the meeting showed that the annual economic growth target was not easily lowered due to the epidemic, and the growth target of 5.5% remained unchanged. Therefore, it is expected to see greater measures to stabilize economic growth in the near future
Since 2022, China’s economic development and capital market have been greatly affected and market confidence has been impacted by complex factors such as repeated outbreaks, Ukrainian Russian conflict and fed interest rate hikes.
Much heartened, today’s meeting of the Political Bureau of the CPC Central Committee blew a “warm wind” to prevent and control the epidemic, stabilize the economy and prevent risks
The meeting dispelled the market’s concerns about the uncertainty of the annual economic growth target and affected “immediate results”. Today, the confidence of A-Shares increased significantly, and there was a pull-up in the afternoon. The Shanghai index returned to 3000 points, and the gem index recovered by more than 4%.
According to the interpretation of many market experts, the most important thing is that the meeting shows that the annual economic growth target has not been easily lowered due to the epidemic, that is, the annual economic growth target of 5.5% has not changed, so it is expected to see greater measures to stabilize economic growth in the near future
In terms of stock market investment, the institutional view is that the concerns about the internal steady growth policy are eliminated, and the oversold rebound is preliminarily confirmed. It is expected to further open the rebound space after the interest rate meeting of the Federal Reserve, and the steady growth sector and growth sector are expected to return to the main line. Starting from the perspective of boosting the growth trend of A-Shares in May, it is expected to start from the perspective of boosting the growth trend of a shares.
firm economic growth target of 5.5%
Whether the recent market growth target of about 5.5% will be affected by the severe epidemic situation in Shanghai. This expectation has a great impact on market confidence.
For the policy direction of epidemic control and the expected target of annual economic growth, which has attracted much attention, this meeting requires that the epidemic should be prevented, the economy should be stable and development should be safe, which is a clear requirement of the Party Central Committee. We should strengthen macro policy adjustment, solidly stabilize the economy, strive to achieve the expected goal of economic and social development throughout the year, and keep the economy running within a reasonable range.
“In the context of the increasing complexity, severity and uncertainty of China’s economic development environment and the new challenges of stabilizing growth, employment and prices, the meeting did not adjust the annual economic growth target of 5.5%, which basically eliminated the market’s concerns about China’s economic fundamentals.” Yan Kaiwen, chief strategic analyst of Huaxin securities, told the international finance news that if the annual economic growth is calculated at 5.5%, the year-on-year growth rate of China’s GDP in the first quarter of this year is 4.8%, which means that the cumulative year-on-year growth rate of GDP in the next three quarters should reach 5.7% after the impact of the national multi-point epidemic on the economy in April, if the economic growth rate in the second quarter of this year is lower than expected, it means that in order to maintain the annual growth target of about 5.5%, the follow-up central level will continue to strengthen macro policy adjustment to stabilize the economy. The market should not underestimate the central government’s determination to stabilize growth
Ye Xiaojie, director and associate professor of the Finance Department of Shanghai National Accounting College, said in an interview with the reporter of the international finance news, first, the conference released the signal of steady growth under the disturbance of the epidemic and other factors, people from all walks of life have doubts about whether the growth target of about 5.5% this year can be achieved. The meeting proposed to strive to achieve the expected goal of economic and social development throughout the year and maintain the economic operation within a reasonable range, which is a very clear signal of steady growth. Only by striving to achieve this goal can we win more time and space for various reform tasks.
second, for epidemic prevention and control, dynamic clearing is also emphasized again, which plays a very important role in condensing the consensus of all sectors of society the continuous influence of Omicron mutant has induced “lying flat theory” and “coexistence theory”, which is not conducive to the overall situation of epidemic prevention and control and economic development.
third, the meeting clearly emphasized the need to prevent various risks and put forward new specific requirements for the real estate market, capital market and platform economy recently, there have been great fluctuations in China’s capital market, which is a severe test for the confidence of all parties in the market. The spirit of today’s meeting plays an important role in guiding and boosting the steady and healthy development of the capital market. From the perspective of market performance, several major stock indexes have increased significantly. In the face of severe challenges, confidence is more important than gold. Only when the capital market stabilizes can we accumulate more energy for China to deal with external challenges.
Li Zhan, chief economist of China Merchants Fund Research Department, said in an interview with the reporter of international finance that from the content and release time of the conference release, the conference not only mentioned steady growth, but also further emphasized stabilizing the capital market. The meeting proposed that “steadily promoting the reform of the stock issuance registration system, actively introducing long-term investors and maintaining the smooth operation of the capital market” plays an important role in stabilizing market expectations.
Li Zhan further pointed out that the Politburo meeting said that striving to achieve the expected goal of economic and social development for the whole year means not giving up the target of 5.5%, which responded to market concerns from the side, but “striving to achieve” is not “ensuring to achieve”. If the epidemic exceeds expectations, it may be acceptable to be slightly lower than 5.5%.
in addition, the two biggest highlights of this meeting are to support the platform economy and the continued easing of real estate platform economy, the meeting pointed out that the completion of special rectification of platform economy and the implementation of normalized supervision, compared with last year’s “preventing disorderly expansion of capital”, this statement is more partial to support and promote healthy development; In terms of real estate, the meeting mentioned adhering to the general tone of “housing without speculation”, supporting rigid and improved housing demand, optimizing the supervision of commercial housing pre-sale funds, and promoting the steady and healthy development of the real estate market. It is expected that the follow-up real estate industry will usher in certain improvements in both supply and demand.
long term capital becomes “Dinghaishenzhen”
Since 2022, A-Shares have experienced several “epic magic” falls in panic.
Market participants believe that attracting long-term funds into the market to play the role of “fixing the sea god needle” and boost the confidence of the capital market has become the key. The meeting also stressed on the capital market, “we should respond to market concerns in a timely manner, steadily promote the reform of the stock issuance registration system, actively introduce long-term investors, and maintain the smooth operation of the capital market.” Recently, the CSRC also issued opinions on accelerating the high-quality development of public funds, which stressed the need to improve the proportion of medium and long-term funds.
Ye Xiaojie also analyzed several points mentioned in the capital market:
First, the meeting mentioned that “respond to market concerns in a timely manner” , which requires relevant departments to grasp the latest changes in the capital market and take timely measures to promote market stability.
Since the beginning of this year, China’s capital market has fallen by a large margin, which has triggered concerns in the market and hit the confidence of market investors, which is not conducive to the reform and development of the capital market. Therefore, more measures may be introduced in the future to promote the smooth operation of the capital market.
Second, the meeting mentioned “steadily promoting the reform of the stock issuance registration system” , which is an important task mentioned in the central economic work conference and the government work report. In China’s current multi-level capital market, only the main board has not implemented the registration system, which is the key sector to promote the reform of the registration system in the future. It is expected to further speed up in the future.
Third, the “actively introducing long-term investors” , which is also closely related to the current market situation. From the perspective of capital, the capital market is not short of money, but the recent sharp fluctuations in the market reflect the lack of confidence of many investors, and their investment behavior is still short-term oriented. Only by further introducing long-term investors can we effectively change the current market environment and promote market stability.
a-share trend is expected to start in May
Combined with the current situation of economic development in the general environment, what is the impact of this meeting on the stock market, and what are the suggestions on investment strategy and allocation of sectors?
Li Zhan said that due to the dual impact of the external conflict between Russia and Ukraine and the rebound of the internal epidemic, the risks and challenges increased. In this context, this meeting will release positive signals in terms of epidemic prevention and control, macro policies, capital market, real estate, platform economy, etc., which will help strengthen market confidence and emphasize accelerating the implementation of policies. If the epidemic does not continue to deteriorate significantly, the economy may be at a low point in the second quarter and will gradually improve in the future therefore, on the whole, this meeting will help boost market confidence, but the follow-up of the inflection point of the stock market also needs to cooperate with the emergence of the inflection point of the epidemic.
In terms of investment strategy and allocation, Li Zhan pointed out that with steady growth, further efforts should be made to recommend the infrastructure chain, building materials, photovoltaic power and other directions that may benefit; When the epidemic situation is under control and the cost pressure is relieved, it is recommended to increase the price of consumption, the plight of the real estate chain and some industries in the second half of the year
“The trend of A-share market is expected to start in May. From the perspective of configuration, we focus on the two ideas of stabilizing growth and boosting consumption. Infrastructure, real estate, tourism hotels and food and beverage are all worthy of configuration.” Yan Kaiwen further analyzed that the meeting reconfirmed the 5.5% economic growth target, and China’s economic resilience will effectively hedge the risk of external uncertainty. At the same time, according to the GDP growth rate of 4.8% in the first quarter, if the GDP growth rate in the second quarter does not exceed 5.3%, it means that the GDP growth rate in the third and fourth quarters may exceed 6% therefore, in any case, the characteristics of China’s economy from low to high will be particularly obvious. At the same time, according to the rhythm, it is expected that April will be a low point of economic growth in the whole year. With the gradual increase of the follow-up steady growth policy, the marginal improvement signal of China’s economic fundamentals data will be more and more clear, and the supporting role of A-Shares will also be highlighted with the improvement of the economy.
“The worries about the internal steady growth policy have been eliminated, and the oversold rebound has been preliminarily confirmed. It is expected to further open the rebound space after the interest rate meeting of the Federal Reserve.” Huaan Securities Co.Ltd(600909) strategy analyst Liu Chao told reporters that the steady growth sector and growth sector are expected to return to the main line.
Main line 1: steady growth chain is still one of the main allocation directions. Especially after the meeting of the Political Bureau of the CPC Central Committee adheres to the annual economic growth and eliminates the concerns of steady growth policies, we can pay attention to building materials, building decoration, steel, cement, water conservancy and hydropower construction, real estate chain (there are still opportunities for the leaders of state-owned and central enterprises to improve their concentration) and banks.
Main line 2: if the yield of U.S. bonds falls after peaking periodically, the growth sector will usher in the opportunity of oversold rebound, focusing on power equipment, electronics, military industry, media, communications, computers, etc. 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.
five aspects of stronger policies are expected
Shenwan Hongyuan Group Co.Ltd(000166) study explained that the meeting showed that the annual economic growth target was not easily lowered due to the epidemic, so it is expected to see greater measures to stabilize economic growth in the near future. This means that more vigorous policies and measures will be taken in at least five aspects to stabilize the supply-demand cycle of China’s economy:
consumption: seize the planning of incremental tools, give play to the leading role, and open up the policy imagination space for fiscal expansion to promote consumption. Two policy signals deserve attention. The meeting proposed that “we should pay close attention to the planning of incremental policy tools, strengthen contingent regulation, and grasp the advance and redundancy of policies under the goal orientation”. The incremental policy mentioned here should not be a monetary policy tool. The main goal of contingent regulation may be the fiscal stimulus policy to promote the recovery of consumption, and the transmission time of policies to stimulate consumption is longer, We need to consider the issue of advance. It is estimated that under the current epidemic situation, the total contribution of residents’ consumption of goods and services to the growth of real GDP may be only about 1.3%, far less than the intensity of 2.5% – 3.5% before the epidemic. The optional tools include three possibilities: directly increasing fiscal expenditure, issuing consumption vouchers, and reducing the individual income tax rate. The fiscal expenditure structure does not match and the sustainability is not strong. If the scale of consumption vouchers is too large, it may squeeze out production. The individual income tax reduction is relatively ideal. Pay attention to the possibility of follow-up.
infrastructure construction: give play to the key role of effective investment and comprehensively strengthen infrastructure construction. The meeting proposed to “fully expand China’s demand, give play to the key role of effective investment, strengthen the guarantee of land, energy use and environmental assessment, and comprehensively strengthen infrastructure construction”. Combined with the requirements of the recent financial and Economic Commission meeting, it is expected that the annual investment growth rate of infrastructure investment projects in the three fields this year may accelerate and focus on the second quarter, including more than 100 key infrastructure projects proposed in the outline of the 14th five year plan, new energy power generation and power grid transformation, as well as thermal power with efficient use of coal and other projects closely related to energy security. Slightly raise the year-on-year growth forecast of infrastructure investment by 2 percentage points to about 8%, and the growth rate in the second quarter can reach 10% – 12%. However, strengthening performance orientation is still a long-term requirement to optimize the infrastructure structure and avoid the formation of new hidden debt risks of local governments.
real estate: due to the city’s implementation of policies to promote sales, slow down foresight, improve financing, stabilize completion and solve near-term worries. The meeting further clarified the combination of policy tools to alleviate “foresight” and “near worries”: first, improve financing stability and solve near worries. Clearly put forward the specific idea of “optimizing the supervision of commercial housing pre-sale funds”, which will help to improve the financing of development enterprises and stimulate this year’s real estate construction and installation investment and completion. At present, we need to achieve a small deviation between this year’s real estate investment and completion and new construction (investment and completion are too high) in order to avoid excessive real estate investment dragging down economic growth. 2、 Because of the city’s policy to promote sales, the foresight is delayed. The third tier cities are the places with the weakest real estate sales in the past two years. Since late February, the majority of second and third tier cities have adopted measures and tools such as reducing the down payment ratio, relaxing the provident fund loan policy and reducing the increase range of LPR, which should play a better role in promoting real estate sales in these cities than reducing LPR, and can also avoid the aggravation of the real estate deviation between the East and the central and western regions, It will help stabilize real estate investment in the next two years.
The meeting also proposed to “support all localities to improve real estate policies based on local conditions and support rigid and improved housing demand”. There is little need and operation space for further relaxation of follow-up monetary policy.
industrial production: the impact of the epidemic on supply chain logistics and advanced manufacturing industry has been paid full attention. Ensuring production means ensuring employment, income and demand. “We should stabilize the market players and implement a package of relief and assistance policies for industries, small, medium-sized and micro enterprises and individual industrial and commercial households seriously affected by the epidemic”, which is intended to stabilize employment and residents’ income. “We should stick to a game of chess throughout the country, ensure smooth transportation and logistics, and ensure the normal operation of key industrial chains, supply chains, anti epidemic and supply guarantee enterprises and key infrastructure”.
bulk commodities and energy security: do a good job in ensuring the supply and price of energy resources, build an energy safety net and enhance the contribution of real growth in the second half of the year. It is preliminarily estimated that on the basis of the large-scale launch of the installed capacity of new energy power generation, if the power coal production capacity can increase by more than 8% this year, it is expected to stabilize the power coal price within the range acceptable to both coal and electricity, and it is expected to avoid the situation that the power shortage caused by the high coal price and the rapid implementation of double carbon targets in the third quarter of last year will inhibit the production.
