Key investment points:
Economic growth in the first quarter was lower than the policy target. GDP in the first quarter of 2022 increased by 4.8% year-on-year, lower than the policy target of the two sessions by 5.5%. Among them, consumption expenditure drove GDP growth by 3.3 percentage points; Total capital formation boosted GDP growth by 1.3 percentage points; Net exports of goods and services boosted GDP growth by 0.2 percentage points. In terms of consumption, the epidemic occurred frequently in China in March, and residents' travel and consumption activities decreased significantly, which had a great impact on the consumer market. In March, the actual social consumption decreased by 6% year-on-year. In terms of investment, the real estate market continued to be depressed. In the first quarter, the sales decreased by 22.7% year-on-year, and the investment in real estate development increased by only 0.7% year-on-year. The impact of the epidemic and the downturn of the real estate market have become the main drag on economic growth. Relatively speaking, the export situation is good, and the investment in manufacturing and infrastructure has increased, which has become an important support for economic growth. As some regions are still taking relatively strict epidemic prevention measures, the economic data in April may be weak. Of course, after the epidemic subsides, the economy is expected to stabilize and recover.
Policies strengthen expectation management to deal with market shocks. For the depressed market sentiment, the management accelerated the introduction of positive policies and held meetings to stabilize market expectations. (1) The State Council has introduced the individual pension system, which can only be withdrawn after retirement and shall not be withdrawn in advance. The CSRC said it would speed up the formulation and introduction of supporting rules and systems for individual pension investment in public funds to optimize the market environment for medium and long-term funds. (2) The CSRC held a symposium for institutional investors, requiring to give full play to the advantages that long-term funds can overcome short-term market fluctuations, make good use of the amount of equity investment, further expand the proportion of equity investment and improve the level of long-term income. (3) The central bank, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and the State Administration of Foreign Exchange respectively conveyed, studied and implemented the spirit of the special meeting of the financial commission of the State Council. All ministries and commissions expressed their position to promote the stable and healthy operation of the capital market and attract more direct investment and securities investment.
The RMB is facing devaluation pressure. Last week, there was a continuous sharp depreciation of the RMB exchange rate. The exchange rate of the US dollar against the RMB was 6.5015 on Friday, with a sharp depreciation of 1305 basis points in a week. The RMB exchange rate broke through the key point of 6.50. There are three reasons for this depreciation: (1) the conflict between Russia and Ukraine continues to intensify, resulting in the maintenance of high international energy prices, a sharp rise in grain prices and an increase in the amount of foreign exchange purchased by importers; (2) The epidemic situation in Shanghai exceeded expectations, the port transportation was not smooth, and China's exports were affected to a certain extent; (3) The Federal Reserve released a signal of substantial interest rate hike, while China has adopted easing policies such as reducing reserve requirements to stabilize the economy, and the yields of China US Treasury bonds have been upside down. As there is no sign of an end to the conflict between Russia and Ukraine in the short term, the epidemic situation in China is still uncertain, China's economic growth may be lower than expected, and the RMB may face pressure to continue to depreciate. During the previous devaluation of RMB, the performance of equity market is relatively weak.
Investment suggestion: under the dual impact of geopolitical conflict and epidemic, economic growth slows down, market sentiment is weak, and policies strengthen expectation management. It is expected that the market will remain weak. It is recommended to maintain 60% of positions and pay attention to banks, textiles and clothing, food and beverage in the short term.
Risk warning: the policy and economic data are not as expected, and the risk events impact the market liquidity.
