Politburo meeting focused on risks and clarified “bottom line thinking” in the past two weeks, investors have sold off stock assets and expressed their concern about the prospect of economic growth stall with valuation and pricing below the bottom of Q1 limit in 2018 and 2020. The statement of the central financial and Economic Commission on April 26 and the Politburo meeting on April 29 focused on clarifying the “bottom line thinking”, and A-Shares returned to 3000 points. The Politburo put forward the idea of “epidemic prevention, stable economy and safe development”, and “strive to achieve the expected objectives of economic and social development throughout the year” and “prevent all kinds of” black swan “and” grey rhinoceros “events”. The positive attitude will help alleviate the current tension of investors to a certain extent. At the same time, the Politburo’s statement of “optimizing the supervision of commercial housing pre-sale funds” and “introducing specific measures to support the standardized and healthy development of platform economy” also contribute to the mitigation of cash flow risk and platform economic supervision risk in the real estate industry, and the risk expectation can converge in stages.
the idea of camera regulation ensures the counter cyclical action ability of policies when necessary The “prudent policy” and “prudent policy” are not the tools of the current meeting, but the “incremental policy” of the current meeting. At the same time, the Politburo meeting stressed that “we should fully expand China’s demand and play the key role of effective investment” and “comprehensively strengthen infrastructure construction”. The changes mentioned above may mean that when necessary, especially in risk shocks, policy tools can be more active or even radical, with the ability of countercyclical action.
however, we should still recognize the complexity of the current macro environment and the lack of credit expansion momentum although the Politburo meeting highlighted the steady growth of infrastructure investment and made it clear to optimize the supervision of real estate pre-sale funds, this measure only helps to alleviate the risk of cash flow repayment of real estate companies. Under the constraints of “no speculation in real estate” and financing channels lacking high risk preference (such as shadow banking in the past), there is still uncertainty about the willingness of real estate companies to expand land acquisition and start new construction. With “epidemic prevention” in the first place, export growth faces downward pressure and the weak willingness of residents and enterprises to spend capital. At present, the momentum of economic growth and credit expansion still lacks effective support. Therefore, investors should not underestimate the complexity of the current macro.
tactical emphasis on switching, not attack with the catalysis of short margin factors, Shanghai’s orderly opening-up and resumption of work, and the Federal Reserve’s interest rate hike landing, it is expected that A-Shares will rebound in the first half of May. However, as the profit outlook and the path of credit easing are still vague, we believe that the stock market has not yet had the opportunity to reverse, and the rebound is still dominated by weak index consolidation and structural opportunities. In the rebound, we believe that the tactical focus is not on attack, but on style switching, from growth to value, and growth rebound should be switched. The correction of supply chain supply capacity is not the core contradiction of the current market. The core of the market lies in the necessity of demand recovery and the trend of inflation. The growth style will still face the downward revision of profit expectation and crowded trading structure in the future. Investment focuses on stocks with low-risk characteristics, layout and stable growth related cycles and consumption.
investment opportunities are in stocks with low-risk characteristics: undervalued, with performance and determined performance industry recommendations: 1) the direction of holding physical assets with stable cash flow: coal, chemical resources, second tier central state-owned enterprises, real estate and banks; 2) Public investment direction dominated by government expenditure: construction, power grid, wind and solar power; 3) The dilemma reversed, focusing on the in-depth optimization of the supply side: pigs, Baijiu and consumer services. Q2 focused on the emergence of investment opportunities in consumption of building materials and steel.
