Key investment points:
China Policy
The downward pressure on China's economy has increased, and the senior management has become more cautious in judging the economic situation. We believe that there are mainly the following four concerns: first, the current high-level judgment on the economic situation is also more cautious and honest, "some of China's external environment exceeded expectations". In recent two weeks, important meetings have repeatedly mentioned concerns about the spread of the epidemic in China and overseas geopolitical risks. China's current round of epidemic has become the largest local outbreak since the Wuhan epidemic. Under the guidance of the zeroing policy, the epidemic prevention policies in many places have been continuously upgraded, which not only has an impact on the service industry and offline consumption, but also transmitted to the manufacturing and construction industries through links such as transportation logistics and real estate sales. Large fluctuations in overseas global grain, energy and other commodity markets have increased the pressure on the cost side of enterprises. Second, highlight the importance and severity of the job market and lay out the key measures to stabilize the main body of the market and ensure employment. On April 6, the national standing committee meeting mentioned that "the local epidemic has expanded since the first quarter of 2022, further impacting the operation of industrial production and service industry, putting pressure on market players and impacting employment". On March 21, the national Standing Committee deployed the work of tax rebate for retention and increased the intensity of transfer payment; On April 6, the national Standing Committee called for strengthening the rescue and employment security, suspending the payment of old-age insurance premiums, and increasing the return proportion of unemployment insurance for small, medium-sized and micro enterprises.
The easing of policy has been confirmed, and the possibility of landing quantitative policy tools has increased. In terms of monetary policy, the first quarter regular meeting of the central bank was held on March 30, which defined the policy orientation of "strengthening the implementation of prudent monetary policy". On April 6, the national standing committee meeting took the deployment of monetary policy tools as the theme of the meeting, which means that after a two-month policy wait-and-see period, monetary policy will be strengthened again this quarter. In terms of policy tools, on the one hand, the national standing committee meeting on April 6 focused on the deployment of structural policy tools, which made it clear to re create two special refinancing tools: scientific and technological innovation and inclusive pension. In addition, efforts to support agriculture, support small-scale refinancing and inclusive small and micro refinancing tools are also expected to increase. On the other hand, under the dual constraints of the internal and external environment, in order to cooperate with the tax month and the maturing bonds of about 60 billion yuan of real estate enterprises, the possibility of reducing the reserve requirement is increasing. In terms of fiscal policy, the national standing committee made arrangements for the issuance of special bonds on March 29, requiring that "the amount issued in advance last year shall be completed by the end of May and the amount issued this year shall be completed by the end of September"; The meeting focused on the importance of old infrastructure, especially water conservancy projects, and laid out that "another batch of projects that have been included in the plan and have mature conditions will be started this year, including major water diversion and transfer projects such as the follow-up project of the South-to-North Water Transfer, backbone flood control and disaster reduction, danger removal and reinforcement of dangerous reservoirs, construction and reconstruction of irrigation areas and other projects". On April 1, the implementation meeting of 102 major projects in the 14th five year plan of the national development and Reform Commission was held. At the meeting, it was required to "strengthen the guarantee of funds, land and other factors". On the whole, the tax rebate policy officially implemented in April mainly plays a supporting role. Under the background of accelerating the issuance of special bonds and the commencement of old infrastructure projects, the financial support in the next stage is still guaranteed.
Voice of overseas
The minutes of the FOMC meeting of the Federal Reserve released a strong "Hawk" signal, the pace of interest rate hike was accelerated, and the table contraction will be started as early as may. On April 6, the Federal Reserve released the minutes of the FOMC meeting in March. At present, the policy direction of the Federal Reserve focuses on preventing and controlling inflation, and the interest rate increase and the approximate rate of table contraction are parallel. The statement on the table contraction path exceeded previous market expectations, and the tightening range is much higher than that of the previous cycle. In terms of raising interest rates, affected by the economic uncertainty caused by the Russian Ukrainian war, the FOMC finally decided to raise interest rates by 25bp in March, but the minutes of the meeting showed that all the voting committee agreed that the monetary policy position should be quickly turned to neutrality, and most participants supported the measures of raising interest rates by 50bp in one or more times in the future to curb inflation, and the pace of subsequent interest rate increases will probably be accelerated. In terms of scale reduction, the Federal Reserve will start the scale reduction as soon as may. Participants generally agreed that the maximum monthly scale reduction was US $95 billion, including US $60 billion of treasury bonds and US $35 billion of MBS. Within about 3 months after the opening of this round of table reduction, the monthly table reduction range will be gradually increased to the upper limit of table reduction. In this round of table reduction, both the monthly maximum limit and the time to reach the limit are faster than the 20172019 tightening cycle, about twice that of the previous round. In terms of institutional perspective, most overseas institutions believe that the tightening acceleration signal released by the minutes of the meeting is expected by the supermarket, and they are worried that the acceleration of tightening by the Federal Reserve will expose the economy to the risk of recession. In addition, most Fed officials who maintain a "Dove" or neutral attitude have recently expressed concern about inflation and the Fed's determination to curb inflation, and their attitude has changed from dove to Eagle.
Based on the surge in commodities caused by the conflict between Russia and Ukraine and the resurgence of the epidemic in China, overseas mainstream institutions are pessimistic about the global economy this year. In addition, overseas institutions generally believe that the Fed's interest rate hike will far exceed market expectations. In terms of global economy, overseas mainstream institutions are pessimistic about the global macro situation. Most overseas institutions believe that Europe is facing the risk of economic regression this year. UBS believes that in the worst case, the world economy may soon have an energy crisis similar to the 1970s, a sharp rise in raw material prices and geopolitical conflicts similar to the cold war. In terms of China's economy, some overseas institutions believe that if the Chinese epidemic continues for a long time this year, it will damage economic demand. Among them, Deutsche Bank predicts that China's economic growth will be 4.5% in 2022. At the same time, affected by the soaring commodity prices caused by the conflict between Russia and Ukraine, the world bank lowered the economic growth forecast of the Asia Pacific region in 2022 to 5% from 5.4% proposed in October last year, The Asian Development Bank predicts that the GDP growth rate of Asian developing economies will be 5.2% in 2022. In terms of the Fed's tightening policy, the energy crisis caused by geopolitical turmoil has exacerbated the soaring inflation. Most overseas institutions believe that the Fed's interest rate hike will far exceed market expectations. The Fed will raise interest rates by 50bp each in the next two policy meetings. Citigroup believes that the inflation rate in 1994 is significantly lower than today. Now it is far behind the inflation curve, A very hawkish Fed may not be able to achieve a soft landing similar to that in 1994.
In terms of global asset allocation, overseas mainstream institutions have differences in the stock market, focusing on many commodities such as industrial metals and natural gas. In terms of U.S. stocks, there are differences among overseas institutions. Morgan Stanley believes that the economic slowdown and the no longer loose macro-economy will erode corporate profits. It is suggested to sell while the rebound occurs. JPMorgan Chase believes that historically, stocks performed well at the beginning of the monetary policy tightening cycle. During this period, stocks tend to outperform bonds, and the stock market usually peaked about a year after the yield curve was upside down. Based on the energy shock caused by Russia's invasion of Ukraine, BlackRock is more optimistic about the US and Japanese stock markets than the European stock markets. In the bond market, due to the economic slowdown, some foreign institutions suggest seeking bond hedging. In terms of commodities, the escalation of the conflict between Russia and Ukraine will lead to further tension in the global supply chain and promote the world to face the largest energy supply crisis in history. In the industrial metal market, the global nickel market disturbed by the historical short rolling market and the conflict between Russia and Ukraine may face a shortage of supply.
Risk tip: China's epidemic situation is repeated, the policy is less than expected, and the external market policy is more than expected.
