The epidemic unexpectedly affected the pace of steady growth, and the urgency of policy overweight increased significantly in the second quarter. It is expected that the steady growth policy will shift from full deployment to centralized development. A number of pessimistic expectations in the market will bottom out in advance before the fundamentals. Since the second quarter, the negative impact of the economy on the market is weakening. It is suggested to grasp the trend of mid-term repair in the second and third quarters and firmly layout the “two low” varieties. The measures to stabilize the economic growth in the whole country in March were still needed to offset the impact of the epidemic in the second quarter. Secondly, the main problems of the current economy are more prominent. It is expected that the policy will shift from comprehensive deployment to precise and centralized force. After this round of epidemic is effectively controlled, it is expected that the prevention and control measures will be further adjusted to reduce the impact on the economy in the future. Finally, the pessimistic economic expectation has reached the extreme. The economic probability in the second quarter showed a trend of first restraining and then rising. The positions and position structure of investors have been fully adjusted. The selling pressure in the A-share market has been significantly released. The peak of concern about overseas risk factors has passed. There has been positive progress on Russia Ukraine issues and China probability regulation issues. In terms of configuration, it is suggested to continue to adhere to the main line of steady growth, focus on the layout of low valuation and expected low varieties, and pay more attention to the real estate industry chain in the second quarter.
epidemic unexpectedly affected the steady growth rhythm
the urgency of policy overweight increased significantly in the second quarter
1) the epidemic situation in many places across the country in March offset the effect of steady growth and disrupted the original policy rhythm Under the steady growth policy, the overall recovery of the national economy from January to February was better than expected. However, since March, the continuous spread of the epidemic situation in Jilin Province and Shanghai will drag down China’s economy to a certain extent and dilute the effect of steady growth. Since mid March, more than 20 places across the country have taken production and travel closure measures such as community closure, traffic control, shutdown and so on. In March, the manufacturing PMI was 49.5%, down 0.7pct from the previous month, and fell into the contraction range after four months of expansion, of which the PMI of small enterprises was only 46.6%. The impact on the service industry is even greater. Due to the spread of the epidemic in Shanghai, the business rate of restaurants, hotels, cinemas and other places in the Yangtze River Delta has decreased significantly, and the logistics efficiency has decreased significantly The macro group of Citic Securities Company Limited(600030) Research Department predicts that the current epidemic and other adverse factors may drag down the GDP growth rate by 0.5 to 1 percentage point in the first quarter of this year. The year-on-year GDP growth rate in the first quarter is expected to be about 4.6%, which is far from the annual growth target of 5.5%.
2) the impact of the epidemic on the economy continued in the second quarter, and the steady growth policy needs to be strengthened urgently 4 since the beginning of April, the overall epidemic situation in Shanghai has still shown an upward trend in the number of infected people every day. More than 10% of the new positive cases in the first three days of April still came from outside the isolation and control area, and it did not drop to 5.6% until April 4. However, 744 cases are still a high absolute number, which means that it still takes some time for Shanghai to achieve the goal of dynamic zeroing of social aspects. The Shanghai epidemic has also caused a certain degree of epidemic spillover to the surrounding Suzhou, Kunshan and Wuxi. In addition, some other provinces and cities have also tightened the prevention and control measures due to the serious epidemic situation in Shanghai, and the overall economic activity has slowed down significantly. From the current severe situation of epidemic prevention, the impact of the epidemic on the economy may last until at least the end of April, and due to the proliferation risk during the May Day holiday, strict population flow control may last for a longer period of time until more provinces and cities establish a stronger “dynamic clearing” prevention and control system that can adapt to the Omicron variant virus. Overall, we believe that the impact of the epidemic on the economy is not only reflected in March, but also continued in the second quarter. In order to achieve the annual growth target of 5.5%, the steady growth policy needs to be strengthened in the second quarter.
expected steady growth policy in the second quarter from comprehensive to centralized
1) at present, the main problems of the economy are more prominent, and it is expected that the policy will shift from comprehensive development to precise and centralized development the measures to stabilize growth in the first quarter showed the characteristics of being fully rolled out, which was reflected in the efforts to reduce financing costs and stimulate credit growth in currency, the advance efforts on the premise of stable financial aggregate, tax reduction and fee reduction, as well as accelerating the implementation of expenditure projects. The tone of “trust but not action” continued in real estate. Due to the gradual implementation of urban policies, some relatively scattered relief measures were taken in the field of service industry according to local conditions, In addition, contractionary policies have been carefully introduced in all fields. However, looking forward to the second quarter, the main contradiction of the economy is more focused than that in the first quarter, which is mainly reflected in the severe setback of the service industry caused by the epidemic. At the same time, residential sales remain depressed after the obvious easing of credit, and developers still face the systemic risk of concentrated debt default. Therefore, we expect that the steady growth policy in the second quarter will be more focused. It is expected that more tax cuts and fees will be introduced for retail, catering, logistics, tourism, hotels and other industries damaged by the epidemic, more direct subsidies will be introduced for groups with serious employment and income damage caused by the epidemic in relevant service industries, and more direct support will be given to the financing of real estate developers, Due to the implementation of urban policies, the restrictive policies in the field of real estate have been greatly relaxed.
2) after this round of epidemic is effectively controlled, it is expected that the prevention and control measures will be further adjusted to reduce the impact on the economy in the future at the beginning of this round of outbreak, the epidemic prevention and control and diagnosis and treatment guidelines have been continuously optimized. On March 17, the Standing Committee of the Political Bureau of the CPC Central Committee set the tone for epidemic prevention and control, trying to achieve the maximum prevention and control effect at the least cost and minimize the impact of the epidemic on economic and social development. However, the recent epidemic situation in the Yangtze River Delta is grim, and the prevention and control measures are bound to be more stringent in the short term. From another perspective, this round of epidemic outbreak has also exposed a series of problems, including the low vaccination rate of the elderly, the significant reduction of logistics efficiency after the centralized outbreak of the epidemic, the shortage of medical resources faced by large-scale centralized isolation, the reduction of large-scale nuclear acid detection efficiency caused by imperfect registration of urban floating population, and uneven grass-roots implementation capacity. We believe that the exposure of the problem just means that there is room for improvement in the future, and a large number of case data also provide a scientific basis for the revision of the new version of the diagnosis and treatment plan in the future. We expect that the short-term prevention and control measures across the country will remain strict and curb the large-scale rebound of this round of epidemic as soon as possible. Since then, in view of the problems and experience in this round of prevention and control, epidemic prevention measures or make new amendments, on the whole, it must be moving towards the direction of lower and lower impact on the economy under the goal of dynamic clearing.
market pessimistic expectations bottomed out ahead of fundamentals
since the second quarter, the negative impact of the economy on the market is weakening
1) the pessimistic economic expectation has reached the extreme, and the economic probability in the second quarter showed a trend of restraining first and then increasing.
current market concerns about the economy have persisted since the beginning of the year, mainly reflected in three aspects: the first is the impact on the service industry caused by the spread of the epidemic, the second is the impact on industrial investment caused by real estate risks, and the third is the export impact caused by the possible weakening of overseas demand in the second half of the year. In March, these concerns have been amplified. The first is the impact of the outbreak on the service industry. However, as Shanghai enters the static control stage of the whole city, it is only a matter of time for the epidemic to be controlled. On April 4, the proportion of positive cases outside the isolation and control area quickly decreased from 16.6% to 5.6%, which is the lowest since the outbreak of this round of epidemic. The second is the risk in the real estate field. From March to April, the peak period of developers’ payment of US dollar debt is. The recent targeted rescue measures have alleviated the short-term payment pressure of some developers. Finally, there may be pressure in the export field in the second half of the year. The interest rates of 10-year Treasury bonds and 2-year treasury bonds in the United States are close to upside down recently, which reflects that market investors have generated strong recession expectations and the pessimistic expectation of the overseas transfer of supply chain caused by the impact of China’s epidemic. We believe that the market has fully traded the logic of export weakening in the past period of time.
2) the position and position structure of investors have been fully adjusted, and the selling pressure in the A-share market has been significantly released institutional funds with the most flexible timing in the A-share market have significantly reduced their positions and maintained a light position. According to the survey data of Citic Securities Company Limited(600030) channels, the average position of small and medium-sized private placement products with flexible timing characteristics decreased significantly by 4 percentage points in the second week of March, and then remained at 70% for three consecutive weeks, at the low point of non systematic bear market in history. The phased withdrawal scale of allocated foreign capital in March (36.3 billion) was once close to the historical limit level that we can observe. On March 17, it began to change to the continuous net inflow mode. As of April 1, it had been a continuous net inflow for 12 trading days, and the cumulative net inflow reached 27.2 billion yuan. In the first quarter, the investment institutions with relative returns have basically completed the position adjustment and position balance. Taking the active equity public offering products with the top 500 returns in 2021 as the sample, the average risk exposure coefficient of the relative gem index in the first quarter of this year decreased by 17.4% compared with the fourth quarter of 2021, and 74% of the samples reduced their weight on the gem, The above estimation shows that the public offering institutions making relative returns have systematically balanced the position layout in the first quarter, and significantly increased the allocation of undervalued industries and sectors, which also means that the selling pressure faced by the follow-up market, even the high valuation sector, will be significantly lower than that in the first quarter.
3) the peak of concerns about overseas risk factors has passed, and positive progress has been made on Russia Ukraine issues and China Ukraine regulatory issues in terms of the situation in Russia and Ukraine, a breakthrough has been made in the fifth round of negotiations between Russia and Ukraine on the ceasefire recently. Both sides have made certain concessions and reached a preliminary ceasefire agreement. Faced with the fact that the US SEC has recently listed six Chinese enterprises in the “pre delisting list”, on April 2, the CSRC issued the provisions on strengthening the confidentiality and archives management related to overseas securities issuance and listing of domestic enterprises (Exposure Draft), adjusting the on-site inspection mechanism from “mainly conducted by Chinese regulators” to “should be conducted through cross-border regulatory cooperation mechanism”, releasing a positive signal, Reduce the market’s concerns about the forced delisting of China concept shares, and the continuous optimization of the issuance system of the Hong Kong Stock Exchange will also help China concept shares to return to Hong Kong for listing to a great extent.
grasp the trend of mid-term repair in the second and third quarters
firm layout valuation low and expected low varieties
Under the current complex situation, the urgency of adding weight to the steady growth policy has significantly increased. We expect that from the second quarter, the policy will focus more on the relief of the service industry and the relaxation of restrictions in the real estate field, and take more precise measures against the core contradictions of the economy. However, the pessimistic expectation of the market has bottomed out in advance of the economic fundamentals. It is expected that the A-share market will rebound before the fundamentals in the second quarter on the premise of policy overweight, and there will be a round of medium-term repair trend market lasting for two quarters. In terms of configuration, ‘ building materials enterprise , The cash flow is obviously improved by the obvious improvement in the cash flow. The obvious improvement of the obvious improvement in the cash flow 6 \ and cloud infrastructure and fine chemical enterprises with the ability to develop new businesses such as new materials. 2) Varieties whose fundamentals are expected to be relatively low on the list, with a focus on the mid stream manufacturing that is being squeezed by cost issues, and the focus on the opportunities that mid stream manufacturers will have to make after commodity prices hit their peak, such as 123 6 \ \ hotels and department stores . In addition, the recent focus can be focused on a quarterly expected to exceed the expected variety, and it is recommended to focus on photovoltaic, semiconductor, Baijiu, Chinese medicine and construction sector .
risk factors
Global epidemic recurrence; The friction between China and the United States in the field of science and technology trade has intensified; The progress of China’s policy and economic recovery is less than expected; Macro liquidity at home and abroad has tightened more than expected; The conflict between Russia and Ukraine further escalated.
