The four major factors affecting the market in the early stage have taken a turn one after another. The pressure of forced selling in the market has been fully released, and the extreme pessimism has been gradually repaired. It is expected that the medium-term repair market lasting for several months will start from May. It is suggested to actively lay out the four main investment lines. First of all, the epidemic situation in Shanghai has improved significantly. The Politburo meeting once again stressed the coordination of economic development and epidemic prevention. Secondly, the decision-making level once again comprehensively set the tone and responded to market concerns in the dimensions of infrastructure development, real estate support, relief of market players and healthy development of platform economy. Thirdly, the Federal Reserve raised interest rates and reduced its table in May, and the trade friction environment or phased improvement under the heavy pressure of overseas inflation. Finally, the first quarterly report of listed companies landed, and the market entered the performance vacuum period and confidence recovery period. After the adjustment in April, extreme pessimism has been fully released, and the market has passed the period with the greatest pressure of forced selling. Recently, some funds have begun to be actively distributed, and investors are also extremely sensitive to positive signals on the margin. Therefore, with the positive signals of the four major factors affecting the market, the medium-term repair market lasting for several months is expected to start in May. It is suggested that investors should actively layout the four main lines of modern infrastructure, real estate, resumption of work and production and consumption repair.
four major factors affecting the market in the early stage have turned for the better
1) the epidemic situation in Shanghai has significantly improved, and the Politburo meeting once again emphasized the overall planning of economic development and epidemic prevention Shanghai has passed the peak of the epidemic, and the number of new local positive cases in 15 districts has remained below the peak for at least 10 consecutive days. The proportion of positive cases outside the isolation and control area has been declining. The six areas have met the basic social clearance standard defined by the official. There were no new cases outside the isolation and control area for two consecutive days on April 29 and 30. From April 25 to May 3, there were 204388 local cases cured, discharged and released from medical observation in Shanghai. During the same period, there were 81589 new local positive diseases in Shanghai (excluding the outcome). The number of new local positive diseases cured, discharged and released from medical observation in a single day has far exceeded the number of new local positive diseases, and the shortage of medical resources has been significantly alleviated. The number of sealed and controlled areas has been decreasing, and the population covered by the prevention area has reached 15.47 million, accounting for 66%. On April 29, the meeting of the Political Bureau of the CPC Central Committee made important instructions on coordinating epidemic prevention and control and economic operation, ensuring smooth traffic and logistics, emphasizing that “the epidemic should be prevented, the economy should be stable, and development should be safe”, and “the epidemic prevention and control and economic and social development should be effectively coordinated according to the new characteristics of virus variation and transmission” and “the impact of the epidemic on economic and social development should be minimized”.
2) the decision-making level comprehensively responded to market concerns in the dimensions of infrastructure, real estate, relief of market entities, platform economy and so on 4 at the end of April, the Politburo meeting once again defined the target of annual GDP growth of 5.5%, and made clear guidelines for the next stage of infrastructure development, real estate support, relief of market players, platform economic development and other stability dimensions. Following the meeting of the central finance and Economic Commission in April, the meeting of the Political Bureau once again made it clear that infrastructure investment is the main focus of expanding domestic demand this year, with transportation, energy and water conservancy as the focus. In the field of real estate, there are three important changes in this meeting. The first is to support all localities to improve real estate policies based on local conditions, the second is to support rigid and improved housing demand, and the third is to clearly propose to optimize the supervision of commercial housing pre-sale funds. In terms of stabilizing market players, the meeting clearly proposed to implement a package of relief and assistance policies for industries, small, medium-sized and micro enterprises and individual industrial and commercial households significantly affected by the epidemic. In view of the platform economy supervision issues concerned by investors, the meeting proposed to “complete the special rectification of the platform economy and implement normalized supervision”, which means that the rectification of the platform economy in the past period has been nearly completed. In the future, it will give better play to the important role of the platform economy in serving people, supporting economic development, expanding China’s employment and coping with the impact of the epidemic.
3) the Federal Reserve’s interest rate hike and contraction table landed in May, and the trade friction environment or phased improvement under the heavy pressure of overseas inflation the overseas macro group of Citic Securities Company Limited(600030) research department believes that the Federal Reserve may officially announce the reduction of the table in May, and increase the interest rate by 50bps at the same time. There is also a high probability of raising the interest rate by 50bps in June. If the table contraction and interest rate increase are implemented as expected, the risk of external monetary tightening will be released to a certain extent. In order to avoid the huge risk of economic recession caused by controlling inflation through monetary tightening alone, the United States may take a series of measures, including phased improvement of the trade environment. The severe inflation situation has begun to hurt the US economy. According to the data released by the New York Fed, the US personal nominal income increased by 0.5% month on month in February, but the actual disposable income decreased by 0.2% month on month. The absolute level has dropped to the pre epidemic level, down 20% from the previous high. At the same time, the personal real consumption expenditure increased by 5% compared with the pre epidemic level, and the difference between the two narrowed to the lowest level since 2017. Under the heavy pressure of inflation, in an interview with Bloomberg on April 22, U.S. Treasury Secretary Yellen said that the U.S. Treasury Department is carefully reviewing the U.S. trade strategy with China. It is “worth considering” to take measures to reduce tariffs on Chinese goods. The U.S. government should do everything possible to reduce inflation and reduce tariffs on China “will bring some ideal results”.
4) the first quarterly report of listed companies has been implemented, and the market has entered a performance vacuum period and confidence recovery period 2022 in the first quarter, the profit differentiation of listed companies intensified, only the upstream resource stocks performed well, and the other sectors were significantly under pressure. Excluding the comparable caliber of new shares, the net profit of all A-Shares and non-financial sectors in the first quarter of 2022q1 increased by 3.4% and 8.1% respectively year-on-year, slightly improved month on month, but significantly slowed down compared with the overall growth in 2021. The disturbance of the local epidemic in April to the supply chain and the impact on production have not been reflected in the first quarter report. However, due to the centralized disclosure of the first quarter report in April, investors’ concerns about the report being less than expected began to be released in advance. With the end of the disclosure of the first quarterly report, A-Shares have temporarily entered the performance vacuum period, and investors’ attention will also shift from the performance of listed companies to the tracking of higher-frequency data and operation, which highly depends on the control of local epidemic in May, the recovery of supply chain and the progress of resumption of work and production. The market’s anxiety about the statements began to weaken. It is expected that with the gradual promotion of resumption of work and production and the improvement of enterprise operation, even if the performance in the second quarter fell significantly compared with the first quarter, investors’ outlook for the future will turn to optimism and their confidence in fundamentals will begin to recover gradually.
the pressure of forced selling in the market is fully released, and extreme pessimism is gradually restored
1) extreme pessimism has been fully released, and the market has passed the period with the greatest pressure of forced selling small and medium-sized private placement positions continued to decline rapidly in April and are the main capital outflows in the recent market. The active private placement positions surveyed by Citic Securities Company Limited(600030) channels have dropped to about 63%, down 7 percentage points in one month, corresponding to a net outflow of more than 150 billion in the whole market. The current position level is close to the lowest point in the third quarter of 2018.
From the rise and fall of some broad-based indexes, the decline of China Securities 500, China Securities 1000 and China Securities 2000 indexes in April this year has exceeded the decline in June 2015 and is close to the decline in July 2015. Despite the great downward pressure, the market withstood the pressure of liquidity. From the level of leverage on the floor, the average proportion of two financial maintenance guarantees in the market once fell to 235% in April, but it was still higher than that in 2015 (227%), 2016 (226%) and 2018 (216%), and the leverage pressure was significantly lower than that in the past when the market adjusted significantly. In April, the maximum number of one-day limit stocks was 765, accounting for 15.9% of the total number of A-share listed companies, of which 283 stocks with a market value of more than 5 billion, accounting for only 5.9%. Both the absolute number and proportion were significantly lower than the level when the market fluctuated sharply in 2015 and 2016. At that time, the proportion of the most extreme one-day limit stocks reached 74% and 47% respectively. With the recent development of policies in financial related fields, market sentiment has improved and smoothly passed the period of maximum liquidity pressure.
2) some funds have begun to be actively distributed, and investors are extremely sensitive to marginal positive signals 4 in late April, the overall net inflow of northward foreign capital has recovered, and the inflow of allocated funds returned to a stable state in the last week of April. The cumulative net inflow of northward funds in the whole month was 6.3 billion yuan, of which the net inflow of allocated foreign capital was about 7.8 billion yuan. The phased cumulative net outflow of allocated foreign capital since March has decreased from – 36.3 billion yuan on March 16 to – 2.3 billion yuan, returning to normal inflow. Dianxin, banking and food and beverage are the three industries with the largest net inflow in the near future Citic Securities Company Limited(600030) channel research shows that active equity surviving products do not face the pressure of large-scale redemption with the market decline, on the contrary, the weekly net redemption rate continues to remain at a low level; Passive equity ETFs continued to maintain the status of net subscription in the first four months, with the scale of net subscription funds reaching 58.1 billion yuan, 1.9 billion yuan, 2.9 billion yuan and 46.6 billion yuan respectively. The pace of subscription in April was significantly faster than that in March. Investors are more and more sensitive to the positive signals on the margin. The meeting of the Political Bureau on April 29 mentioned the healthy development of the focused platform economy. When the channel of Hong Kong stock exchange was closed, the Hang Seng technology index rebounded rapidly in the session, with an increase of 11% in the day. These signs fully show that after the continuous position adjustment, position reduction and even the phased market liquidity pressure in April this year, the market is not short of money. Investors have been actively waiting for the change of policy signals, and the market is imminent.
it is expected that the medium-term repair market, which will last for several months, will be started from May, and the four main investment lines will be actively laid out
1) the four major factors affecting the market showed positive signals, and the medium-term repair market was opened in May 4 at the end of April, there was a significant positive improvement in the prevention and control of the epidemic in Shanghai. On April 29 and 30, there were zero new cases outside the isolated control area for two consecutive days. The meeting of the Political Bureau on April 29 once again emphasized the overall planning of economic development and epidemic prevention, dredging logistics and ensuring the stability of the industrial chain. We expect that the negative economic impact caused by repeated local epidemics will be gradually alleviated. The policy comprehensively responded to the early market concerns in multiple dimensions, emphasizing the comprehensive strengthening of infrastructure development, supporting all localities to improve real estate policies according to their own conditions, implementing 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, and promoting the healthy development of a flat economy. The Fed’s fear of raising interest rates fell in stages in May, and the trade friction environment may improve in stages under the heavy pressure of overseas inflation. In addition, the first quarterly report of listed companies landed, and the market entered a performance vacuum period and confidence recovery period. We expect that the market will usher in a trend market of value and growth resonance repair lasting for several months in May.
2) actively lay out the four main lines of modern infrastructure, real estate, resumption of work and production and consumption restoration cloudinfrastructure , focusing on high-quality developers, property management and building materials . In the quarterly dimension, it is suggested to actively allocate relevant industries for resumption of work and production, focusing on smart cars and parts, semiconductors, photovoltaic wind power equipment etc. In the monthly dimension, it is suggested to focus on aviation, hotels, duty-free, food and beverage, department store super related to consumption repair. It is expected that these industries will also usher in phased recovery under a package of policies such as the regression of large-scale epidemic, the relief of market players and consumption stimulation.
risk factors
Repeated outbreaks outside China; The friction between China and the United States in the field of science and technology trade has intensified; The progress of China’s policy and economic recovery is less than expected; Macro liquidity at home and abroad has tightened more than expected; The conflict between Russia and Ukraine further escalated.
