It’s time to be optimistic—commentary on February financial data- Wall Street News

Credit data released in February is indeed hard to say optimistic from the data itself.The weak demand for credit from enterprises and households dragged down the supply of credit. From the perspective of the enterprise level, in February, the medium and long-term loans of enterprises increased by 505.2 billion yuan, a significant decrease of 590 billion yuan year-on-year. Even compared with the new 512.7 billion yuan in the same period of 2019, which is close to the Spring Festival, it is still slightly lower, especially the bill financing, which increased year-on-year. 490 billion, once again verifying the lack of corporate credit demand.There may be two reasons for this. First, under the guidance of the policy of full support for the issuance of manufacturing credit in January, it may be a little too hard, resulting in the sluggish demand for credit in February. Second, there may be a phenomenon such as approval but not release of real estate medium and long-term credit. The direct cause is lack of confidence in the healthy development of real estate, limited by the inertial thinking of pessimistic expectations, and insufficient real estate credit.

In view of the accelerated implementation of tax rebates and subsidies of more than 1.5 trillion yuan, the cash flow of enterprises is expected to be significantly improved, and the situation of “insufficient demand” for corporate credit may continue this year, which needs to be treated rationally.How to reverse this apparent change, or how to realize the ease of credit after financial subsidies, is the crux of the real estate. And the medium and long-term credit of real estate companies is the post-reflection of demand, which may be what we are more worried about, that is, the real estate demand shown by the current residents’ medium and long-term credit is not optimistic.In February, the negative growth of residents’ medium and long-term loans was 45.9 billion. This was the first negative growth since statistics were available. The residents’ expectations were hard to change, and it was difficult to adjust the degree of policy in the face of the healthy development of real estate.

Worries about the credit data have sparked confusion in expectations for steady growth, namely how to achieve this year’s 5.5 percent growth target as the first quarter comes to an end.First of all this is a dead end for expected reinforcement. What is an expectation, an expectation is an assumption based on past data and models. Even if it has been verified many times, it is difficult to guarantee future correctness. Because if the prediction is correct and it is a high probability event, then the development direction of all events should be unilaterally changed, so how come there is an economic crisis, and what about cyclical changes? Just in the past 2021, there has been a big deviation in the market’s expectations. At the beginning of 2021, market expectations for economic growth in 2021 were generally between 9% and 10%. At that time, we gave a growth forecast of about 7.5%, which was generally considered to be too pessimistic. It is difficult to explain why the forecast is low only by a low base. Similarly, the understanding of fiscal investment and monetary policy is naturally quite different. Why do we choose “pessimistic” expectations for 2021? The reason is also simple, the growth target is not high, and the goal is to “guess” what may happen. For example, use every opportunity to speed up reforms, set aside space for 2022, the epidemic, and even worsening geopolitical risks. If it is possible, there is reason to believe that the goal is reasonable. Then why “guess” toward the target, because the government understands more comprehensively and macroscopically than the market.From this, going back to 2022, to “guess” towards the target of 5.5%, what “good things” will happen?For example, the end of the new crown epidemic, the gradual cooling of geopolitical risks, the emergence of new investment opportunities in the manufacturing industry driven by technological progress, etc., if there is a chance, you should dare to “guess”. Secondly, taking a step back, assuming that “good things” have not been realized but turned bad, then it should be believed that there will be steady growth at the production end resulting in an increase in inventories. At least the demand for mid-to-upstream bulk commodities is stable, which is an investment. opportunity. Therefore, the idea of ​​”that’s what it is” should be changed.

How to achieve 5.5% growth is the concern of policy makers, and we are more concerned about finding investment opportunities in the process of realizing 5.5%.First, the government has clarified large-scale tax rebates and subsidies, and the improvement of corporate cash flow will bring about a steady rise in M1, which itself is a favorable condition for secondary market investment. Secondly, large-scale fiscal expenditures are more inclined to tax rebates and subsidies. There are four possible results: First, it is necessary to think about where the funds for “releasing water and raising fish” will end up when the direction of short-term physical investment is unclear. The second is that infrastructure funds are squeezed out. Even if the infrastructure investment is ultimately more optimistic than we expected and achieves a growth of around 5% expected by the market for the whole year, the performance of infrastructure-related targets in the secondary market since the beginning of the year has basically fulfilled this expectation. Third, as mentioned earlier, the crux of stable growth and lenient credit lies in real estate. The healthy development of real estate will play a greater role in stabilizing growth, and the policy side should provide necessary rapid correction and guidance.Fourth, the fiscal policy should choose the former between “releasing water and raising fish” and “immediate results”, which pays more attention to the medium and long-term policy dividends, which will also lead to the increased urgency of monetary easing in short-term stability maintenance.

In addition, changes in overseas policies and risks will also affect the nerves of the domestic market.How long will the Ukrainian crisis last, will it worsen, and since the beginning is not guessed correctly, is everything possible? The shortage of resources and energy supply caused by the Ukrainian crisis has caused the price of crude oil to skyrocket. Will it trigger another global economic crisis? It cannot be said that there is no such possibility, but this is exactly where dialectical thinking can be made. Because since it is a crisis, it is an unexpected situation, and this kind of accident is often premised on the extreme optimism and disdain for potential risks before the crisis broke out.But at present, on the contrary, expectations are more pessimistic than reality, and the market is reacting to the deterioration of expectations in advance, even worse than reality.. So on the premise that expectations have deteriorated, can advanced economies continue to tighten to forcibly suppress event-induced inflation? I am afraid that choosing between recession and inflation, the patience for inflation will be greater. It is true that optimistic markets tend to be “all mountains are small at a glance”, and all external shocks can be dealt with “mainly on me”. A pessimistic market is often “suddenly falling like a edifice”, everything is directed at me, and all disasters can happen.At present, what we need is to look at the problem dialectically. We dare not say that the risk has bottomed out, but at least we have seen a situation that has not been seen in decades.

To sum up, the economic data for February is about to be released. Don’t bite the demand. After all, it is impossible to judge that the demand for the whole year is weak based on the data of two months.To stabilize the first quarter, focus on production first. Taking a step back, assuming that the production recovery in January-February is not as good as expected, causing market volatility,We are willing to interpret this as short-term market bearishness.