BlackRock's latest voice: China's economic stimulus policy still has room to increase and allocate more Chinese assets
highlights
We are still in a position. However, we have recently reduced our positions from Europe and increased our positions in the United States and Japan.
From the perspective of strategic allocation, the allocation of Chinese assets by global investors (global investors outside China) is very low, so we have reason to increase the allocation of Chinese assets, especially Chinese bonds.
I think a lot of pessimistic things have actually been reflected in the stock price, and the valuation and profitability have turned for the better. More importantly, in the medium and long term, some major trends have not changed.
If the demand is changed through interest rate adjustment to curb inflation, the unemployment rate in the United States may rise from less than 4% to 10%.
On the evening of April 19, BlackRock, a world-renowned investment institution, held an online exchange meeting. Li Wei, BlackRock's global chief investment strategist, Lu Wenjie, BlackRock's fund investment director, and Liu Yajun, fund manager of BlackRock's global emerging market equity investment team, focused on the theme of the new market pattern and China's opportunities under global inflation.
the following is the actual record of communication (with deletion)
focus on the three investment themes of inflation coexistence, through fog and net zero transformation
Lu Wenjie: what are some of the most important investment themes in the world and what has changed since the beginning of the year?
Li Wei: we published three investment themes at the beginning of the year.
The first investment theme is coexistence with inflation. We expect inflation to continue and supply may ease at the end of the year, but we expect inflation to stabilize at a level higher than before the epidemic. The epidemic itself has had an impact on supply, but with the occurrence of the Russian Ukrainian incident, the impact on supply will be greater, which will slow down growth and exacerbate inflation. For China, inflation is not a thorny problem, but for the world, inflation is a difficult problem. Because of inflation, central banks around the world are canceling monetary stimulus policies one after another. At present, inflation in the United States, Britain and Europe has basically reached a high level in nearly 40 years.
The second is to go through the fog. Many situations, such as geopolitical situation, may lead the market and even policymakers to reassess the current inflation level. Central banks are not consistent in information transmission. At present, many central banks are in a dilemma. On the one hand, they are trying their best to curb inflation, such as by raising the exchange rate, which will have a more obvious impact on the economy and employment. It is difficult to play a big role in dredging the supply chain by raising the exchange rate.
The third is the transformation of net zero (net zero carbon emission). We believe that climate change will be real in the future, and the world is accelerating to achieve the goal of net zero. Although it may take 2050 or even longer to achieve these goals, investors should now make a portfolio in advance to prepare for the net zero transformation. Although the Russia Ukraine incident has had some impact on the recent market fluctuations, it can promote the attention to energy security in the long run.
the Federal Reserve is less likely to raise interest rates by 75 basis points in the future
China's economic stimulus policy has room to increase
Lu Wenjie: there is a view that the Fed may raise interest rates by 75 basis points at one time in the future. What is the view of the Fed's interest rate hike?
Li Wei: this is a very important issue not only for the United States but also for the global market. We believe that the actual interest rate increase of the Federal Reserve is not consistent with the expectation. The current economy has reached a stage that does not need special policy stimulus, but it is not realistic to switch from a relatively mild economic stimulus to a "sudden brake", which will lead to more obvious problems of economic development and employment. At present, the supply chain has not fully recovered. If the demand is changed by adjusting interest rates to curb inflation, the unemployment rate in the United States may rise from less than 4% to 10%.
Lu Wenjie: add that from some cases, it can not be said that global inflation has no impact on China's economy. For example, the price of new energy vehicles has risen, including the price rise of lithium, the raw material of lithium batteries. In addition, the conflict between Russia and Ukraine has affected barley, and our beer prices will also rise. In addition, the price rise of chips will lead to the price rise of some of our automobile chips. At present, China's CPI in March was 1.5%, far lower than that of the United States. Therefore, from this perspective, from the current inflation environment in China, there is still room for further expansion of China's economic stimulus policy.
Lu Wenjie: how do you view the geopolitical risks of Russia and Ukraine?
Li Wei: it is difficult to judge the development of the future situation. We think it will last for a long time. If geopolitics leads to the continuous maintenance of oil and natural gas prices at a relatively high level, such as the current oil prices of US $100 / barrel and US $130 / barrel, and the natural gas prices in Europe are between 105 and 115 euros / MWh, our expectations for economy and inflation will also change accordingly. From our research, if the oil price and natural gas price are at such a high price, the negative impact on the economy of Europe this year will be 2% ~ 3%. The impact on the United States is 0.5%, because the U.S. economy is relatively less dependent on Russia.
Lu Wenjie: as you said, the impact of the Russian Ukrainian conflict on different regions is different. As far as China is concerned, I think that because of the particularity of China's economy, such as energy, it will also be affected by the world. However, China's own economic cycle is different from that of the world, and its policy cycle is also different. This is also a big reason for global investment in China. Because only by finding differences can we fully disperse risks. Benefiting from the support of policies and other aspects, the advantages of China's infrastructure, construction machinery, new energy and other industrial chains are very obvious.
reduced European equity positions
increase China's bond allocation
Lu Wenjie: what is our latest global asset allocation?
Li Wei: for the stock market, we still hold positions.
However, due to the influence of geopolitics and economy, we have recently reduced our positions from Europe and increased our positions in the United States and Japan. Among them, the Central Bank of Japan will not adjust interest rates soon, which is a comparative advantage.
For the fixed income market, one of our investment ideas this year is to reduce government bonds whenever possible, and replace government bonds with inflation linked bonds. We are now reducing our positions in government bonds, including US government bonds, because we think the prospect of government bonds in developed markets still faces great challenges.
Moderator: what do some of BlackRock's overseas customers, such as those in Europe and America, think about the allocation of Chinese assets?
Li Wei: my feeling is that the farther away from China, the more cautious you will be about China. For example, American customers are very cautious about investing in China, European customers will be more cautious about investing in China, and Asian customers will be better.
From the perspective of strategic allocation, the allocation of Chinese assets by global investors (global investors outside China) is very low, so we have reason to increase the allocation of Chinese assets, especially Chinese bonds. Mainly from the perspective of return and investment diversification, we prefer government debt.
steady growth still needs real estate support
Moderator: what do you think of the follow-up impact of the epidemic on the market?
Liu Yajun: it should be said that from the fourth quarter of last year to now, the Chinese market has experienced countless things, large and small, but basically it has been subject to some controllable changes. Therefore, I think some of the previous concerns have been answered to some extent, or have been reflected in the stock price.
Moderator: steady growth is our important theme this year. What are your expectations?
Liu Yajun: because the epidemic mainly started in the last two weeks of March, which will have a certain impact on the economy. The Bureau of Statistics recently released the economic data of the first quarter (there will be a certain lag), so there may be a further decline in April. But we can see some clues from the data in the first quarter, such as which policies are endorsing steady growth.
According to our observation, the biggest highlight in the first quarter was infrastructure investment and manufacturing investment. If it were not for the epidemic, both would have been double-digit (10% and above) growth. In addition, the export data fell compared with the growth rate of last year, but basically showed resilience. Relatively speaking, the drag on economic growth may be real estate investment and consumption.
Then, if the government wants to achieve GDP growth of 5.5% this year, it is likely to make efforts at both ends of Finance and currency at the same time. At present, on the financial side, more cities have relaxed their real estate policies. This means that the "policy bottom" has appeared or appeared for a while. However, the "data bottom" of the fundamentals has not yet appeared. For example, according to the data of the Bureau of statistics in March, there has been a (very large) double-digit decline in real estate sales and land acquisition. However, according to our statistics, the real estate situation in 70 ~ 80 cities in China, 10 cities have relaxed the proportion of down payment and 5 cities have relaxed the qualification of cash sale. It should be said that these two are actually the most favorable tools to relax and stimulate demand. In addition, we can also see that 40 ~ 50 cities have seen a decline in loan interest rates. For example, Nanjing has announced that real estate developers can further make better (loose) use of pre-sale regulatory funds and can take 60% as working capital. These are what we are very worried about at the beginning, which will cause the symptom of "hard landing" of real estate.
If the real estate can really support the bottom, and can rebound and recover to a certain extent, we believe that this is relatively good for China's overall economy and the whole very long real estate industry chain.
Moderator: what is your outlook for China's stock market?
Liu Yajun: I think the performance of China's stock market should be driven by valuation and profitability. In terms of valuation, in the past six months to one year, as just mentioned, there have been factors that have depressed the valuation of the Chinese market, which has reduced the predictability of profits in the whole market, or weakened everyone's confidence in the predictability of profits, resulting in the market value of A-Shares and Hong Kong shares hitting a new low in recent years. But at the same time, we actually see some factors of valuation bottoming. For example, in the field of the Internet, the version number of the game has been reissued recently; In terms of China concept shares, the government is also actively discussing with the United States. Therefore, to a certain extent, we still have some confidence in the valuation bottom.
In terms of profits, the biggest fluctuation in profits is caused by the epidemic, but the situation is also improving. For example, Shanghai recently announced the white list of 666 key enterprises to resume work and production.
To sum up, I think many pessimistic things have actually been reflected in the stock price, and the valuation and profitability have turned for the better. More importantly, in the medium and long term, some major trends have not changed.
layout upstream raw materials, new energy, dairy
Moderator: what's the difference between your focus on investing in A-Shares and Hong Kong shares? Which main lines do you prefer?
Liu Yajun: I think the connectivity between A-Shares and Hong Kong shares is constantly increasing, but there are also differences. For example, we can also see that the correlation between a shares, especially the gem and NASDAQ is much higher than in the past few years. Because of the intervention of foreign capital, the two markets have become more and more similar. A shares are mostly in the secondary industry (midstream enterprises), including (we are more optimistic about) new energy, semiconductors or high-end manufacturing, as well as some consumer enterprises. The Hong Kong stock market may be 40% ~ 50% of some traditional industries, including real estate and finance, which pay more attention to the layout of the tertiary industry. But anyway, I think the investment methods in these two markets are common, with three main lines:
First, under the theme of inflation, we have made some upstream raw materials layout this year, including Shenzhen Agricultural Products Group Co.Ltd(000061) . Because the profits of the upstream are very considerable, and some upstream targets with global business, such as copper and aluminum, their global inventory is a very low level. In addition, global shipping is still in short supply.
Second, under the theme of carbon neutrality, opportunities in the field of new energy can also be explored. After all, there has been differentiation this year. In fact, we are looking for companies with local highlights in the whole industry and relatively reasonable valuation.
Third, under the theme of demographic dividend, China's huge population and the continuous growth of the middle class will bring demand for consumption and medical care. Among them, we think it is relatively stable in areas with relatively stable demand that are not greatly affected by upstream raw materials this year, such as dairy industry.
