Key points:
The medium and long-term prospects of China’s stock market are promising. Steady growth in 2022 is the focus. It is expected that China’s economy will develop at a high speed since the reform and opening up, and enter a period of medium, low-speed and high-quality growth after 2008. The 14th five year plan has no specific target for GDP, but according to the target of US $2 million per capita in 2035, the corresponding GDP growth rate is about 5%, It is still higher than the potential growth rate of major developed economies.
In 2022, China’s economy will face the triple pressure of shrinking demand, supply shock and weakening expectation. Steady growth is the focus of policy, and the acceleration of taper in the United States will strengthen China’s fiscal policy in 2022. The neutral and wide monetary policy, coupled with the general trend of residents’ capital entering the market, it is expected that loose liquidity in the previous period will push the market index upward; However, with the expected rise of interest rate increase in the United States, the downward pressure on the market in the later stage increases, showing an overall state of high before and flat after. The Shanghai composite index fluctuates between 3200-4200 points.
A-share repricing, the industry profit center is down, and most of the roes in the consumer sector are in the upward channel. The repricing process of some A-share sectors has been completed in 2021q2-2021q3, and some of the risks accumulated in the stock market during the epidemic have been released. The A-share profit cycle reached a high point in the fourth quarter of 2020. The single quarter profit growth rate in the third quarter of 2021 has changed from positive to negative. It is expected that the A-share profit growth rate in 2022 will drop to about 4.0% year-on-year. In terms of industry, roe will continue its upward trend in 2022, mainly in consumption related fields: medicine and biology, automobile, household appliances, leisure clothing, food and beverage, etc.
The continuation of high prosperity, price transmission and defense are the main directions of stock selection in 2022
Most of the high boom industries directly benefit from policy support. With the issuance of the action plan for reaching the carbon peak before 2030, new energy meets the dual carbon requirements, and it is expected that the high boom in this field will continue in 2022; In 2021, the high price in the upstream will eventually be transmitted to the downstream. The slow rise of China’s CPI in 2022 is a high probability event, which is good for the downstream industries with price rise expectations: Food and beverage, textile and clothing, medicine and biology; Affected by inflation, the expectation of interest rate increase in the United States in 2022 is rising. Banks, securities and other industries with undervalued and good roe deserve attention.
Investment advice
Overall, the scissors between PPI and CPI turned in 2022, and the profit growth rate of China’s industry will fall back to about 4.0% year-on-year in 2022. The superposition of US inflation leads to an increase in the expectation of interest rate increase, which is the main source of pressure on the capital market. The interest rate gap between China and the United States makes China’s monetary policy still independent and flexible. The liquidity of China’s market will remain reasonably abundant in 2022. It is expected that the trend of Shanghai Composite Index will be high before and flat after 2022. In terms of industry, it is optimistic about new energy, new technology and military industry with high prosperity; Food and beverage, textile and garment, pharmaceutical and biological industries benefiting from price transmission; And defensive banks and securities companies.
Risk statement
If new outbreaks such as “Omicron” lead to global epidemic prevention out of control, it will drag down the pace of global economic recovery.
