Key points of the report:
The monetary easing policy expected by the market finally landed:
Last Friday, the central bank decided to reduce the deposit reserve ratio of financial institutions by 0.25 percentage points (excluding financial institutions that have implemented the 5% deposit reserve ratio) since April 25, 2022. So far, the broad monetary policy that the market has been expecting has finally been implemented. However, this measure is obviously lower than the market expectation. Not only the MLF interest rate remains unchanged, but also the small reduction rate is rare in history.
The pain point of the current economy is not the amount of money:
Last year, the central bank lowered the reserve requirement twice and LPR unilaterally. In January this year, the central bank lowered both MLF and LPR, superimposing this comprehensive RRR reduction, and the central bank's monetary policy has been in place. By the end of last year, the excess deposit reserve ratio of financial institutions was 2%, which was at a high position in recent years, indicating that the liquidity at the level of financial institutions was very sufficient and even rampant. The difficulty lies in how to inject these funds into the real economy. The central bank's policy lower than market expectations and the statement that "the current liquidity is at a reasonable and sufficient level" also reflect that the pain point of the current economy does not lie in the amount of money.
The core contradiction lies in insufficient demand:
To expand the economic cake, both water and flour are indispensable. At present, water (currency) is enough, while flour (confidence) is missing. The past strong regulatory policies on many industries such as real estate, education and the Internet, as well as the current supply chain rupture in the Yangtze River Delta, especially in Shanghai, have had a strong or even irreparable belief impact on enterprises and residents. At the same time, it also affected the micro main body's expectation of future income. Taking the real estate industry as an example, although many places have issued preferential house purchase policies to relax purchase and loan restrictions, reduce the down payment ratio and loan interest rate, the sales side has not improved, the residents' willingness to buy houses has decreased significantly, and the real estate enterprises are facing the problem of "living".
The economic fundamentals of China and the United States deviate:
Compared with China's interest rate and reserve requirement reduction and strict control of the spread of the epidemic, overseas developed economies are another scene. The US economy is booming, inflation is high, the Federal Reserve continues to raise interest rates, and the 10y-2y interest rate spread of US bonds has reversed to negative for the first time since 2019. The market began to worry about the possible recession in the United States. We don't think there is much problem with the fundamentals of the United States this year. At present, the pull rate of private sector consumption and investment on the U.S. economy is still significantly higher than the historical average, and there are dividends for some labor force to return to the job market. According to the past time difference, the recession in the United States may not begin until next year.
To sum up, our views on major categories of assets are as follows:
Bonds: Although endogenous pressure is better than everything, this does not mean that China is the year of bonds this year
\u3000\u30001. The long-term yield is the futures price of economic growth, which usually reflects the expectation of economic growth. The "premium" range of the long-term yield level relative to the current GDP growth reflects the long-term expectation of the economy; This long-term expectation has always fluctuated with the fluctuation of economic growth, but recently, this long-term expectation has obviously deviated downward on the track of economic growth;
\u3000\u30002. At present, the scope of monetary policy is very limited: first, in the peripheral interest rate increase environment, China's 7-day reverse repo interest rate is 2.1%, and the market expects the target interest rate of the US federal fund to increase to 2-2.5% by the end of this year, and the policy interest margin has been extremely narrow; Second, China's weak economic fundamentals, consumption, investment and exports may face an overall weakness.
Stock market: economic uncertainty has increased, and the fundamentals of the stock market are under pressure
\u3000\u30001. The economy faces many uncertainties: multiple outbreaks of the epidemic, the layout of epidemic prevention and control measures in multiple places, the decline of economic growth vitality, especially the serious contraction of the service industry; The inflection point of real estate has not yet arrived, and the growth rate of real estate sales is still hitting a new low; At the same time, the optimism of infrastructure construction is also declining. The issuance of local government special bonds in 2022q1 reaches about 40% of the annual quota. This pre proportion is much higher than normal experience, and the subsequent decline in issuance is almost inevitable.
\u3000\u30002. In addition, the downward revaluation of performance caused by PPI may have a negative impact on the equity market: empirically, if PPI falls by more than 3% in that year, the stock market will fall in that year, which is no exception.
\u3000\u30003. It is suggested to pay attention to the structural opportunities of the stock market: recommend banks (benefiting from wide currency and credit at the same time), pigs (cycle reversal logic), varieties benefiting from the post epidemic period and with low current valuation (catering, tourism, film and television, airport).
Commodity: generally, it is not in a downward channel
\u3000\u30001. Although the commodity cycle and monetary cycle are closely related, they do not completely overlap, that is to say, although the overseas monetary cycle has begun the tightening cycle, it does not mean that commodities can start to decline soon.
\u3000\u30002. It should be noted that under the condition that the investment in most resource products has been shrinking in recent ten years, the current inventory of the whole bulk commodity is at the historical low quantile. The geographical impact since the beginning of the year has only exacerbated the contradiction in a pro cyclical manner, further exposing the vulnerability of supply and the limited ability to resist price risks.
\u3000\u30003. Before the geopolitical risk is further expanded, we believe that the short-term high point of commodities has been realized, but the price center is still strong. It is suggested to pay attention to the callback and long opportunities in energy, industrial products and Shenzhen Agricultural Products Group Co.Ltd(000061) aspects.
Risk tip: monetary policy exceeded expectations and economic recovery exceeded expectations.