Wen Ren Zeping Team
Straight to the point, we judge that the capital market is ushering in a new round of structural opportunities. The main driving logic is the restoration of risk appetite, the decline of risk-free interest rates and the rapid recovery of the economy.
Knowing that as a long-established scholar, it is "wise" to say something ambiguous and always true.
However, rationality and professionalism tell us that the door of opportunity has been opened, and the opportunities in the capital market now outweigh the risks. Although we are not quite sure of the adjustment time of the market at the bottom range, fundamental analysis shows that many good stocks are oversold and their prices have risen significantly. Below the intrinsic value, it has configuration value in the long run, but the early oversold provides opportunities and space.
It's as if we don't know how cold the winter is, but it is an iron-like law and trend that winter comes to spring.We must respect the law and follow the trend.
At the moment, we believe that A-shares should play a big role.If the A-share market starts a new round, it will help boost market confidence and unblock the virtuous circle of the real economy and capital market.It will help listed companies expand investment and drive capital into the real economy; it will help increase residents' income, drive wealth effect and consumption, and improve people's happiness index.
A-shares are at a relatively low market valuation, therefore, if they are guided correctly, it is expected to form a consensus among all parties in the future.
Earlier investors overreacted to short-term pessimism and ignored long-term optimism, and now the pessimistic expectations are being repaired, and the catalyst for the optimism is starting to appear.
1. Catalysts for Structural Opportunities Begin to Emerge
Since the beginning of the year, a wave of in-depth adjustments have been triggered due to the conflict between Russia and Ukraine, the Fed’s interest rate hike, and the regulatory conflict between China and the United States.
However,dialectically, what goes up is risk and what goes down is opportunity.Now is the time to be able to find the gold that falls with the sand, it just needs everyone to overcome their inner panic.
In the future, with the restoration of pessimistic expectations and the emergence of optimistic factors, the capital market is expected to usher in a new round of structural opportunities. The basic logic is the restoration of risk appetite at the denominator, the decline in risk-free interest rates, and the rapid economic recovery at the numerator.
Catalysts of structural opportunity begin to emerge:
1. The strategic level is bullish on China: the economy will return to full blood in the third quarter
We judge that, starting from June, China's economy will recover rapidly in the third quarter and come back full of blood.Similar to the first quarter of 2020, China's economy was -6.8%, but after the rapid resumption of production and work in the second quarter, the economy rebounded sharply to 3.2%, leading the world.With the State Council launching a package of 33 policies and measures to stabilize the economy in 6 areas, the economy is expected to rebound sharply in the third quarter and restore the industrial chain and supply chain.
The economy will improve marginally. April is the bottom of the economy, the data in May began to improve, and it is expected to rebound sharply in June and July.Among the troika, the fastest recovery will be investment, especially new infrastructure investment, followed by consumption, followed by exports.
The main policy force is fiscal policy, which has a more direct effect and a faster transmission, and monetary policy provides funding ammunition.The key is to change from loose money to loose credit, that is, to drive corporate investment and bank loans through government investment, so boosting corporate confidence is very important, which is related to the magnification of the investment multiplier effect.
We believe that the basic logic of China's long-term economic prosperity and development has not changed: marketization, internationalization, industrialization, urbanization, and informatization.
At present, we should strengthen our confidence in the bright future of China's economy. The concept of market economy has already taken root in this country.The road is tortuous, and the future will be bright in the end.
Even though the market is full of controversy, we choose to be bullish on China at a strategic level to ignite hope and illuminate the future.
Reference: "China's economy will return full of blood in the third quarter", "Strategic-level bullish China: the economy will return full of blood in the third quarter"
2. Steady growth this year is the top priority, and macro policies are more friendly to the economy and the market
It is recommended that you read the following words three times. The friendship between macro policies and the market is beyond words, and the efforts to stabilize growth continue to increase.
On May 25, the national video and telephone conference on stabilizing the economic market emphasized that stable growth should be placed in a more prominent position, and efforts should be made to protect market players, ensure employment and people's livelihood, protect China's economic resilience, and strive to ensure that the economy achieves reasonable growth and unemployment in the second quarter. drop as soon as possible.The executive meeting of the State Council determined that a package of 33 policies and measures for stabilizing the economy in 6 areas should be released before the end of May.It is necessary to complete the tasks of economic and social development while doing a good job in epidemic prevention and control.On the 26th, the State Council will send inspection teams to 12 provinces to carry out special inspections on the implementation of policies and supporting facilities.
The "Notice of the State Council on Printing and Distributing a Package of Policies and Measures for Solidly Stabilizing the Economy" was recently announced and implemented, emphasizing that "we should make efforts ahead and apply appropriate force to promote the implementation of the "Package of Policies and Measures for Solidly Stabilizing the Economy" as soon as possible to ensure timely implementation. As soon as possible, it will have a greater policy effect on stabilizing the economy and helping enterprises to bail out."
According to historical experience, the order of transmission is: the bottom of the policy, the bottom of the sentiment, the bottom of the market, and the bottom of the economy.
It is expected that measures to stabilize growth in the near future are expected to be accelerated, including but not limited to increased investment in new infrastructure, intensive introduction of soft-landing measures for real estate, increased efforts to ease monetary and credit, lower financing costs, tax rebates, etc.
3. Real estate regulation is constantly loosening, supporting rigid and improving needs, and the dawn of the reversal of the predicament may not be far away
Since May 2021, the real estate market has experienced a cold winter, which is the result of the superposition of long and short cycles.
Real estate is one of the keys to steady growth this year.When the real estate is stable, the economy is stable.See Views and Recommendations on the Current Real Estate Situation.
Recently, the country has released positive signals: the "Government Work Report" in March pointed out that "the city's policies will promote a virtuous circle and healthy development of the real estate industry".On March 16, the Financial Committee of the State Council proposed, "With regard to real estate enterprises, we must promptly study and propose effective and effective risk prevention and mitigation solutions, and propose supporting measures for the transformation to a new development model." On March 29, the State Council executive meeting proposed, " Put stable growth in a more prominent position, and policies to stabilize the economy will be released sooner rather than later, without taking measures that are not conducive to stabilizing market expectations, and formulate a plan to deal with greater uncertainty." The central bank said on June 2: "Correct the excessive risk-aversion behavior of financial institutions in a timely manner, and maintain a stable and orderly real estate financing.”
Since March this year, the easing of policies has been further strengthened, and since May, it has continued to increase, from the previous reduction of interest rates and relaxation of provident funds to relaxation of purchase restrictions and sales restrictions.The effect began to appear, the spring river plumbing duck prophet, and the property market in some hot cities began to pick up in volume:
We judge that with the continuous relaxation of the real estate market, under the premise of adhering to the principle of "housing and not speculating", the dawn of the reversal of the predicament may not be far away. Market confidence will help achieve the goal of stable growth this year.
Reference: "Views and Suggestions on the Current Real Estate Market"
4. There is no need to panic too much about the epidemic, and you will be able to win the battle
China's national system is good at doing big things. Although we have experienced various difficulties over the past 40 years, we have all fought and won, and it is also the country with the best economic growth in the world.
As the epidemics in Beijing and Shanghai are brought under control, the resumption of production and work is accelerated, and the industrial chain and supply chain are restored, the Chinese economy will return to full blood in the third quarter.
For hundreds of years, human beings have successively defeated the Black Death, smallpox, Spanish flu, cholera, SARS, etc. It is believed that today, when technology has advanced so rapidly, it will definitely be able to overcome this epidemic.See "A Brief History of the Great Global Plague".
5. Chinese and American regulatory authorities strengthen coordination and communication to ease market concerns and support the healthy development of the platform economy
Recently, the Chinese and American securities industry regulators are strengthening coordination and communication, improving the efficiency of cross-border regulatory cooperation, embodying the concept of overall openness and security, and promoting the orderly development of overseas securities issuance and listing activities by Chinese domestic enterprises.
On May 17, the National Committee of the Chinese People's Political Consultative Conference held a special consultation meeting on "Promoting the Sustainable and Healthy Development of the Digital Economy" in Beijing. Member of the Political Bureau of the CPC Central Committee and Vice Premier Liu He of the State Council attended the meeting and delivered a speech.He pointed out that the global digital economy is showing new features such as intelligence, quantization, and cross-border integration.We must strive to adapt to the all-round changes brought about by the digital economy, fight the tough battle of key core technologies,support the sustainable and healthy development of the platform economy and the private economy, properly handle the relationship between the government and the market, support digital companies in the listing of domestic and foreign capital markets, and promote competition through openness , to promote innovation through competition.
The "Notice of the State Council on Printing and Distributing a Package of Policies and Measures to Steadily Stabilize the Economy" clearly states: to promote the standardized and healthy development of the platform economy.Introduce specific measures to support the healthy development of the platform economy.
6. There is no need to worry too much about the Fed raising interest rates. The slowdown of the US economy will greatly restrict the process of raising interest rates, and China's monetary policy will be "me-based"
The foundation of the US economic recovery is very fragile, which will greatly restrict the Fed's rate hike process.Recently, the US PMI index, employment data, consumer confidence index, etc. have begun to show weakness.
The current U.S. inflation is largely related to geopolitical turmoil.
Therefore,it is expected that the Fed will raise interest rates quickly and then slowly. When the U.S. economy turns down again, the market will change its view on the Fed's rate hike process.
Moreover,as the world's second largest economy, China's monetary policy will not be interfered with by the Fed's policy, and it has made it clear that "we are the master".
7. The market reverts to the mean, which is a constant law
The laws of history tell us that the market has an inherent error correction mechanism, and mean reversion will eventually play a role.The market often breeds new life at the bottom of pessimistic expectations, reborn in despair, rise in controversy, and collapse in carnival.So, we have to "I am greedy when others are panic, and panic when others are greedy".Advance in artillery fire, retreat in fireworks.
From an objective point of view, the oversold in the early stage has provided us with an opportunity to fall out of room for growth.
What goes up is risk, what goes down is opportunity.Buying cheap is the last word. When the market is too pessimistic, you can find a good company and good assets that have been killed by mistake. The only thing you need to do is to overcome your inner fear.
Reference: "From today, start optimistic"
2. Five Structural Opportunities
It is a philosophical proposition that the world will belong to rational optimists.Pessimists are right, optimists move forward.
We should be long-term rational optimists.Rational at the top, optimistic at the bottom.If you're not an optimist, you don't have confidence in the future and you don't get in because asset prices have fallen too far.Now is the time to take a long-term view.
Future structural opportunities worth watching:
The first major opportunity is the reversal of the predicament: for example, Chinese stocks, Hong Kong stocks, real estate industry chain, pig cycle, catering, tourism, finance, etc.
There is no doubt that real estate is facing a historic reshuffle of the industry, but everyone can pay attention to the increase in industry concentration after the reshuffle of the home appliance industry that year, creating a number of big bull stocks, and the recent policies to stabilize the housing market have been intensively introduced and continuously increased. Help boost market confidence.
Many Chinese concept stocks and Hong Kong stock companies are still very competitive, and their intrinsic value has not been destroyed. It is just due to short-term geopolitical factors that cause investors to be overly pessimistic and sell down. I believe that these good companies and stocks will have a very strong repair ability. As if gold always shines.
The second biggest opportunity is a good company with solid fundamentals and a good stock that was killed by mistake:a strong moat, a business model that has not been destroyed, excellent management, obvious technical advantages, and so on.
The third biggest opportunity benefits from steady growth:Steady growth is the top priority for the macro economy this year.Han Wenxiu, deputy director of the China Finance Office in charge of daily work, emphasized that "stabilizing the macro economy is not only an economic issue, but also a political issue."
The fourth major opportunity benefits from new infrastructure construction:the main force for steady growth this year is infrastructure construction, which is also a key support area such as credit issuance, special debt support, and project approval.
The fifth biggest opportunity, benefiting from the increase in valuation:This year's monetary easing will help the risk-free interest rate to fall, and pay attention to industries that benefit from the loose currency and the increase in valuation.
Risk factors that undermine the above judgment and logic include:the conflict between Russia and Ukraine; the global financial turmoil caused by the unexpected rate hike by the Federal Reserve; real estate; and the strength of policy hedging.
Finally, this article attempts to convey rationality, professionalism and confidence, and attempts to reflect on the human cycle in the market, especially when the market is overly pessimistic and sluggish.
Yes, at a time when the market is in such a downturn and when investors are generally pessimistic, we are willing to stand up and convey rational and objective ideas and voices.Long-term investment practice and practical economics research shows that rational, professional and contrarian thinking will eventually gain the gift of time.
Even though the market is full of controversy, we choose to be bullish on China at a strategic level. The economy will come back full of blood in the third quarter, igniting hope and brightening the future.
