Main points:
Market changes
On April 25, the market fell sharply, of which the Shanghai stock index fell 5.13% and the gem index fell 5.56%. At the industry level, the whole line fell sharply, and the steady growth chain and growth industries led the decline.
Under the expectation of monetary tightening, the transmission of weak markets at home and abroad, the severe epidemic situation, persistent concerns about the economic outlook, repeated black swans in the performance of representative targets, and the continuous and rapid depreciation of the exchange rate have led to significant market adjustments
The main reasons for the sharp decline in the market include: ① the Federal Reserve’s interest rate meeting is imminent, the expectation of monetary tightening is continuously strengthened, and the sharp correction of US stocks restricts the external risk appetite of a shares. Powell publicly stated at the international monetary fund that a 50 basis point interest rate increase would be discussed at the interest rate meeting in May. On Friday, the three major indexes of US stocks made a sharp correction, with a decline of more than 2.5%. The continuous adjustment of US stocks inhibited the formation of a shares. ② The epidemic situation in Beijing began to be severe. Many places entered “static management” and regional control was upgraded. The number of new cases in Beijing has increased rapidly, and some regions have been upgraded to high-risk areas. In addition, some urban areas such as Anhui, Liaoning and Henan implement static management. Starting from Shanghai, epidemic concerns are also constantly curbing A-share sentiment. ③ The market is more worried about the future economic outlook. At a time when the economic data in the first quarter is weak and the current policy has not been made strong enough, the market is skeptical and worried about whether the annual economic growth target will continue to be adhered to. ④ Negative news of some representative stocks increased, and investors’ performance expectations were revised down. Including Contemporary Amperex Technology Co.Limited(300750) delaying the release of the first quarter performance announcement, Jiangsu Hengrui Medicine Co.Ltd(600276) both revenue and net profit fell in the first quarter, China Merchants Bank Co.Ltd(600036) management facing adjustment, etc. This makes investors generally revise and worry about the performance expectations of some sectors, including new energy, medicine and other sectors, and track stocks are facing a significant adjustment. ⑤ The RMB exchange rate continued to depreciate rapidly, and concerns about capital outflow increased. Under the triple concerns of dislocation of internal and external monetary policies, comparison of economic situation and weakening of exports, the RMB exchange rate has continued to depreciate recently, depreciating by more than 1300 basis points in a week from April 18 to April 22. Today, the exchange rate continues to depreciate by nearly 700 basis points, and the fear of capital outflow is gradually heating up.
An important internal and external meeting will be held soon, and the weakness will grind to the bottom or come to an end, waiting for the oversold rebound signal
Recently, the market has been subject to the core constraints of the external Fed’s expectation of monetary tightening, the continuous surge of US bond yield, the uncertainty adjustment of the internal annual economic growth target, and the pessimistic expectation of the future economic outlook. The trend of A-Shares has been in the doldrums. Recently, it has fallen below the 3000 mark, and there has been an emotional sell-off in the market. Paying attention to the tone of the upcoming important internal and external meetings is expected to alleviate the internal and external core concerns of the market and may become an opportunity to drive the market to usher in an oversold rebound.
First, the setting tone and policy arrangements for the economy at the meeting of the Political Bureau of the CPC Central Committee at the end of April. The most important aspect is its statement of the annual economic growth target: one possibility is to continue to adhere to the growth target of about 5.5%, which is expected to ease the market’s concerns about the uncertainty of the economic growth target, help to repair the current extremely pessimistic expectations of the market, and form new support for the stable growth market; Another possibility is to imply or explicitly reduce the annual economic growth target, which will have a broader impact on the market. In this case, the configuration needs to be more conservative. We believe that the first is more likely. Adhering to the growth target of 5.5% is of great practical significance to economic operation and social stability.
The second is the upcoming interest rate meeting of the Federal Reserve on May 5. At the meeting, it is a foregone conclusion to raise interest rates by 50bp and implement the schedule reduction plan, which is also fully expected and responded by the market. The most important point is the statement of the meeting on the subsequent monetary tightening path: one may be a moderate statement. The implementation of such interest rate increase and schedule reduction will lead to the periodic peak decline of 10Y US bond yield, the decline of US stocks will stop, stabilize or even rebound in the same period, and the external risk preference restriction of A-Shares will come to an end, At the same time, growth is also expected to lead the oversold rebound; Another possibility is that the Hawks have made tough statements beyond expectations. In this way, the expectation of overseas monetary tightening will continue, and the US stocks and A-Shares will continue to be restrained.
Short term balanced allocation, after the oversold rebound signal appears, steady growth and growth are expected to return to the main line
In terms of the current environment, each style sector has different constraints. The stable growth sector is subject to the uncertainty of the annual economic growth target, the growth sector is subject to the upward trend of overseas 10Y US bond yield and the mapping of the large decline of NASDAQ, the consumer sector is subject to the continuous severity of the epidemic situation and the upgrading of regional control, and the financial sector, especially banks, has a slightly better performance price ratio. Therefore, in the short term, it is still appropriate to allocate it in a balanced manner. If considering the signal of market oversold rebound in May, especially the meeting of the Political Bureau of the CPC Central Committee continues to emphasize adhering to the annual economic growth target and the decline of US bond interest rate after the interest rate meeting of the Federal Reserve, the steady growth sector and growth sector are expected to return to the main line.
Three main lines of industry configuration are suggested. Main line 1: stable growth chain. Before the policy level clearly gives the reduction of the economic growth target, there are still configuration opportunities for the stable growth chain. Even the meeting of the Political Bureau of the CPC Central Committee insists that the annual economic growth is a high probability event. Therefore, we can pay attention to the building materials, building decoration, steel, cement, real estate chain (after the current round of real estate adjustment, the leaders of state-owned enterprises and central enterprises still have the opportunity to improve the concentration) and banks. Main line 2: if the U.S. bond yield periodically peaks and then falls, the growth sector will usher in the opportunity of oversold rebound. Pay attention to power equipment, electronics, military industry and other industries. Main line 3: consumer goods must be selected. The transmission of PPI to CPI is accelerated. Under the situation of epidemic prevention and control, the reserve of consumer goods must be selected is increased. Attention is paid to food processing, meat products, dairy products, condiments, grain, oil, rice noodles, small household appliances and other subdivided fields.
Risk tips
The development of Omicron mutant strain exceeded expectations; Risk Spillover of geopolitical conflict between Russia and Ukraine; The uncertainty of the Fed’s interest rate hike path has increased; China’s policy is not as strong as expected.
