Market review: the commodity market in the first quarter of 2022 continued the rebound trend since November last year, especially after the escalation of the conflict between Russia and Ukraine in February, the rise of energy, metals and Shenzhen Agricultural Products Group Co.Ltd(000061) collective led to the accelerated rise of the commodity index. In early March, Russia and Ukraine entered the negotiation stage, adding to the rising market expectations for the Federal Reserve’s sharp interest rate hike, and the decline in international oil prices led to a wave of adjustment of the commodity index. However, after the official landing of the Federal Reserve’s interest rate hike boots on March 17, the commodity index rebounded.
Macro logic sorting: since this year, there have been three main lines of logic at the macro level: first, the situation in Russia and Ukraine is deteriorating, and the West continues to increase sanctions against Russia, increasing the risk of global supply chain interruption. Second, due to the increasing inflationary pressure in China, the Fed has gradually turned to hawks, and the expectation of policy tightening continues to rise. Third, in the face of triple pressure, China’s steady growth policy continues to make efforts to stabilize expectations and steady growth.
1) the situation in Russia and Ukraine. At present, the event is gradually evolving into a long-term direction, the two sides of the conflict and the stakeholders behind it are still playing games, and the impact on the economy and financial markets is far from fading. On the one hand, the risk of supply chain interruption caused by conflict has become a reality, and the contradiction between supply and demand of bulk commodities is prominent; On the other hand, high inflation and hedging demand are not conducive to financial assets.
2) the Federal Reserve raises interest rates. Risks such as the still tight labor market, high inflation that has not yet seen an inflection point, tight monetary policy and political factors outside China in 2022 may drag down the significant slowdown of U.S. economic growth. At the same time, high inflation is sweeping with the tide of global austerity. In the coming period, US inflation is expected to continue to rise, the labor market will continue to improve, support the Federal Reserve to tighten monetary policy at a faster pace, and more economies will join the ranks of raising interest rates.
3) steady growth in China. Since the end of last year, the steady growth policy has been implemented one after another. In terms of fiscal policy, a total of 877.52 billion yuan was issued from January to February, reaching 60.1% of the 1.46 trillion “approved in advance”. The issuance of special bonds was significantly ahead of schedule, helping to “moderately advance infrastructure investment”. At the same time, tax reduction and fee reduction measures such as value-added tax retention and tax rebate helped to reduce the burden on enterprises; In terms of monetary policy, it continued to be precise and forward. The interest rates of Omo, MLF and SLF all fell, and the one-year and five-year LPR were lowered simultaneously, which effectively promoted the reduction of corporate financing costs. Considering the weakening of export substitution effect and the disturbance of consumption, the focus of steady growth this year is on the investment side. There is great room for infrastructure investment to rebound in the first half of the year. With the loosening of real estate policy, real estate investment is expected to hit the bottom and improve in the second half of the year.
Commodity market outlook: the IMF lowered this year’s global economic growth, while the upside down of US Treasury bond interest rate indicates an increased risk of future economic recession, indicating that global demand will fall further in the future. At the same time, the problem of supply shortage will be gradually improved in the medium and long term. With the gradual tightening of policies by the Federal Reserve, the financial environment is no longer loose, and the medium and long-term trend of commodities needs to be cautious.
However, under the targets of carbon peak and carbon neutralization, the production capacity of some commodities continues to be limited, while the conflict between Russia and Ukraine has led to the interruption of the global supply chain, and the concerns about the shortage of energy, metals and Shenzhen Agricultural Products Group Co.Ltd(000061) supply continue to increase. In addition, the economic repair of some emerging market countries is still pending, the commodity demand cycle has been prolonged, and some bulk commodities may still have some structural opportunities. Specifically, we can pay attention to two main lines of transaction: 1) goods with short supply caused by the conflict between Russia and Ukraine, such as energy; 2) China’s steady growth continues to develop, and varieties related to the improvement of China’s demand, such as black goods.
Risk factors: the conflict between Russia and Ukraine has further expanded, the Fed has raised interest rates more than expected, and the steady growth is less than expected
