China Merchants Securities Zhang Xia believes that there are still many individual stock investment opportunities in the field of “specialization, specialization, and newness”. In addition, energy equipment, waste utilization, seeds, agricultural machinery and other sub-sectors will have more policy support.
The documents of the Central Economic Work Conference in 2021 have been released. We interpret the spirit of the Central Economic Work Conference in terms of economic setting, goals, policy guidelines, fiscal and monetary policies, industrial policies, capital market policies, and real estate policies.
On the whole, in 2022, under the background of economic development facing the triple pressure of demand contraction, supply shock, and weakening expectations, China’s economy needs to remain within a reasonable range to welcome the victory of the 20th National Congress. Therefore, inter-cyclical and counter-cyclical fiscal and monetary policies will be made on the basis of discretion and strength, providing a basis for the overall maintenance of A-shares within a reasonable range of fluctuations. If the A-share market adjusts due to weaker economic expectations or a more severe external shock, it may be supported by the expected stronger fiscal and monetary policies and return to the upward cycle.
In terms of industrial policy, in the past few years, the central economic work will have a clearer industrial orientation, providing opportunities for large A-share industries. The 2021 Central Economic Work Conference puts more emphasis on smoothing the domestic cycle and improving the efficiency and competitiveness of various industries.Provides subdivision of the track and stock picking opportunities.
For A shares,In 2022, a number of industrial infrastructure reengineering projects will be launched and a large number of “specialized, special new” companies will emerge. There are still many individual stock investment opportunities in the “specialized, special new” field.As for the real estate industry, more positive expressions were given in the context of housing not being speculated.existPromote the construction of affordable housing and support the commercial housing market to better meet the reasonable housing needs of buyers under the guidance of industrial policies,If the downward pressure on the economy further increases next year,The real estate sector and the real estate industry chain systematically kill valuations may come to an end, and stock picking opportunities will emerge. In addition, energy security and food security once again emphasized that there will be more policy support in sub-sectors such as energy equipment, waste utilization, seeds, and agricultural machinery.
In the field of anti-monopoly, the fastest stage of platform-based Internet companies’ valuations may have passed. In the future, there will be a degree of standardized operation and behavior.There will still be room for development for Internet companies that can actively “unblock the domestic cycle, promote the upgrading of traditional industries, increase employment for economic growth, and achieve common prosperity”.. In the fields related to the “dual carbon” target, the development of new energy next year will still be a very important industry development direction.However, it is significantly more difficult for the sector to raise valuations significantly. It is necessary to find more than expected subdivisions and subdivision tracks in it. The importance of the performance of individual stocks exceeding expectations has also been further increased.. In particular, areas that can achieve breakthroughs in green and low-carbon technologies, such as new energy storage technologies, hydrogen energy and other more efficient battery technologies, should be given more attention.
In the field of reform, the reform of the registration system has been comprehensively promoted. As an important intermediary for equity financing and residents’ asset allocation in the new era, securities firms will play a more important role in social development. Considering that the liquidity environment may become looser next year,Brokers may usher in a valuation increase in 2022; The Central Economic Work Conference in 2021 proposed to complete the three-year action task for the reform of state-owned enterprises. Therefore, the reform of state-owned enterprises will have more implementation next year.State-owned enterprise reform will become one of the main lines of stock selection next year.
Economic setting: the central government has a clear expectation for the weakening of the economy and the severe external environment
Regarding the setting of the economy, the central government mentioned“my country’s economic development is facing the triple pressure of demand contraction, supply shock, and weakening expectations” indicates that the central government has expectations of economic weakening, and therefore has the subsequent setting of relatively proactive fiscal and monetary policies.And for the external environment，“Accelerated evolution of a hundred years of change, and the external environment has become more complex, severe and uncertain” also shows that in 2022, China’s economy may once again encounter the uncertainty caused by the “accelerated evolution of a hundred years of change”.For A shares, earnings expectations will weaken, and the uncertainty of the external environment has become the two major challenges that A shares will face next year.
But on the other hand, the central government’s overall arrangements for stabilizing economic growth and coping with external shocks will bring new investment opportunities for A shares next year.
Goal: Keep the economy within a reasonable range and welcome the party’s 20th victory
Re-promotion of “keep the economy running within a reasonable range” and welcoming the party’s 20th victory means that if economic data declines and slips out of the “reasonable range”, it may trigger further efforts in fiscal and monetary policy and increase economic growth. The speed remains within a reasonable range. Looking back at 2019 and 2020, after the slowdown in economic growth, the fiscal and monetary policies have been triggered to varying degrees.
Judging from the indicators we track, with the implementation of the central bank’s series of precise quantitative easing measures, the marginal improvement of inter-bank liquidity, the year-on-year growth rate of excess inter-bank liquidity has turned positive since July.The current growth rate of about 4% is not high, which is reflected in the fact that the central bank does not have the willingness to loose liquidity on a large scale, but it has also begun to invest in marginal liquidity.
With the further decline in economic growth, the market is now beginning to follow the logic of loose trading liquidity. Specifically, the real estate sector, which benefited from the improvement of liquidity margin and policy relaxation, and the military industry and computer sectors, which benefited from the improvement of liquidity margin, began to become active, and the activity of thematic investment and small and medium-sized stocks increased significantly.
Policy: Seek progress while maintaining stability, and put forward policy efforts appropriately.
Behind the stabilization pawn, it mentioned “seeking progress in stability”,“All regions and departments must take up the responsibility of stabilizing the macroeconomics” and “policy development is appropriate to the front” also means that the central government requires all regions and departments to actively respond to the “threefold of demand shrinking, supply shocks, and weakening expectations.” pressure”
Fiscal policy: Carry out infrastructure investment moderately ahead of time, but “resolutely curb new hidden debts of local governments”
In the expression of fiscal policy, on the one hand, it requires fiscal policy “Improve performance,Pay more attention to precision and sustainability”,“Improve performance,Pay more attention to precision and sustainability. However, there is no clearer expression of “increasing special debt” or “increasing the deficit rate”. At the same time,“Resolutely curb new hidden debts of local governments.” This shows that the central government still maintains its strength in the current economic downturn and does not rush to increase the government’s leverage ratio.
Monetary policy: Monetary policy has entered a stage of flexible adjustment and responsiveness
In the earlier third-quarter monetary policy report of the central bank, the central bank no longer mentioned the “liquidity gate”. In this central economic work conference,“Maintain the growth rate of money supply and the scale of social financing basically match the nominal economic growth rate, and maintain the macro-leverage ratio basically stable”. Similar expressions are not emphasized, but there is no similar statement like “guide the loan market interest rate down”, “guide the broad sense” The growth rate of money supply and the scale of social financing is significantly higher than that of last year. After the outbreak of the epidemic, the clear signal of loose monetary policy indicates that monetary policy has entered a discretionary stage, which can be flexibly adjusted according to the objective of maintaining a reasonable range of the actual economy. .Fiscal policy and monetary policy should be coordinated and linked,Cross-cyclical and counter-cyclical macro-control policies must be organically combined.
Industrial Policy-Focus on valuation restoration opportunities in subdivisions and certain sectors
In the industrial policy of the Central Economic Work Conference at the end of 2018 and 2019, more statements were made on the IT sector. From 2019 to the first half of 2020, the performance of the information technology sector was still quite excellent; in the industrial policy for 2020, “Enhancing the independent controllability of the industrial chain supply chain” and “Doing a good job in carbon peaking and carbon neutrality” have made a fairly detailed description, especially “dual carbon” has become the main line of industry selection in 2021. However, this year’s Central Economic Work Conference did not make specific statements about specific industries, and emphasized more on improving the “efficiency” of manufacturing.
In addition to the seven key tasks, more expressions were made for several industries, including specific instructions for energy security and food security. In the field of energy security, it emphasized “It is necessary to enhance the capacity of domestic resource production and support, accelerate the development and application of advanced mining technologies for oil and gas and other resources, and accelerate the construction of a waste recycling system.
In the field of food security, it is necessary to put the improvement of comprehensive agricultural production capacity in a more prominent position, continue to promote the construction of high-standard farmland, in-depth implementation of the seed industry revitalization action, improve the level of agricultural machinery and equipment, and ensure the reasonable income of grain farmers. They must be held firmly in their own hands.
Therefore, energy equipment, waste utilization, seeds, agricultural machinery and other sub-sectors will have more policy support.
(1) Regarding anti-monopoly-from strengthening anti-monopoly and preventing the disorderly expansion of capital to “playing the positive role of capital as a production factor while effectively controlling its negative role”
The 2020 Central Economic Work Conference proposed “Strengthen anti-monopoly and prevent disorderly expansion of capital.Anti-monopoly and anti-unfair competition.” In 2021, the disorderly expansion and unfair competition of the platform Internet will be subject to strict supervision, and the valuation of Internet companies listed on Hong Kong and U.S. stocks will undergo significant adjustments.。
While inThis year’s Central Economic Work Conference set the tone for capital——”It is necessary to correctly understand and grasp the characteristics and laws of behavior of capital. The socialist market economy is a great creation. There will inevitably be various forms of capital in the socialist market economy. The positive role of capital as a production factor must be brought into play while being effective. Control its negative effects”.
The fastest stage of platform-based Internet companies’ valuation decline may have passed. In the future, standardized operations and behaviors can be positive.“Unblocking the domestic cycle, promoting the upgrading of traditional industries, increasing the employment driving force of economic growth, and achieving common prosperity” Internet companies will still have some room for development.。
(2) Regarding dual carbon-based on the facts, avoiding “sports” carbon reduction
After the goal of “carbon peak and carbon neutrality” was put forward in 2020, the 2020 Central Economic Work Conference made it clear that “Support the places where conditions permit to reach the peak first. To accelerate the adjustment and optimization of the industrial structure and energy structure, promote coal consumption to peak as soon as possible, and vigorously develop new energy” has also become a very important industry main line this year. Due to energy consumption control and output control, prices have risen sharply and stock prices have risen sharply in some industries. The new energy has also ushered in a systematic and large-scale valuation.
Among the seven key tasks of the Central Economic Work Conference in 2021, the “dual carbon” is not emphasized separately but discussed separately from the seven points. The latest “dual carbon” goal is more objective.It is necessary to unswervingly advance, but it is impossible to complete the effort”, “the gradual withdrawal of traditional energy must be based on the safe and reliable replacement of new energy”, “increase the capacity of new energy consumption, and promote the optimal combination of coal and new energy.”
From this perspective, due to the repeated emphasis on the “dual carbon” target this year, the new energy sector has achieved substantial and systematic valuations in the context of increasing policy efforts, and the development of new energy next year will still be a very important industrial development. direction,However, continuing to increase the valuation of the sector substantially and increasing the difficulty, it is necessary to find more than-expected subdivisions and subdivision tracks in it, and the importance of the performance of individual stocks exceeding expectations has further increased.
In particular, areas that can achieve breakthroughs in green and low-carbon technologies, such as new energy storage technologies, hydrogen energy and other more efficient battery technologies, should be given more attention.
(3) Regarding real estate-support the commercial housing market to better meet the reasonable housing needs of buyers, and implement policies in accordance with the city to promote a virtuous circle and healthy development of the real estate industry
Since 2014, the monetization of the shed reform and the gradual advancement of the three-to-one-reduction and one-subsidization. In the first half of 2016-2021, in addition to the negative impact of the epidemic, real estate investment has always contributed to the economy’s steady growth. Starting in the second half of 2021, With the further development of real estate control policies, individual real estate companies have experienced operational problems. Real estate sales, new construction, and construction growth rates have all declined significantly, and the growth rate of real estate investment has also turned negative in a single month. Therefore, in 2022 “Accelerating the development of the long-term rental housing market, advancing the construction of affordable housing, supporting the commercial housing market to better meet the reasonable housing needs of buyers, and implementing policies to promote the sound and healthy development of the real estate industry” has become an important starting point for stabilizing real estate.
Since this,The real estate industry’s systemic killing of valuations since 2015 has basically come to an end. Due to the huge market space in China’s real estate industry, listed real estate companies in the future will see huge divergence due to their operating capabilities. Excellent real estate companies will also have the opportunity to step out of independence. α” Quotes.
Capital market policy: full implementation of the registration system, securities firms may have better performance in 2022
At the end of 2018, the work conference was arranged to promote the establishment of a science and technology innovation board on the Shanghai Stock Exchange and the implementation of the pilot registration system as soon as possible. At the end of 2019, arrangements were made to steadily advance the reforms of the ChiNext and the New Third Board.
As a result, on the financing side, the importance of stocks and equity financing in the scale of social financing has further increased. In China’s financing structure, the proportion of direct financing and equity financing will steadily increase, and on the side of residents’ asset allocation , The transfer of residential assets to equity assets has been irreversible. Therefore, as an important intermediary for equity financing and residential asset allocation in the new era, securities firms will play a more important role in social development.Taking into account that the liquidity environment may become more relaxed next year, securities firms may usher in a systematic valuation increase in 2022.
State-owned enterprise reform: fully implemented, seize the opportunity of individual stocks
Since the Central Economic Work Conference in 2019 put forward the “three-year action plan for the implementation of state-owned enterprise reform”, and then in 2020, the “three-year action plan for the in-depth implementation of state-owned enterprise reform”, the Central Economic Work Conference in 2021 proposed to complete the three-year action task of state-owned enterprise reform. therefore,The reform of state-owned enterprises will have more implementation next year, and the reform of state-owned enterprises will become one of the main lines of stock selection next year.
Summary: From the policy big β to the subdivision track small α
On the whole, in 2022, under the background of economic development facing the triple pressure of demand contraction, supply shock, and weakening expectations, China’s economy needs to remain within a reasonable range to welcome the victory of the 20th National Congress. Therefore, inter-cyclical and counter-cyclical fiscal and monetary policies will be made more discretionary and more vigorous. Provide a basis for the overall maintenance of A shares within a reasonable fluctuation range. If the A-share market adjusts due to weaker economic expectations or a more severe external shock, it may be supported by the expected stronger fiscal and monetary policies and return to the upward cycle.
In terms of industrial policy, in the past few years, the central economic work will have a clearer industrial orientation, providing opportunities for large A-share industries. The 2021 Central Economic Work Conference puts more emphasis on smoothing the domestic cycle and improving the efficiency and competitiveness of various industries.Provides subdivision of the track and stock picking opportunities.
For A-shares, a batch of industrial infrastructure reengineering projects will be launched in 2022, which will stimulate the emergence of a large number of “specialized, special new” companies. In the “specialized, special new” field, there are still many investment opportunities in individual stocks. As for the real estate industry, more positive expressions were given in the context of housing not being speculated. Under the guidance of industrial policies that promote the construction of affordable housing and support the commercial housing market to better meet the reasonable housing needs of buyers, if the downward pressure on the economy further increases next year, the real estate sector and the real estate industry chain may come to an end. Stock opportunities will emerge. In addition, energy security and food security once again emphasized that there will be more policy support in sub-sectors such as energy equipment, waste utilization, seeds, and agricultural machinery.
In the field of anti-monopoly, the fastest stage of platform-based Internet companies’ valuations may have passed. In the future, standardized operations and behaviors can be positively driven by “unblocking the domestic cycle, promoting the upgrading of traditional industries, and increasing economic growth.” Internet companies that are able to achieve common prosperity” will still have a good room for development. In the areas related to the “dual-carbon” target, the development of new energy next year will still be a very important industry development direction, but the difficulty of raising the valuation of the sector by a large margin has increased significantly, and it is necessary to find more than expected subdivisions and subdivision tracks, and individual stocks. The importance of over-expected performance has also been further enhanced. In particular, areas that can achieve breakthroughs in green and low-carbon technologies, such as new energy storage technologies, hydrogen energy and other more efficient battery technologies, should be given more attention.
In the field of reform, the reform of the registration system has been comprehensively promoted. As an important intermediary for equity financing and residents’ asset allocation in the new era, securities firms will play a more important role in social development. Considering that the liquidity environment may become more relaxed next year, securities firms may usher in a valuation increase in 2022; the Central Economic Work Conference in 2021 proposed to complete the three-year action task of state-owned enterprise reform. Therefore, the state-owned enterprise reform will be more advanced next year. With more landings, the reform of state-owned enterprises will become one of the main lines of stock selection next year.
Author of this article: Zhang Xia, etc., source: Investment Strategy Research (ID: zhaoshangcelve), original title: “[Investment Strategy]From Policy β to α-How the Central Economic Work Conference in 2021 Guides A Shares-Weekly Report on A Share Investment Strategies (1212)”, the original text has been deleted from the Wall Street experience
Risk warning and exemption clause
Market risk, the investment need to be cautious. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, opinions, or conclusions in this article are consistent with their specific conditions. Invest accordingly at your own risk.