On March 16, the financial stability and Development Commission of the State Council held a special meeting to study the current economic situation and capital market problems. The meeting pointed out that financial institutions must proceed from the overall situation and firmly support the development of the real economy. Long term institutional investors are welcome to increase their shareholding ratio.
After the news of the financial commission of the State Council came out, the capital market responded quickly, the stock market rose sharply, and the confidence of the capital market was boosted. A number of industry experts interpreted this. The statements made by the financial commission of the State Council on macroeconomic, real estate, zhonggai shares, the stability of Hong Kong’s financial market and institutional investors effectively boosted market confidence, stabilized investor expectations, took a “reassurance” for the capital market, and is expected to promote the short-term oversold A-share market and gradually realize the return of value.
take “reassurance” for the market
the financial commission of the State Council expressed its position to boost market confidence
On March 16, the financial stability and Development Commission of the State Council held a special meeting to study the current economic situation and capital market problems.
In response to the relevant statements in the above-mentioned meeting, Liu Feng, chief economist of galaxy securities, said that the financial commission of the State Council had taken a “reassurance” for the market for the relevant statements of China concept stocks, institutional investors, macro economy and real estate, maintained the continuity, stability and long-term nature of China’s policies, and effectively boosted market confidence and investor expectations.
For example, the meeting mentioned that “financial institutions must proceed from the overall situation and firmly support the development of the real economy. Long term institutional investors are welcome to increase their shareholding ratio.” As a professional investor in the capital market, institutional investors should maintain their concentration in the sharp fluctuations of the stock market, strengthen their responsibility, be full of confidence in China’s economic fundamentals and play the role of “stabilizer” in the capital market.
Dong zhongyun, chief economist of AVIC securities, also said that today’s meeting of the financial committee of the State Council gave a positive response in many aspects, such as macro-economy, real estate, zhonggai shares, platform economic governance and the stability of Hong Kong’s financial market. The above issues are the main concerns of the recent market and the core factors causing recent market fluctuations. The positive response to the policy further consolidated the “policy bottom” and helped alleviate the market’s concerns about real estate, the Internet and other fields, especially “maintaining the stable operation of the capital market”, “any policy that has a significant impact on the capital market should be coordinated with the financial management department in advance”, “welcoming long-term institutional investors to increase their shareholding ratio” and other statements directly point to supporting the capital market and driving the significant repair of market sentiment, A shares, Hong Kong stocks and China concept stocks are expected to rebound.
Hongta Securities Co.Ltd(601236) chief economist Li Qilin also believes that the content of this special meeting is detailed. First, in view of the weak credit data structure from January to February, the meeting once again stressed that monetary policy should take the initiative to deal with it and new loans should maintain a moderate growth. Since then, the central bank also reiterated this view. This means that the follow-up monetary policy will be active.
At the same time, the meeting also expressed the need to actively introduce policies conducive to the market and prudently introduce contractionary policies. To a large extent, this shows that the general direction of the current policy of “steady growth” remains unchanged, and the fiscal policy and monetary policy will cooperate well to promote the steady repair of the economy. The economic data from January to February also verified that China’s economy was gradually improving when the policy was put into force. Therefore, we believe that the general direction of China’s economy for the better in the future remains unchanged.
Second, the economic data from January to February and relevant high-frequency data show that there is still great downward pressure on the real estate industry, weak sales end, poor expectations of real estate enterprises and weak investment. In response to this phenomenon, the meeting said that it would timely study and put forward effective solutions to prevent and resolve risks, and put forward supporting measures for the transformation to a new development model.
Third, the inclusion of five companies in the temporary identified list in the United States has triggered concerns about the collective delisting of zhonggai shares, which has led to a sharp decline in the prices of zhonggai shares and other underlying stocks in the near future, and the market sentiment is very weak. In response to this phenomenon, the meeting made it clear that the regulatory authorities of China and the United States have maintained good communication, made positive progress and are working to form a specific cooperation plan. The Chinese government continues to support all kinds of enterprises to list abroad. Therefore, we can see that after the meeting, there was an obvious correction in the stock market. At the close, the Shanghai stock index rose by 3.5%, the Hang Seng Index rose by 9.1%, and the Hang Seng technology rose by 22.2%. The market sentiment was obviously warmer.
Fourth, the governance meeting for the platform also made it clear that we should improve the established scheme in accordance with the principles of marketization, legalization and internationalization, adhere to seeking progress while maintaining stability, and so on. The regulation of policy boundaries also reduces the uncertainty of the market and reduces the concerns of the market to a certain extent.
Fifth, the meeting stressed the need to do a good job in the management of market expectations. Before the introduction of follow-up policies, we will strengthen coordination and communication with the market, which is also conducive to guiding enterprises and financial institutions to do their own work. For example, when the policy uncertainty is reduced, enterprises have the motivation to further make technological transformation and expand investment.
In addition, Huaxia Fund also believes that the special meeting held by the financial stability and Development Commission of the State Council is a key meeting held at a critical time, which is of great significance for stabilizing the market and restoring investor confidence. The major measures proposed at the meeting are conducive to maintaining the long-term trend of China’s healthy economic development and jointly maintaining the stable development of the capital market.
Wang Jing, chief strategist of ChuangJin Hexin fund, also said that the stock market rose sharply today, and the stable signal released by policies was the main reason for the sharp increase in market confidence. At the financial stability meeting of the State Council on the 16th, vice premier Liu he reiterated the importance and sustainability of steady growth. At the same time, he stressed that relevant departments should earnestly assume their responsibilities, actively introduce policies conducive to the market, carefully introduce contractionary policies, and respond in time to hot issues concerned by the market. All policies that have a significant impact on the capital market should be coordinated with the financial management department in advance to maintain the stability and consistency of policy expectations.
“This statement has largely dispelled market doubts, reversed market expectations, encouraged long-term funds to increase the shareholding ratio, and fundamentally alleviated the Liquidity Dilemma.” Wang Jing said.
Harvest Fund also said that the company will consistently and actively implement various financial stability guidelines and policies proposed by the central government, adhere to long-term ism, pay attention to scientific and technological innovation in the process of investment and research, give better play to the role of professional institutional investors in serving the real economy, and promote the optimization, adjustment and upgrading of the real industrial structure. Actively practice with practical actions “to maintain the long-term trend of China’s healthy economic development and jointly maintain the stable development of the capital market.”
China’s economy will improve for a long time
capital market is expected to boost confidence and promote value return
In fact, under the background of the recent conflict between Russia and Ukraine and the rebound of the epidemic, China’s A-share and Hong Kong stock markets fell sharply. After the release of this meeting, the capital market rose rapidly.
Many experts and institutional figures said that the recent sharp decline in China’s stock market is an overreaction to various negative factors. China’s economic fundamentals are in a long-term positive trend, and the basic system and reform dividends of the capital market are also continuously released. After the market uncertainty factors are weakened and the panic is eliminated, the capital market will gradually improve in the follow-up.
Liu Feng, chief economist of galaxy securities, said that the current round of A-share market decline was mainly caused by the intertwined influence of various negative factors: first, the covid-19 pneumonia epidemic in China has further spread recently; Second, the conflict between Russia and Ukraine has triggered panic in market sentiment. As a major energy and food country, Russia has an impact on global energy and commodity prices; Third, China’s PPI has accumulated a lot of growth in the past year, while the demand side such as consumption is weak. Combined with the fact that the United States has entered the interest rate increase cycle ahead of schedule under inflationary pressure, these factors have spread investors’ pessimism about future market expectations, resulting in overreaction of A shares and a short-term sharp decline.
In Liu Feng’s view, despite the short-term decline of the stock market, China’s economic development has been resilient enough, and there has been no major change in economic fundamentals. The basic indicators of the latest economic data for the first two months of 2022 are still healthy, and investment, retail consumption and other indicators have been significantly improved; On the other hand, the impact of the conflict between Russia and Ukraine on China is relatively limited in the short term, China’s energy imports are relatively diversified, and the energy supply is guaranteed in the short term; The self-sufficiency rate of wheat, rice and corn is high, and the food security is relatively controllable.
Therefore, Liu Feng believes that although China’s economy will still face difficulties and challenges in the future, its economic fundamentals are healthy. We have also accumulated good experience in epidemic prevention and control and have efficient prevention and control measures. These factors will play a positive role in China’s economic development; In the capital market, the establishment of the Beijing stock exchange, the promotion of the comprehensive registration system and the improvement of the delisting mechanism have created better conditions and environment for more listed companies to finance in the capital market. The relevant regulatory measures and basic systems to maintain the order of the capital market have also been intensively introduced, which have laid a solid foundation for the long-term and healthy development of the capital market.
In the view of the chief economist of the US Securities Regulatory Commission, there are also many factors closely related to the tightening of the liquidity of China’s securities market, such as the tightening of the US Securities Regulatory Commission’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s central bank’s. In addition, the Hong Kong epidemic has also exacerbated investors’ concerns about the fundamentals of Hong Kong stocks to a certain extent.
“This meeting of the Finance Committee has given positive signals for China concept stock, Hong Kong stock and platform economy. The market performance is very positive. The Hang Seng technology index of Hong Kong stock closed up 22.20%. It is expected that China concept stock will also rebound.” Dong zhongyun said.
Focusing on the capital market, Huaxia Fund also believes that the recent superposition of a series of factors has led to weak market confidence. At present, the index is still in the process of finding the bottom. Considering that the geographical situation, especially the trend of energy sanctions, is still the most important determinant in the short term, the market may be repaired, but it still does not rule out repetition until the situation is further clarified and improved. At present, the level of risk appetite has shrunk to a similar range in 2011, lower than that in 2016 and 2018. Although the short-term adjustment is drastic, the risk appetite itself is repaired by the periodic mean value, so the rebound will not come too far. From the perspective of structure, the growth direction will still be the leading direction of the subsequent rebound.
Harvest Fund also said that the long-term positive trend of China’s overall economy has not changed. With the introduction of various policies, it can be expected to play a further positive role in the high-quality development of the economy and the healthy development of the economy. In terms of investment direction, from a medium and long-term perspective, we are still firmly optimistic about investment directions with high growth space, including green power, smart cars, life technology and emerging consumption; For the medium and short term, we still maintain the judgment of abundant structural opportunities in the future market and are relatively optimistic about “stable growth”, such as infrastructure; Boost demand, such as logistics, aviation and agriculture; High prosperity continues, such as new energy, semiconductors, etc.
Wang Jing of ChuangJin Hexin fund also said that at present, the negative impact of factors such as the Russian Ukrainian war and the sharp rise of commodities on the global market is passing. On Thursday, the Federal Reserve will announce the decision to discuss interest rates, which will probably not exceed market expectations, and the peripheral environment is expected to pick up. The clear warming and timely response of internal policies, combined with the fact that the market is in a relatively undervalued area, will help A-share confidence continue to boost and promote the return of value.
“We have a positive attitude towards the trend of the follow-up capital market.” Hongta Securities Co.Ltd(601236) chief economist Li Qilin also said.
According to Li Qilin’s analysis, first, the Russian Ukrainian impact has not changed China’s fundamentals. At present, the concerns about the Russian Ukrainian conflict are mainly focused on the imported inflation pressure brought to China by the rebound of overseas inflation. However, on the one hand, the recent Russian Ukrainian conflict has cooled down, and the prices of crude oil, nonferrous metals and other related commodities have fallen. On the other hand, China’s policy of ensuring supply and price stability has been steadily promoted, coupled with the gradual decline of tail raising factors, China’s inflation pressure is still controllable. Moreover, in view of the possible pressure caused by upstream prices, China has launched a larger scale of tax cuts and fee reductions this year to create a better environment for manufacturing enterprises. Under such circumstances, the conflict between Russia and Ukraine will not have an obvious spillover impact on China.
Second, the meeting made it clear that the current tone of China’s “steady growth” remains unchanged, and the follow-up monetary and fiscal policies will continue to work. Moreover, the economic data from January to February verified that China’s policies can effectively promote the repair of the economy. The continuous improvement of China’s fundamentals can provide a foundation for the improvement of the capital market.
Third, the meeting eliminated many uncertainties in the market, such as the delisting of zhonggai shares, the governance of the platform, the introduction of contractive policies and so on, and frequently stressed the need to strengthen expectation management.
“After the market uncertainty is gradually reduced and the panic is eliminated, the follow-up of the capital market will gradually improve.” Li Qilin said.
