understand the contrast between the market and the economy: investors’ trading risk expectations “will not be worse” with long policies this week, under the expectation of active negotiation between Russia and Ukraine and relaxation of China’s real estate policy, the risk assets in China and even the world have warmed up to a certain extent. Within a shares, the real estate chain and consumer service sectors highly related to the economic cycle rebounded sharply, which is in obvious contrast to the current tense epidemic situation in China and the continued downward fundamentals. This contrast, we believe, stems from the fact that the market starts trading, and the risk expectation “will not be worse” in a short cycle. For example, after the golden stability meeting, the financing of some real estate enterprises was restored, and at the same time, all localities began to accelerate the relaxation of purchase and loan restrictions; For example, as the epidemic situation in Shanghai is under comprehensive control, the risk of losing control of the epidemic is decreasing; For another example, the CSRC has clearly improved cross-border regulatory cooperation, which has reduced the policy risks faced by some Chinese concept stocks in the United States. The overall dynamic valuation of A-Shares is close to the pessimistic pricing situation in 2018. The phased convergence of risk expectations provides conditions for the current A-share rebound. The short-term market is expected to continue, but more rebound.
before the blooming flowers: after the transaction “will not be worse”, we need to expect the fundamentals to “get better” understanding whether the market rebound is due to the convergence of risk expectations or the reversal of fundamental expectations is particularly important for judging the future strategy. However, at present, the investment from “no worse” to “better” is still full of fog: 1) after “no speculation in housing”, the expectation of residents’ departments that house prices will only rise but not fall has been reversed, but the cycle of sales recovery may take more time than in the past rather than immediate effect, which in turn will restrict the micro behavior of new land acquisition and new construction of real estate enterprises; 2) “War never tires of fraud”, the situation in Russia and Ukraine has been difficult to return to the starting point, and geopolitical disturbances such as the US mid-term elections are still an important source of the current risk premium; 3) The demand for liquidity and cash in the residential sector and the enterprise sector increased, and the risk-free interest rate in the stock market increased. A shares have entered the stock game from the incremental market, which makes the expectation of immediately breaking through the pressure zone at the transaction level very easy to fail our view: spring will finally come, so we should have confidence. However, under the existing policy mix and fundamental expectations, before the path of demand and credit easing is clear, we believe that the Shanghai stock index 31003400 fluctuates. At this stage, it is recommended to do a good defensive counterattack rather than a trend counterattack
in the process of rebound, stocks should change positions and styles we should have confidence in the future, but it does not mean that the style of the market will not change and the main line of the market will not change. The decline of investors’ risk appetite in 2022 and the current industry rotation structure show that the preference characteristics of the market have changed from “looking at the long and doing the short” to “looking at the short and doing the short”. The market’s preference for profit is no longer long-term space, but the certainty of immediate profit. Looking forward to the next stage, growth will rebound, but the economic cycle fluctuations will also dust its demand. On the contrary, differences over steady growth will make it easier for sectors that are more sensitive to the economic cycle to exceed expectations, while lower valuations and changes on the supply side (increased concentration) will become more favorable. Therefore, we believe that the investment in the next stage will focus on stocks with low-risk characteristics, focusing on cycle and consumption.
industry configuration: embracing the new main line, stocks with low-risk characteristics focus on cycle and consumption investment should focus on stocks with low-risk characteristics, pay attention to the intersection of undervalued value and profit improvement, and focus on consumption and cycle sectors. Specifically, there are three directions: 1) pro inflation & High Dividend: coal and chemical resources; 2) To G end or public investment direction: photovoltaic, wind power, power operation, power grid, construction, etc; 3) dilemma reversal and profitability certainty: pig, Baijiu, consumer service; Pay attention to the bottom elasticity of the midstream of Q2 consumer building materials, light industry and other parts.
