Ping An View:
I. will the world economy fall into stagflation or recession? After the geopolitical conflict, the pressure of global "stagflation" increased further. In extreme cases, monetary policy may require aggressive tightening to curb inflation, but the cost may be recession. However, we believe that the degree of "stagflation" in the United States this time may be weaker than that in the "great stagflation" period of the 1970s-1980s. The risk of US recession this year is relatively limited. This round of "economic bottom" may be in 2023. The Federal Reserve may moderately slow down the process of raising interest rates in the second half of this year to minimize the risk of a "hard landing" of the US economy. Compared with the United States, the risk of "stagflation" in the eurozone is higher, the monetary policy space of the European Central Bank is narrower, and the possibility of economic recession in Europe is greater.
II. How to deduce the commodity cycle? Under the pressure of global "stagflation", the commodity market is facing a pattern of "tight supply and demand", which makes the trend of commodity prices variable. However, in the medium term, the current high commodity prices will guide the growth of commodity supply. Take crude oil as an example. With the high oil price above $100 / barrel, American enterprises are more motivated to increase production in the short term. In addition, the United States has launched a new round of oil dumping and storage, and actively contacted Iran and Venezuela. The EU is more cautious and divided about Russia's energy sanctions. In the future, the international crude oil supply may be "easy to loosen but difficult to tighten". In terms of demand, two major factors may suppress commodity demand this year: one is the tightening of overseas central banks, and the other is the peak demand for replenishment in the United States.
III. will global asset prices ebb? This year, the return of risky assets represented by stocks may be limited, but whether there will be in-depth adjustment remains to be seen. In the first quarter of 2022, the stock markets in major regions of the world performed poorly. However, after adjustment, the current valuation level of US stocks is more reasonable. The US bond market has fully taken into account the possibility of the Federal Reserve's radical interest rate hike (and table contraction), and the 10-year US bond yield has risen above 2.9%; The dollar index easily broke the 100 mark, and there are obvious signs of capital outflow from emerging market countries. The spillover risk of "dollar reflux" needs to be highly vigilant.
IV. what changes are facing the global economic and trade order? After the conflict between Russia and Ukraine, western countries implemented more extreme financial sanctions, and the road of economic and financial "globalization" is full of thorns. Since the beginning of this year, two phenomena have inspired us. First, the volatility of overseas Chinese concept stocks has intensified, reflecting the urgency of strengthening regulatory linkage outside China and accelerating the development of China's multi-level capital market. Second, the RMB exchange rate was once strong, which we believe is related to the steady progress of RMB internationalization in recent years. Even if the RMB exchange rate depreciates in stages, it is also the embodiment of the internal and external balance of exchange rate regulation, so there is no need to over interpret it.
V. how can China's economy open a new chapter in the changing situation? First, enhance the "independent and controllable" ability of the industrial chain. Second, we will advance towards "common prosperity" and stimulate endogenous economic vitality. Third, promote the development of urban agglomerations and metropolitan areas and leverage new investment demand.
Risk tip: the impact of geopolitical conflict exceeds expectations, the pressure of stagflation and recession in the United States and Europe exceeds expectations, and the fluctuation of financial market exceeds expectations.
