Long term changes are emerging. Amid concerns about the upside down of China US 10Y interest rate spread, growth stocks led the market to a significant decline. In December 2021, we began to prompt the phased risks of the market, When the market fell sharply on March 15, we put forward the "back 3000 point war", and then after the general rebound of the market, we stressed that "it is better than easy to win" ": the structure is still switching to upstream resources, real estate and banks. Looking back on the past period, the core reason why we came to a market conclusion different from the mainstream perception when facing the same macro data information is that we recognize that some long-term changes are taking place. The upside down of China US 10-year bond yields dates back to May 2010, but before that, it often occurred. China US bond market is emerging." "Ten year change", stock investors should also think about whether our inertial cognition in the past 10 years will partially become a cognitive trap for us to understand the future.
Do not be blinded by past "experience". From 2011 to 2021, global bulk commodities were a trend downward variety. Benefiting from the dividend of the significant expansion of upstream production capacity, midstream and downstream enterprises were able to develop rapidly on the basis of cheap resources. Sales growth, share increase, product power and brand power have become the most valued elements of great enterprises. In terms of cost management, the downward trend of price is justified. High turnover and low inventory have become an important starting point of cost management, and the space for supply chain security and flexibility has been compressed. Similarly, no matter the research of new economy or old economy, the investment that depends on price judgment is always abandoned and avoided. In 2010, more than 20% of the profits of industrial enterprises came from upstream enterprises. At present, even if the upstream profits rose sharply and the downstream profits had a certain impact, this proportion is still only 14%, while the historical maximum is 31%. From the perspective of gross profit margin, upstream enterprises are just returning to the level of 2010 compared with downstream enterprises. But you know, in the time before that, the lowest level of gross margin difference was 5% higher than now, and the net profit margin was 10% higher. The market represented by the United States is basically consistent with our situation. The gross profit margin difference of energy / optional consumption indication began to rise at the lowest level in 60 years. If you only see the experience of the past 10 years and the short demand cycle, you will think that the downstream can no longer bear it. However, from a longer dimension, this may be a correction to the over distribution of profits in the past 10 years. The long-term excess profit space makes the road for high prices to destroy the final demand long. The investment philosophy of the past 10 years has formed a very rational and fundamental foundation, but the environment is changing. However, for the capital market, the upstream / downstream Pb valuation level has not yet reached the level. During the supply side reform in 2017, it is also far from the stagflation like period in 2011, which means that the middle and downstream investors are still optimistic about the current profit (ROE). Even if we believe that prices will eventually decline due to the destruction of demand, we should also recognize where it is relatively safer.
Global physical assets may be experiencing the "Shanghai moment". The past 10 years have been a time of substantial expansion of financial assets. In the United States, for example, the proportion of financial assets rose sharply to an all-time high of 75%, and the price of copper relative to Nasdaq was close to a new low. Basic raw materials are very cheap compared with stock financial assets. Commodities can not only resist inflation, but also have the significance of security: as commodities ensure the basic economic activities, military activities and basic needs of life, their shortage will have an impact on social security. At present, the US inflation expectation and breakeven inflation rate are close to 20-year highs, activating the attribute of commodity inflation resistance. The regionalization trend that began before the conflict between Russia and Ukraine and the possible separation between major Western powers and resource producing countries after the conflict will bring about a new imbalance: not only in the imbalance of supply and demand, but also in the imbalance of spatial distribution. In the future, even if Europe finds new energy supply in the Middle East, the establishment of new routes may require more flexible production capacity of the shipping industry, and even the safety of transportation routes may arise due to factors such as geographical conflicts. When the basic raw materials and Shenzhen Agricultural Products Group Co.Ltd(000061) safety of bulk commodities have problems, the high proportion and high price financial assets of various countries will be converted into the inventory of bulk commodities at all costs to improve the desired level, and significantly push up the price of bulk commodities denominated in currency. The above scenario almost appeared in most families during the epidemic prevention and control in Shanghai some time ago: necessities that can better ensure the safety of basic life and are very low relative to the value of family financial assets have been increased to varying degrees. The "Shanghai phenomenon" may be spreading to more cities. We should know that the span and cycle of bulk commodity production, transportation and storage will be longer, and the interaction and interaction between its varieties will bring broader dimension and long-term impact. Europe is the "demonstration effect".
The "should be" world in the hearts of investors is deviating from the reality, and risks and opportunities will be born at the same time. If we are willing to recognize this historical change, we can seize the opportunity. Inflation is at the heart of everything. The current upside down of interest rates is more due to the difference in inflation. At present, the real interest rate in the United States is still negative, and inflation is still the reason for the rise of overseas interest rates. It is worth discussing that even if overseas interest rates are raised, in the short term, it may bring more supply side shocks (new production capacity, transportation circulating funds, etc.), and then curb demand. On the contrary, the inflation trend will be further strengthened in the short term. In this context, China's capital market has a more stable currency value under the lower internal energy level and inflation control ability, which creates space for demand recovery and credit easing (Social Finance and credit have been greatly verified in March); In the context of supply chain reconstruction, China still has the ability to reduce the relative energy cost through multiple market trade and finally gain an advantage. Resource stocks, which are closest to physical assets, are still a better choice for investors in the stock market (copper, gold, aluminum, coal, zinc, oil and gas and chemical fertilizer); In the adjustment of the new global supply chain pattern, the transportation industry will undertake the important task of adjusting the spatial allocation of resource goods. Its value should be linked to the value of goods and the degree of mismatch. Its route itself is also an important resource and obtains value revaluation (dry bulk and oil transportation); In the process of demand recovery, real estate is still the best choice, followed by banks.
Risk tips: inflation is lower than expected, Russia Ukraine conflict, liquidity impact is higher than expected, epidemic development is higher than expected, and carbon neutralization policy restrictions are relaxed.
