Event:
The Political Bureau of the CPC Central Committee held a meeting on April 29 to analyze and study the current economic situation and economic work and review the national talent development plan during the 14th Five Year Plan period. The meeting stressed the need to strengthen macro-control policies, stabilize the economy and maintain the smooth operation of the capital market. At the same time, the platform economy ushered in an important statement.
Comments:
At present, the market pays most attention to two key points: whether the economic growth rate is reduced, and how to find opportunities in the capital market between stable economic growth and epidemic prevention and control. Following the central economic work conference and the meeting of the financial commission, this meeting once again made important replies to market concerns, boosting market confidence.
I. focus on the current market: is the economic growth rate down?
The meeting stressed that "strive to achieve the annual economic and social development target of 5.5%." Since the first quarter, disturbed by internal and external factors, the "triple pressure" faced by China has been strengthened. The market once thought that the government might lower its economic growth target. This meeting clearly will not revise the economic growth target. Among them, the meeting mentioned "accelerating the implementation of the policies that have been issued, implementing the policies of tax rebates, tax reductions and fees, and making good use of all kinds of monetary policy tools." This shows that in order to achieve the growth target, on the one hand, the implementation of various financial measures that have been determined to be implemented should be accelerated. On the other hand, the central bank's refinancing tools have increased structural support for the economy. We believe that the follow-up escort of steady growth is still worth looking forward to, and the loose policy environment may be maintained until the economy improves substantially.
II. Minimize the impact of the epidemic situation on the economy
The epidemic situation should be prevented, the economy should be stabilized and development should be safe. The meeting stressed the need to effectively coordinate the epidemic prevention and control and economic and social development according to the new characteristics of virus variation and transmission, unswervingly adhere to the people first and life first, adhere to external defense input and internal defense rebound, adhere to dynamic zeroing, protect people's life safety and health to the greatest extent, and minimize the impact of the epidemic on economic and social development. From the description of the epidemic situation at this meeting, the general policy of "dynamic clearing" has not changed. However, this meeting emphasized the "accurate balance between anti epidemic and economic development". We believe that the subsequent "dynamic clearing" will put flexible and accurate prevention and control in a more prominent position. On April 29, at the press conference of the Information Office of the State Council, Li Bin, deputy director of the National Health Commission, said that "dynamic zeroing" is not absolute "zero infection". Subsequently, after learning from the repeated lessons and experience of the epidemic in the first quarter, all localities will be more fully prepared to find a balance between "preventing the epidemic" and "stabilizing the economy" in the face of the new characteristics of rapid transmission of mutant strains. With the optimization of epidemic prevention and control measures, the impact of the epidemic on the economy is expected to gradually weaken.
In addition, the meeting stressed the need to ensure smooth logistics, protect the supply chain and alleviate the short-term plight of industry. Since March, China's logistics has been frequently blocked, and the industrial operation has been affected to a certain extent. After the accelerated implementation of a series of recent policies, in the context of the national "game of chess", even if the follow-up epidemic repeats again, the disturbance to the supply chain is expected to be controlled within a relatively small range.
III. how to achieve "steady growth"
How to achieve subsequent steady growth? The meeting also gave an answer - effective investment, fully expand China's demand and play the key role of effective investment. As the impact of the epidemic on consumption is greater than investment, China may face some pressure of economic structure imbalance in the short term. Therefore, in the second quarter, effective investment may become the core focus under the main line of steady growth.
Comprehensively strengthen infrastructure construction. In terms of stabilizing domestic demand, the meeting particularly stressed the need to comprehensively strengthen infrastructure construction. In combination with the statement of the meeting of the central finance and Economic Commission on April 26 on "accelerating the construction of new infrastructure, improving the level of traditional infrastructure, moderately ahead of schedule, and laying out infrastructure conducive to leading industrial development and safeguarding national security", as well as the further proposed five major infrastructure areas. We believe that under the background of downward macroeconomic pressure and rising uncertainty this year, infrastructure is expected to play a more central role in steady growth policies, or it will be the most clear "main card" in steady growth investment this year.
The marginal loosening of the real estate policy supports all localities to improve the real estate policy from the local reality and optimize the supervision of commercial housing pre-sale funds. In the context of housing without speculation, China's real estate policy is mainly due to urban policies. The statement of the Politburo meeting on supporting all localities to improve real estate policies and optimize the supervision of commercial housing pre-sale funds from local realities further clarified the signal of marginal loosening at both ends of real estate supply and demand. In our previous annual strategy, we suggested that although "no speculation in real estate" means that real estate will no longer become the main focus of the underlying economy, for China's economic structure, the stabilization of the real estate sector is of great practical significance for economic stability. At present, the real estate industry is still bottoming out due to the impact of the epidemic on the sales side. The meeting further clarified that the marginal loosening of the real estate industry is in line with our judgment at the beginning of the year that the real estate may be gradually loosened until it stabilizes this year. It is expected that all localities will further relax the real estate policy to help "stabilize the real estate".
IV. under the main line of steady growth, the market performance resumed after the Politburo meeting
Looking back on the previous Politburo meetings, the stock market rose continuously in the month after each meeting. We counted the trend changes of Wande A and Shanghai Composite Index in the month after the four Politburo meetings held on April 17, 2020, July 30, 2020, April 30, 2021 and July 30, 2021. Within 28 days, the stock market rose by an average of about 2.6%, of which the range of two meetings in 2021 rose by more than 3%. On the whole, after the Politburo meeting, investor confidence was boosted, and the improvement of risk appetite led to the rise of the stock market. However, the core logic of the medium and long-term A-share trend will still be the degree of macroeconomic repair.
V. how can the capital market find opportunities between economic growth and epidemic prevention and control
Since the beginning of the year, the global growth style has been suppressed due to the sharp increase in interest rate expectations by the Federal Reserve, driving the upward trend of discount rate. The rise in the price of upstream raw materials caused by the conflict between Russia and Ukraine makes it more and more difficult to repair the profits of downstream enterprises in the industrial chain. Repeated outbreaks in China have suppressed consumption. When multiple styles are suppressed together, the equity market has been weak since the beginning of the year. At present, China's macro environment is favorable to the bond market. However, under the background of "clarifying and starting again" of the current main line of steady growth, although credit easing is "late", it will not be absent. It is expected that the opportunity to do more in the bond market in the second half of the year may be weaker than that in the stock market.
At present, the A-share is the most intense period under the joint suppression of multi factor resonance, and the cost performance has been obvious. From the perspective of stock bond price ratio, the current A-share ERP has entered the extreme range within five years, close to the extreme value at the time of the outbreak of the epidemic in early 2020, which means that the attraction of stocks relative to bonds has emerged. In the second half of the year, when the profit recovery expectation stabilized, the funds may shift from bonds to the stock market.
In terms of A-share style, from the initial stage of policy implementation to the market confirmation of significant policy effect, the advantages of value and cycle stocks are often greater than growth. The relative growth of value in the first quarter has been recognized by the market. We believe that based on the background of China's economic bottoming and steady growth, the value may still dominate in the short term before the economy stabilizes. Among them, the first is the infrastructure field that matches the value style and has the most clear strength of steady growth policy, including power grid, building materials and steel. In addition, there are real estate, upstream and downstream of real estate and banks holding real estate. With the advent of corporate profit recovery, growth performed better in the late stage of market rebound.
In terms of industry performance, the meeting once again stressed the need to fully expand China's demand and give play to the traction and driving role of consumption in the economic cycle. Combined with a series of intensive measures to stabilize domestic demand since mid and late April. In the future, consumption is expected to gradually recover with the improvement of the epidemic, relay infrastructure investment, improve the profits of middle and lower reaches enterprises, and drive China's economy for the better. It is expected that after the intensive implementation of the steady growth policy, the relative income of leisure services, food and beverage, electrical equipment and other industries will be better. In the second half of this year, we can focus on the consumption and cyclical investment opportunities after the reversal of the epidemic.
At present, the bottom of the policy has appeared, and the market is at the bottom stage. With the implementation of steady growth policies and the emergence of epidemic prevention and control effects, the bottom of profits may appear in the middle of the year. At that time, it is expected to provide new impetus for the lifting of the A-share center.
Risk warning: the epidemic situation exceeded expectations; China's policy implementation was less than expected.
