The average rise and fall of our top ten targets in December 2021 was – 0.53%, outperforming the CSI 300 index by 2.77%. The stocks with large increase in December were mainly Lianchuang Electronic Technology Co.Ltd(002036) (+ 14.65%). The annual cumulative rate of return of gold stocks from January to December 2021 was 27.36%, outperforming the Shanghai and Shenzhen 300 index by 32.55%.
Strategic perspective outlook for January 2022: market repair and upward prospects: the recovery of liquidity, “steady growth” policy is expected to be further strengthened, the failure of the Federal Reserve to raise interest rates and reasonable valuation are the main factors supporting the market. Specifically:
(i) M1 growth rate and social finance growth rate hit the bottom, showing obvious signs of recovery, and the macro liquidity environment is relatively warm. First, from the M1 year-on-year growth rate and social finance growth rate (6-month moving average growth rate) in November, there are obvious signs of bottom recovery. Among them, the growth rate of M1 rose to 3% from 2.8% in October, bidding farewell to the nine consecutive months of decline; The growth rate of Social Finance (6-month moving average growth rate) also began to rebound. Secondly, the central bank has again issued support policies for small and micro enterprises since the RRR reduction on December 15. The people’s Bank of China issued a notice on January 1, 2022, and implemented the continuous conversion of two direct tools, the Pratt & Whitney small and micro enterprise loan extension support tool and the Pratt & Whitney small and micro enterprise credit loan support plan, from January 1, 2022. By increasing financial support for small and micro enterprises, it is conducive to stabilizing enterprises and ensuring employment, so as to stabilize the basic macroeconomic market.
（2） The “steady growth” policy is expected to be further strengthened. The central economic work conference for the first time proposed that the economy is facing the triple pressure of demand contraction, supply shock and weakening expectation, and it is necessary for the policy to continue to work. We believe that in Q1 2022, it is expected to continue to implement an active fiscal policy and a flexible and prudent monetary policy, and “broaden credit” and “broaden money” at the same time. In terms of fiscal policy, “moderately advanced infrastructure investment” means that the infrastructure development can be expected across years and cycles; “Guiding financial institutions to increase support for the real economy, especially small and micro enterprises, scientific and technological innovation and green development” means that liquidity is reasonable and abundant, and the tone remains unchanged.
（3） Overseas, since the normalization process of the Fed’s current round of monetary policy, taper has just started, and the interest rate hike has not yet started. At present, the current situation of term interest margin does not support substantial and continuous interest rate increase. Historically, the current period interest margin has fallen to the current level. The average number of remaining operable interest rate increases is 5.5 times, and the rate increase range is about 1.5%. This means that even if the current interest rate increase cycle starts, it may be short and hasty. In addition, the necessity for the fed to raise interest rates depends on the trend of inflation. Dongfang overseas macro forecasts that the peak of US inflation will fall in 2022, giving the fed the freedom to make decisions on raising interest rates. In this case, the long-term and short-term interest rates do not have the momentum to continue to rise sharply.
（4） In terms of valuation, 2021 is a year of killing valuation for the main weighting indexes of a shares. Whether it is the CSI 300 index with a negative increase in the index throughout the year, or the gem index, CSI 500 and Shanghai index with a positive increase, the valuation at the end of 21 declined to varying degrees compared with that at the end of 20. Although the earnings growth of A-Shares will decline in 2022, we believe that the adjustment of valuation in 21 years has partially reflected the expectation of downward earnings growth next year. On the other hand, the 21 year structure of the industry with high valuation is mainly concentrated in the new power sources, Baijiu, automobiles and social services. Most other industries are still competitive in 22 years.
（5） Therefore, based on the above factors, we believe that the market can be expected to rise in January 21. In terms of allocation, one of the main lines is still industries benefiting from the “steady growth” policy. Mainly electricity, infrastructure (mechanical equipment, building materials), real estate and related industrial chains (household appliances, light industry), etc. The second main line is the large consumption sector, mainly food and beverage, consumer electronics, medicine (a segment with stronger consumption attribute), agriculture, etc. The third main line is the sectors with strong performance certainty in the first half of 22 years (mainly with PEG less than 2), mainly including Dianxin, military industry and electronics.
The targets of concern in January 22 were: Angel Yeast Co.Ltd(600298) (600298, buy), China Zhenhua (Group) Science & Technology Co.Ltd(000733) (000733, overweight), Foryou Corporation(002906) (002906, buy), China Tourism Group Duty Free Corporation Limited(601888) (601888, overweight), Zhejiang Xcc Group Co.Ltd;(603667) (603667, buy), Huaneng Power International Inc(600011) (600011, Unrated), Zhejiang Weiming Environment Protection Co.Ltd(603568) (603568, buy), satellite Chemistry (002648, buy), Lianchuang Electronic Technology Co.Ltd(002036) (002036, buy), Goertek Inc(002241) (002241, buy)
Risk statement
1、 The macroeconomic downturn exceeded expectations; 2、 The global epidemic broke out again than expected; 3、 The promotion of the “steady growth” policy was less than expected
