CICC strategy: the "steady growth" of A-Shares is expected to continue

Recently, the market is worried about the impact of the tightening of monetary policy of the Federal Reserve and the rise of US bond interest rate on the Chinese market. We believe that the characteristics of "internal stagnation and external inflation" of growth and inflation outside China are becoming more and more obvious. This round of overseas tightening cycle is mainly due to the previous over stimulation of some overseas economies, high inflation and significant lag of monetary policy behind inflation. At the same time, China's own growth has hovered at the bottom The steady growth policy is expected to continue under such a comprehensive background, the impact of this round of overseas tightening on the Chinese market may be relatively limited, and the pressure of capital outflow and RMB devaluation may be less than in previous periods

In view of the fact that the recent value style has significantly outperformed the growth, we believe that the current steady growth policy is still relatively positive, but the results will take time. With the superposition of the impact of the recent local epidemic in China, the policy still has room for further strengthening, "steady growth" may still be the main line at present. In combination with the overall low market risk appetite in the bottom grinding period and the consistency of the style of global growth underperforming value under the background of tightening overseas liquidity, we believe that the stable growth field with undervalued value still has phased relative allocation value

currently focus on three directions:

1) in the "bottom grinding" stage of the market, the stable growth sector with relatively low valuation may still have relative benefits in the current macro environment, such as traditional infrastructure, stable demand for real estate and related industrial chains (real estate, building materials, construction, household appliances, home furnishings, etc.);

2) risks in the manufacturing growth sector, including new energy vehicles, new energy and technology hardware semiconductors, have been released, but the turnaround lies in the marginal improvement of "stagflation" risk, global liquidity and market sentiment factors;

3) for the middle and lower reaches consumption with many adjustments, low valuation and clear medium and long-term prospects in 2021, choose stocks from bottom to top, including household appliances, light industry and household appliances, automobiles and parts, agriculture, forestry, animal husbandry and fishery, medicine, etc.

market return Gu : index slightly callback, "steady growth" sector has relative performance

Last week, the expectation of tightening monetary policy of the Federal Reserve was further strengthened. The US bond interest rate rose rapidly by more than 2.7% and the US dollar index broke through the 100 point mark. The local epidemic in China is still severe. The national standing committee will continue to set the steady growth direction. Under the influence of internal and external factors, the market failed to continue the pre holiday rebound trend after the small and long holiday, and the Shanghai Composite Index fell 0.9% in three trading days. The average daily turnover of the market was close to 0.94 trillion yuan, basically the same as that of the week before the festival. The cumulative net outflow of funds from the north is 6.56 billion yuan, with a relatively large outflow from the Shenzhen market. In terms of style, the undervalued style was relatively strong, and the growth style was significantly weaker. The 300 week decline in Shanghai and Shenzhen was 1.1%, while the gem index and Kechuang 50 fell 3.6% and 5.7% respectively. In terms of industry, the construction, steel and building materials sectors related to steady growth expectation continued to lead the rise; Agriculture, forestry, animal husbandry and fishery fell the most, and the manufacturing growth of electronic and power equipment and new energy also performed poorly.

Market Outlook: market is still in the bottom stage, "steady growth" is still relatively dominant

Recently, the market continues to grind the bottom, the overall mood is relatively low, and the growth sector has been significantly adjusted. The value style of undervalued value is relatively strong. Combined with the recent market concerns about the impact of the tightening of monetary policy of the Federal Reserve and the rise of US bond interest rate on the Chinese market, we believe that the characteristics of "internal stagnation and external inflation" of growth and inflation outside China are becoming more and more obvious. This round of overseas tightening cycle is mainly due to the previous excessive stimulation of some overseas economies, high inflation and significant lag of monetary policy. At the same time, China's own growth has hovered at the bottom The steady growth policy is expected to continue under such a comprehensive background, the impact of this round of overseas tightening on the Chinese market may be relatively limited, and the pressure of capital outflow and RMB devaluation may be less than in previous periods and in view of the fact that the recent value style has significantly outperformed the growth, we believe that the current steady growth policy is still relatively positive, but the results will take time. With the superposition of the impact of the recent local epidemic in China, the policy still has room for further strengthening, "steady growth" may still be the main line at present combined with the overall low market risk appetite in the bottom grinding period and the consistency of the style of global growth underperforming value under the background of tightening overseas liquidity, we believe that the stable growth field with undervalued value still has phased relative allocation value on the whole, we believe that the short-term internal and external uncertainty may still bring repetition, and the market is still in the bottom grinding period. However, combined with the market correction time, range and low valuation level, the current asset price may have reflected more pessimistic expectations, the stage similar to the sharp decline in the previous period may have ended, and the market opportunities in the medium-term dimension gradually outweigh the risks structurally, "steady growth" may still be the main line of the market at the end of the grinding period, and the areas where the performance of the first quarter exceeded expectations are also worthy of attention. In the future, with the gradual mitigation of overseas supply risks, the tightening of liquidity and the gradual stabilization of China's growth expectations, the growth style with high prosperity may gradually usher in a turnaround recent progress in the following aspects:

1) economic and financial data for the first quarter and March will be released next week Since 3 month, China's economic activities have been greatly affected by the epidemic, and bulk price increases continue to put pressure on the profits of the middle and lower reaches. The degree of decline in economic data may have important reference significance for the subsequent steady growth; Moreover, after the meeting of the Finance Committee in mid March, the steady growth effect reflected by real estate, infrastructure and financial data may also be more important.

2) new progress in steady growth through policies recently, the national Standing Committee stressed that "the policy of phased deferred payment of endowment insurance premiums for industries in extreme poverty" and said that "the deployment and timely use of monetary policy tools" can more effectively support the development of the real economy [1]. We believe that we need to pay attention to whether monetary policy easing is further strengthened according to the evolution of the epidemic and economic trend. Recently, Lanzhou, Qinhuangdao and other cities have cancelled purchase restrictions, and Quzhou, Zhejiang and other cities have cancelled sales restrictions [2]. We need to pay attention to whether more cities follow up the steady demand for real estate;

3) progress of performance forecast of Listed Companies in the first quarter next week will enter the centralized disclosure period of the performance forecast of the first quarter. As of April 8, 266 companies have disclosed the performance forecast of the first quarter. At present, the proportion of good performance is 84%. Combined with the current economic environment, we expect this proportion to fall further. Among the companies that have disclosed their performance, more than 50% of the median value of performance forecast has doubled, while the proportion of high growth in downstream industries is relatively low.

4) progress of epidemic situation outside China: recently, the epidemic situation in Shanghai is still on the rise, with more than 20000 new cases in a single day, and new cases also occur in many surrounding cities. Considering the important position of the Yangtze River Delta in China's economy, in addition to paying attention to the impact of the epidemic on consumption, logistics obstruction may also impose significant restrictions on export trade, The production links of manufacturing industry chains such as semiconductors may also be affected. Overseas, the German Federal Ministry of Health announced that it would continue to follow the policy of compulsory isolation of covid-19 infected persons, and declared that it was "wrong" to allow voluntary isolation [3].

5) capital market reform direction on Saturday, the chairman of the China Securities Regulatory Commission said at the member congress of the China Association of listed companies that "we will pay close attention to the study and launch of a new round of practical measures for independent opening-up, and steadily expand the scope of the Shanghai Shenzhen Hong Kong Standard", and stressed that we will support Chinese enterprises to make better use of the two markets and two resources in accordance with the law, promote the achievements of China US audit and supervision cooperation, and actively respond to the higher concerns of investors about the opening of the capital market. In addition, important issues such as the comprehensive registration system and the innovation and transformation of private enterprises were also mentioned at the meeting [4].

6) overseas progress: last week, the Federal Reserve revealed the details of the "table reduction", indicating that it has the ability to start the table reduction after the May meeting, with a maximum monthly table reduction of US $95 billion, and it may need to raise interest rates by 50 basis points once or more in the future [5]; The EU decided to impose a coal embargo on Russia and set up a 120 day "transition period" [6]. The impact of the situation in Russia and Ukraine on commodity prices is still worthy of attention.

bank industry suggestions : the main line of steady growth still has allocation value, and pay attention to the growth style according to the progress of the global inflation situation

currently focus on three directions:

1) in the "bottom grinding" stage of the market, the stable growth sector with relatively low valuation may still have relative benefits in the current macro environment, such as traditional infrastructure, stable demand for real estate and related industrial chains (real estate, building materials, construction, household appliances, home furnishings, etc.);

2) risks in the manufacturing growth sector, including new energy vehicles, new energy and technology hardware semiconductors, have been released, but the turnaround lies in the marginal improvement of "stagflation" risk, global liquidity and market sentiment factors;

3) for the middle and lower reaches consumption with many adjustments, low valuation and clear medium and long-term prospects in 2021, choose stocks from bottom to top, including household appliances, light industry and household appliances, automobiles and parts, agriculture, forestry, animal husbandry and fishery, medicine, etc.

recent concerns: 1) economic and financial data in March and the first quarter; 2) Performance disclosure of listed companies; 3) Epidemic situation outside China; 4) Overseas geopolitical situation and US monetary policy.

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