Market view: resumption of work and production, policy intensive, growth and repair, market continuation
In the third week of May, under the background of the sharp reduction of the five-year LPR, the resumption of work and production in Shanghai in stages and the continuous decline of the yield of external US bonds, the main stock indexes continued to rebound and realized the general rise. Subsequently, as China's policies entered the full force period at the end of the disturbance of the epidemic, the US bond yield gradually priced, the marginal slowdown of the US economy continued to fall, the market risk appetite is expected to rise steadily, and the rebound of A-Shares will continue. In terms of allocation, we continued to focus on three main lines last week. First, with the introduction of incremental policies, building decoration and building materials closely related to steady growth; Second, the US bond yield continued to fall, and the rebound constraints were gradually eliminated; Third, covid-19 related pharmaceutical segments with performance support under the stable release of the price rise of mandatory consumer goods and the demand for normalized epidemic prevention and control.
Risk appetite is steadily improving. Under the background of the steady growth policy and incremental policy, the national epidemic situation improved, the external 10Y US bond yield fluctuated downward, and the pressure of the rapid depreciation of the RMB exchange rate eased, the market risk appetite increased steadily. Recently, the continuous weak adjustment of A-Shares compared with U.S. stocks has come out of an independent rebound market, indicating that the response of A-Shares to U.S. stocks is weakening. Of course, if U.S. stocks continue to fall sharply, it is bound to curb global risk appetite, which will inevitably affect a shares.
In April, the economy ushered in a phased bottom, and the policy entered a full force period after the end of the epidemic disturbance. Affected by the more complex and severe international environment and the obvious impact of China's epidemic, the new downward pressure on the economy further increased in April, which is consistent with our previous judgment, but there is no need to be overly pessimistic. With the positive progress made in China's epidemic prevention, the phased resumption of production and work in Shanghai, the gradual introduction and implementation of various steady growth incremental policies, the negative factors and positive stimuli of economic growth will change one after another, and the economic data in April is expected to become the phased bottom of the year. In the follow-up, as the focus of the government's work gradually shifts from anti epidemic to steady growth, the policies will enter a period of full force, and the economy will build a bottom for the better.
Monetary policy was "targeted", loose structural overweight, reasonable and sufficient support for short-term liquidity remained unchanged, and the marginal of micro liquidity improved. The policy stabilized the real estate overweight, only unilaterally lowered the five-year LPR for the first time, and the use of credit mitigation tools helped private real estate enterprises finance. The short-term liquidity is reasonable and sufficient, the support remains unchanged, the high level of local government bond issuance is further accelerated, and the long-term and short-term interest rates are expected to remain low and volatile in the short term. The marginal of micro liquidity is good, and the capital flows into the North actively. It is expected that the market will continue to improve with the market rebound.
Industry configuration: the rebound continues and continues to exceed the allocation to stabilize growth, growth style and required consumer goods
The rebound is expected to continue and continue to exceed the allocation of stable growth, growth style and required consumer goods. Looking forward to the fourth week of May, under the joint action of the sharp reduction of 15bp in the five-year LPR, the acceleration of local production and resumption of work, and the continuous decline of external US bond yields, the market risk appetite is expected to rise steadily, and the oversold rebound market will continue. In terms of allocation, it is suggested to continue to focus on the three main lines of stable growth chain, growth oversold rebound and price rise of mandatory consumer goods:
1) the five-year LPR has been significantly reduced by 15bp, which shows the decision-making level's determination to stabilize growth. Before China's economic fundamentals turn better, it can continue to exceed the allocation and stabilize the growth chain. Pay attention to the new and old infrastructure (water conservancy construction, highway and railway construction, UHV, urban pipe network, etc.) that is an important focus on steady growth and supported by the performance in the second quarter; In the medium term, the relevant market of the real estate sector brought about by the rebound of the industry after the stabilization of real estate sales has been deduced in the short term due to the expectation of policy relaxation. In the follow-up, unless there is a significant change in the front-line real estate policy; As well as banks that trade in price by volume, increase loan scale and broaden credit, and superimpose undervalued and high dividend attributes.
2) under the support of multiple factors such as the continuous decline of US bond yield, the expected performance in the second quarter and the safety margin of valuation, we continue to be optimistic about the overall rebound of growth style. Pay attention to the power equipment, electronics, military industry and communication, computer and Internet driven by favorable policies that are expected to continue the high boom.
3) post epidemic repair, grasp the opportunity of price rise of mandatory consumer goods and valuation and repair of pharmaceutical sector. Focus on the price rise of mandatory consumer goods (food, beverage and dairy products), as well as the valuation repair opportunities of the pharmaceutical sector where risk appetite is expected to pick up, performance is supported and undervalued.
Risk tips
The development of Omicron mutant strain exceeded expectations; Risk Spillover of geopolitical conflict between Russia and Ukraine; The uncertainty of the Fed's interest rate hike has increased; The deterioration of China US relations exceeded expectations.
