. However, the decline in January still exceeded our expectations, mainly because the Federal Reserve's expectation of raising interest rates rose sharply in January, resulting in sharp fluctuations in US stocks and US bonds, which affected the high-level assets of a shares. As shown in Figure 7-8
III. how to interpret the market after the credit (Social Finance) in February was lower than expected:
In January and February, the year-on-year growth rate of social finance fell (10.5% - 10.2%). Except for corporate bonds and government bonds, other sub items basically increased less year-on-year, indicating weak real estate demand. Historically, the process of credit easing has also been subject to twists and turns: in 2016 and 2019, the average annual amount was one day in January, lower than expected in February and one day in March.
2. However, this time, the confidence of social finance in March may be insufficient. On the one hand, the confidence of real estate recovers slowly, on the other hand, the epidemic ferments in major cities. Therefore, after February was significantly lower than expected, the market's confidence in the follow-up social finance data may be further weakened, and the rabbit will not scatter the eagle.
3. Therefore, after the twists and turns of the "big force" of credit, the market can only expect to further release the "signal bomb" of reducing reserve requirements and interest rates.
4. In the short term, after the emotional freezing point, the market may deduce the "double downward expectation" superimposed on the "Russian Ukrainian easing expectation", Form a twists and turns oversold rebound around the expectations of the first quarterly report (lithium battery, lithium battery equipment, automotive electronics, photovoltaic modules and inverters, military industry, CXO, cycle, as shown in Figure 9) and the direction of steady growth (nuclear power, 5g + industrial Internet, UHV, water conservancy and pipe gallery).
5. In the medium term, in our credit profit two-dimensional framework, A-Shares see a large-scale rise or a new round of stock market cycle, which requires the condition of "harmony between time, place and people" - that is, credit expansion + bottom profit + 300 share bond yield difference is at - 2x standard deviation. These three conditions are expected to be achieved in the middle of the year or the second half of the year. As shown in Figure 10-16.
Risk tips: geopolitical upgrading, intensified supply chain crisis, inflation restricting the space for steady growth, etc
