(Original title: Strategy Focus | Stabilize the general mobilization of the economy, the main market is approaching)
Text｜Qiu Xiang Qin Peijing Yang Fan Cheng Qiang Li Shihao
Yang Jiaji Contact: Xu Guanghong
Entering June, after the epidemic is effectively controlled, a package of policies to stabilize the economy is expected to take effect in a concentrated manner. The stage of the greatest overseas disturbance pressure has passed, and it has begun to gradually ease. The slow rise is the characteristic and will last for several months, and the four main lines will be firmly laid out. First of all, from the perspective of the internal environment, since the second quarter, the policy of stabilizing growth has been fully rolled out, but the repeated epidemics have made it difficult to release the policy synergy. It is expected that the epidemic situation nationwide will be fundamentally improved in June. The economy has shown signs of recovery, and it will begin to enter the accelerated recovery phase in June. Secondly, from the perspective of the external environment, under the heavy pressure of overseas inflation, the Sino-US trade environment may improve in stages, the Fed’s expectation of raising interest rates has passed the peak, the rising risk of US economic recession may further ease the expectation of interest rate hikes, and the conflict between Russia and Ukraine is increasingly It is clear that the period when the biggest shock to global commodity markets is expected has passed. Finally, the liquidity of the A-share market has improved significantly recently, and the current position of investors with absolute returns is still relatively low. With the accelerated improvement of the internal and external environment, the main market for medium-term repair is approaching, and we will firmly deploy modern infrastructure, real estate, resumption of work and production and consumption. Repair the four main lines.
Entering June, after the epidemic has been effectively controlled
A package of policies to stabilize the economy is expected to take effect centrally
1) Since the second quarter, the policy of stabilizing growth has been fully rolled out, but the repeated epidemics have made it difficult to release the policy synergy. Since the Politburo meeting on April 29 this year clearly stated that “the target of economic growth of around 5.5% for the whole year has not changed”, the central government has continued to increase its policy of stabilizing growth, and successively launched a package of policies in response to the outstanding problems in the current domestic economic fundamentals. On May 23, the State Council held an executive meeting to clarify that the next step would be to launch a policy “combination punch” of 33 measures in six areas, including finance, consumption and effective investment. After that, Premier Li Keqiang held a national video conference on stabilizing the economic market, calling for a package of policies to stabilize the economy. Implementation details will be issued by the end of May. After the meeting, 11 provinces including Henan, Shandong, and Shaanxi have welcomed the “Special Supervision Team of the State Council for Steady Growth and Market Entities to Ensure Employment”, promoting the implementation of the previously issued policies in the first half of the year. However, due to the impact of the epidemic, it is difficult for this package of policies to be effective. As of the first ten days of April, the reserve of major projects across the country increased by 8% year-on-year, but a series of data reflecting infrastructure investment did not improve. The cement storage capacity ratio reached 70%, the highest level since the beginning of the year; real estate policies across the country have been significantly relaxed, but in April The transaction volume of second-hand housing in 50 cities fell by 20% month-on-month and about 50% year-on-year. The second-hand housing price index fell by 0.3% month-on-month, and the decline was wider than that in March, and the year-on-year decline expanded to 4.8%; the epidemic also affected small and medium-sized enterprises and residents. Confidence, short-term corporate loans and household loans remained subdued.
2) It is expected that the nationwide epidemic situation will be fundamentally improved in June, and the centralized effective window will be ushered in the policy accumulation. As of May 28, the actual daily new positive cases in Shanghai had dropped to 104, the lowest level since March 13. The resumption of work and production and the resumption of business and market continued to advance, and the process of returning to normalcy will be entered on June 1. the third stage. The number of new local positive cases in Beijing in a single day has dropped for 6 consecutive days, and the epidemic has been fully controlled. Changchun, which had a large-scale epidemic earlier, achieved a “double clearing” for 14 consecutive days, announcing that all production and operation entities will fully resume business from the 28th. After the epidemic is under control, more targeted policies may usher in a window for centralized implementation. On May 27, the Standing Committee of the Shanghai Municipal Party Committee held a meeting to deploy work related to resumption of work and production and speeding up economic recovery, and discussed a package of powerful stimulus plans at the meeting. This once again proves that the introduction of more targeted policies and the effectiveness of the previous policies to stabilize growth largely depend on the premise that the epidemic is effectively controlled. As the epidemic is brought under control, stable growth will become a more important goal. A series of After the policy has been accumulating in the past two months, June is the window for centralized implementation and effect.
3) The economy has shown signs of recovery, and will begin to enter the accelerated recovery phase in June. From the high-frequency data, freight logistics has been recovering well since mid-May. On May 26, the national railway transported 11.18 million tons of goods, which was 1.3% higher than the average of 4.28-5.4 this week. The base rebounded by 17.2%, and the postal express collection increased by 20.1%. According to the latest data this week, the operating rate of petroleum asphalt plants (25.9%) increased by 3.3 percentage points from last week, the operating rate of automobile all-steel tires (56.1%) increased by 1.6 percentage points from last week, and the operating rate of blast furnaces (83.8%) was higher than that of last week. Weekly increase of 0.8 percentage points. These high-frequency data show that with the smooth flow of logistics, industrial production is recovering in an orderly manner. In May, industrial production and profitability are expected to stabilize and improve, and the structure will be optimized. Although the export was affected by the epidemic and repeated in the first ten days of May, by mid-May, the throughput of concentrated containers had increased by 5%, and the export recovery trend was becoming more and more obvious. According to data released by the Passenger Car Association, the retail sales of passenger vehicles nationwide in the first three weeks of May were 780,000 units, down 16% year-on-year, and the decline continued to narrow. Compared with April, sales increased by 34% month-on-month. The Macro Group of the Research Department of CITIC Securities predicts that in June, the impact of the epidemic on the economy will basically subside, and the 33 package of measures deployed by the State Council in 6 areas will gradually show results, driving the economic growth rate to recover to over 5% in the month, and the single-quarter GDP in the second quarter. The growth rate is expected to be around 1%.
The stage with the greatest pressure from overseas disturbances
has passed and is beginning to gradually ease
1) Under the heavy pressure of overseas inflation, the Sino-US trade environment may improve in stages. Inflationary pressure has become the main factor that has dominated the policies of European and American countries. The EU’s discussions on increasing sanctions against Russia have not been resolved, and the previous sanctions have not effectively restricted the flow of Russian crude oil into the international market. In the first 24 days of May, Russian offshore crude oil and condensate exports averaged 3.6 million barrels per day, down slightly from April, but lower than the average in the first quarter of 2022, according to statistics from agencies such as the IEA. It was nearly 400,000 barrels per day higher, and it was basically at the level before the global outbreak of the new crown. Recently, India and other major exporters of basic commodities and industrial products have begun to restrict the export of some products, which will undoubtedly further exacerbate the risk of global inflation. As the world‘s largest producer and exporter of industrial products, China plays an important role in stabilizing global inflation in the current environment of global trade protectionism. In order to deal with the risk of domestic inflation, on May 10, Biden said that “dealing with inflation is a priority of the U.S. federal government, and whether to remove tariffs is under discussion.” On May 26, US Secretary of State Blinken said in his speech on China’s strategy to seek cooperative competition, and emphasized that he would avoid the Cold War mentality, and his tough attitude was significantly lower than previous market expectations. rebound.
2) The peak of the Fed’s rate hike expectations has passed, and the rising recession risk may further ease the rate hike expectations. Excessive inflation levels have begun to seriously affect the actual consumption situation in the United States. According to statistics released by the New York Fed on May 13, the real disposable income of US residents turned negative (-0.4%) to US$15.31 trillion in March this year, and the growth rate of real personal consumption in February and March was only 0.1. % and 0.2%, almost stagnating. The inventory value of U.S. retailers reached $686.4 billion in the first quarter of this year, a year-on-year increase of 11.4%, which has exceeded the level before the outbreak in 2020. Top U.S. retail companies, including Walmart and Target, all announced in May. In the quarterly financial report, it said that it faces the problem that overall costs are rising much faster than retail prices, and it has lowered its profit expectations for this year. Concerns about recession have also begun to affect the market’s expectations for the Fed to raise interest rates. According to CME data, the probability of the Fed raising interest rates by 75bps in June has dropped from 35.2% in early May to 2.4%. also fell sharply.
3) The conflict between Russia and Ukraine is becoming more and more clear, and the stage where the biggest impact on the global commodity market is expected has passed. On May 28, the Russian Defense Ministry said that Russian troops and troops from the Donetsk People’s Republic had occupied the Ukrainian town of Liman. The military conflict between Russia and Ukraine in the Donbas and other major battlefields has gradually entered the final stage. Both Russia and Ukraine have recently stated that the military conflict is approaching the end of the stage. In the future, the military conflict between the two sides may come to an end temporarily and turn to other means such as negotiation. At present, Russia has achieved a staged military victory, and has achieved its pre-war strategic purpose of controlling many strategic objectives in Ukraine through military means. Ukraine may have to reconsider how to develop Russia-Ukraine relations in the next stage. Both sides have strong demands to return to Diplomatic negotiation and consultation at the negotiating table. As the situation in Russia and Ukraine gradually comes to an end, the peak of its impact on the global commodity market has passed, and the price of the global commodity market will enter a stable stage in the future.
The main market for mid-term recovery is approaching, and it is expected that
Still characterized by a rolling slow rise and will continue for several months
1) Market liquidity has improved significantly, and the current position of investors with absolute returns is still relatively low. In May, allocation-oriented foreign capital continued to maintain a net inflow. As of May 27, the cumulative net inflow of allocation-oriented foreign capital was 9.2 billion yuan, and the cumulative net inflow scale has hit a record high. Relative income investors represented by public offerings took the lead in increasing their positions in May, and the new funds established this year have shown signs of accelerating their positions this month. The fluctuation levels of the net worth of the newly established funds in January this year from February to May were equivalent to 33.8%, 54.9%, 65.9% and 90.1% of the normal equity products, respectively. We estimate that there was a relatively obvious concentrated increase in positions in early and mid-May. behavior, and concentrated on the growth and manufacturing sectors (such as photovoltaic equipment, lithium batteries, auto parts, vehicles, etc.) Absolute return investors, represented by private equity institutions, remained cautious in May after sharply reducing their positions in April. According to the channel survey data of CITIC Securities, the positions of small and medium-sized private equity institutions increased slightly in May, from less than 65% at the beginning of the month to nearly 70%, but they are still at a historically low level, and the increase in positions is slower than the rapid reduction in the previous period. Phase 1, such absolute return investors may continue to return to the market after observing clear signs of the pandemic and economic recovery. With the accelerated inflow of incremental funds, we expect the main market for this round of mid-term repairs, which lasted several months, to start in June.
2) Firmly lay out the four main lines of modern infrastructure, real estate, resumption of work and production and consumption restoration. In terms of configuration, from the perspective of the whole year, it is recommended to focus on modern infrastructure and real estate layout. The infrastructure sector should focus on low-value building leaders, power grids, data centers and cloud infrastructure, and the real estate sector should focus on high-quality developers, property management and building materials. From the quarterly perspective, it is recommended to actively add related industries that resume work and production, focusing on smart cars and parts, semiconductors, photovoltaic wind power equipment, etc. From the monthly dimension, it is recommended to focus on consumption repair related to aviation, hotels, duty-free, food and beverage, department stores and supermarkets. Under the package of policies such as the subsidence of the large-scale epidemic, the bailout of market players and consumption stimulation, these industries will also usher in a phased recovery. We expect that the four main lines with the clearest expectations will show the characteristics of slow growth in rotation, and the market will rise alternately with the mid-term repair.
risk factor
The epidemic has been repeated; the friction between China and the United States in the field of science and technology trade has intensified; the progress of domestic policies and economic recovery has not been as expected; the macro liquidity at home and abroad has tightened more than expected; the conflict between Russia and Ukraine has further escalated.
Source of this article: Editor-in-charge of CITIC Securities Research: Zhong Qiming_NF5619