Strategy review report: we should not be overly pessimistic and gradually enter the value range

Event:

The market fell sharply today, with all indexes falling by more than 5%, and the Shanghai composite index falling below 3000 points. At the industry level, non-ferrous metals, national defense and military industry and electronics led the decline.

Key investment points:

There are three main reasons for the sharp decline in the market today. First, the RMB exchange rate depreciated rapidly. Today, the offshore RMB exchange rate once depreciated by more than 1%, and the depreciation rate in recent five days exceeded 3%, which exacerbated the concerns of market investors about economic fundamentals and foreign capital outflow. Second, the epidemic situation occurred repeatedly in some areas over the weekend, including the rebound of confirmed cases and asymptomatic infections in Shanghai, the rise of new cases in Beijing, and the virus has "hidden spread for a week", making it more difficult to grow steadily; Third, U.S. stocks fell sharply. Last Friday, the three major indexes of U.S. stocks all fell by more than 2%. Under the background of the intensification of the tightening of the Federal Reserve, the risk of a double dip in U.S. stocks increased.

We should not be overly pessimistic and gradually enter the value range. Today, the market ushered in a sharp decline of catharsis. However, with the substantial adjustment of the market, the indexes gradually entered the value range and should not be overly pessimistic. First, after today's decline, the valuation quantile of major indexes has been in a relatively cheap position. Among them, the Shanghai stock index and gem index are located at about 20% of the valuation quantile in recent 10 years, and Wande A is located at about 30% of the valuation quantile in recent 10 years. Second, after effectively controlling the epidemic, stick to economic construction as the center, and steady growth is still the focus of policy. The implementation of stronger macro policies to hedge the impact of the epidemic and make the economy return to more than 5% in the second quarter is the basis for achieving the annual target of 5.5%. Third, from the perspective of overseas disturbance factors, the strongest tightening expectation of the Federal Reserve is from May to June. It is almost certain to raise interest rates by 50bp in May. The market tends to set prices in advance. The actual rate increase range and frequency of the Federal Reserve in the second half of the year will probably be lower than the most extreme expectation at present.

Bargain hunting layout, structurally optimistic about consumption, focusing on three segments. First, food and beverage, catering and tourism, hotels, automobiles, household appliances and other industries that have been fully adjusted and benefited from the marginal improvement of the epidemic situation; Second, agriculture, forestry, animal husbandry and fishery benefiting from the rise in product prices and inflation; Third, medicine and biology with low valuation.

Risk tips: the situation in Russia and Ukraine worsened again, Sino US relations deteriorated, US monetary policy tightened more than expected, the epidemic in China spread sharply, and the external market fell sharply.

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