The two black swans of the COVID-19 epidemic and the plunge in crude oil prices are disturbing the global political and economic situation and have a greater impact on the capital market. So, where do the opportunities lie for the stock market over the next few months?
From April 21st to 24th, CITIC Securities 2020 Spring Investment Strategy Conference will be held online with the theme of "Sail Against the Current". CITIC Securities Chief Economist Zhang Anyuan, Co-Head of Research Department Macro Fixed Income Chief Huang Wentao, and a number of industry chiefs took turns to share their views on global and Chinese economic trends, "gold nugget" opportunities in the stock market in the second quarter, and other topics. Brokerage China reporters collate the main points for readers.
Chief executives have a unanimous view that this year’s GDP target is no longer important to investors. It is foreseeable that the second and third quarters will have stronger policies, which is the golden period for stock investment. It is very important to grasp the rhythm; U.S. stocks have continued to rebound recently, but currently The valuation is not consistent with the fundamentals, and there may be greater room for adjustment in the future. It is not recommended to continue to gain gains from the upward trend of U.S. stocks at the current position.
Zhang Yulong, chief strategy of CITIC Securities, recommended that A-share investors continue to hold consumer staples sectors (especially pharmaceutical stocks) while increasing allocations to some real estate. At the same time, infrastructure (including new infrastructure and old infrastructure) is an important focus of this year's policy, and there are many good investment opportunities.
Huang Wentao believes that judging from various economic indicators, the world has now stepped into the financial crisis. The next step is to observe whether corporate and individual credit defaults in the United States occur on a large scale. There are currently three overseas risk points that need to be paid attention to. One is the increase in debt default rates, the other is the violent redemption of stock ETFs, and the third is the appreciation of the US dollar, the depreciation of exchange rates in emerging markets and capital outflows, as well as the risk of sovereign debt defaults in emerging markets.
Zhang Anyuan believes that after the epidemic, the world's geopolitical pattern will not undergo major changes, nor will China's industrial division of labor pattern. As far as domestic policies are concerned, Zhang Anyuan specifically mentioned that cash distributions targeted at specific groups are worth looking forward to.
Ding Luming, chief research officer of CITIC Securities Financial Engineering and Major Asset Allocation Fund, recommends overweighting the A-share GEM, believing that the main board will restart a second wave of rebound in May. It is believed that technology is the core theme throughout the year, and large market value industries focus on real estate and securities companies.
It should be noted that the chief executives also admitted frankly that the stock market may be more volatile this year, making it more difficult for investors to operate. Zhang Anyuan bluntly said, "It is difficult to see a definite direction for A-shares in the second quarter."
Zhang Yulong: Optimistic about the fields of consumer necessities, real estate and infrastructure
Zhang Yulong, chief analyst of CITIC Securities strategy, analyzed the A-share investment strategy in the second quarter of this year. This is a topic that has attracted much market attention. He believes that although the GDP growth rate in the first quarter was negative 6.8%, from a structural perspective, we will still find good investment opportunities in certain sub-fields, but it also suggests some risks.
Looking at the economic performance of various industries, in the first quarter, agriculture, finance, IT and other industries achieved positive growth. Does this mean that at the current position, these industries can still continue to hold? Zhang Yulong said that specifically, the main contribution to agricultural growth is the high level of pork prices. With the recovery of sow stocking and replenishment, pork prices have gradually fallen from the high level, which means that starting from the second half of this year, agricultural prices will continue to rise. There are not many opportunities; in the financial industry, especially the banking industry, although high dividends are relatively stable, the risk of bad debts during economic downturns is also relatively large, which requires careful consideration; IT is relatively a better choice.
Most industries achieved negative growth in the first quarter, with the accommodation and catering, transportation, and construction industries experiencing the most severe declines. However, this is not without investment opportunities. Zhang Yulong believes that after experiencing a sharp decline in the early stage, if the demand in these industries rebounds with retaliation in the later period, there will be investment opportunities. It can be found that in recent times, especially since last week, the hotel and catering industry has rebounded to a certain extent.
From an investment perspective, fixed asset investment has actually picked up since March, mainly in the real estate industry.Although the real estate industry has always been suppressed, the valuation level of this industry is actually very low, the dividend level is indeed relatively high, and the overall liquidity is relatively loose. It is recommended to continue to hold the necessary consumer sectors, especially pharmaceutical stocks, and increase allocation to some real estate.
infrastructure is an important starting point of this year’s policy. In absolute terms, old infrastructure is still the focus of stabilizing the economy, which will greatly promote the entire high-speed rail industry, urban rail transit construction, and regional economic construction; the investment opportunities in new infrastructure are very clear, and the early high valuations have passed After a round of adjustments, the price/performance ratio has been restored. The seven major areas of new infrastructure are all good investment directions, especially ultra-high voltage, new energy vehicle charging piles, etc.
Against the background of negative growth in the first quarter, the full-year GDP target has attracted much attention from the market. We believe that if the economy maintains normal growth in the next three quarters, that is, if the growth target of 6.5% is achieved each quarter, then the full-year economic growth will be 3%; if the subsequent economic growth slows down, then the full-year economic growth may be About 2%. In any case, the second to third quarter is likely to be the period of greatest economic improvement throughout the year, which is a golden period for stock investment.
Regarding US stocks, US stocks have continued to rebound recently, and the dynamic price-to-earnings ratio of the S&P 500 has increased rapidly. The current dynamic price-to-earnings ratio of the S&P 500 is 19.3, basically the same as at the end of February and early March, and similar to the average level since 1990 (20.4). We believe that with the support of the Federal Reserve's continued balance sheet expansion, the valuation of U.S. stocks has returned to the level before the liquidity crisis in March. With the prospect of a downward earnings revision as a result of the subsequent economic recession, the current valuation is not consistent with fundamentals. Even if the U.S. stock market rebounds again due to ample liquidity, continuing to gain upside gains from the U.S. stock market at its current position will undoubtedly be a straw from the fire.
Huang Wentao: With one foot in the financial crisis, we need to pay attention to three overseas risk points
Huang Wentao, co-head of the Research and Development Department of CITIC Securities and chief analyst of macro fixed income, gave a speech titled "Second Quarter Macroeconomic Outlook: Sailing Against the Current 》. He said that in the past three months, the global economy, politics, society and markets have been disrupted by two black swans, the two new crown epidemics and the crude oil plunge, which have had a huge impact on global politics, economy and capital markets. Judging from various economic indicators, the world has now stepped into the financial crisis. The next step is to observe whether corporate and individual credit defaults in the United States occur on a large scale.
We currently need to pay attention to three overseas risk points, one is the rise in debt default rates, the other is the violent redemption of stock ETFs, the third is the appreciation of the US dollar, the depreciation of exchange rates and capital outflows in emerging markets, and the risk of sovereign debt defaults in emerging markets. .
my country's GDP growth rate in the first quarter was -6.8%. In view of the spread of the global epidemic, the GDP growth rate in the second quarter is forecast to be 3-4%. It is possible to achieve an economic growth rate of about 3% throughout the year, but it will not be easy to achieve. I personally think that the GDP target for this year is not very important to investors. Everyone only needs to know that the worse the GDP is in the first quarter, the stronger the subsequent policies will be. For investors, grasping the rhythm is even more important.
From the perspective of monetary policy, interest rate cuts are imperative; fiscal and quasi-fiscal policies are actually short-term and fast policy tools for stabilizing growth, and should play the main role throughout the second and third quarters. Among them, urban investment and financing policies are believed to continue to be relaxed.
Zhang Anyuan: China’s industrial division of labor will not change in the short term
CITIC Securities Chief Economist Zhang Anyuan’s speech was titled “Change and Stability in the Post-Disaster Era”. The main issue discussed was the impact of the epidemic on world politics. What impact will the economic structure have on China's industrial structure?
Zhang Anyuan believes that after the epidemic, symmetrical impacts will not change the geopolitical landscape. The impact of the epidemic on the world is symmetrical and indiscriminate. There is no place in the world for outsiders. There is no situation where the epidemic only affects one country but not others. The balance of power between the two countries was balanced before, and it will remain balanced after the epidemic.
Regarding the recent industrial reshoring phenomenon, Zhang Anyuan said that the judgment of accelerating anti-globalization is worth studying, and the epidemic will not lead to changes in China’s industrial division of labor.Over the past 30 years, the scale of China's industrial agglomeration in the Yangtze River Delta and Pearl River Delta has been world-class. The scale of related infrastructure and industrial investment has reached hundreds of billions of yuan. This agglomeration is not the result of industrial policy, but is based on the market itself. Industrial relationships endogenous to factors will not change significantly due to the epidemic. As for potential substitute countries such as Vietnam, the impact of the epidemic is also symmetrical. Under the current circumstances, the changes in their domestic economic and financial conditions are still unknown.
Are the U.S. financial markets facing the risk of a new round of turmoil? Zhang Anyuan believes that the current liquidity crunch in the United States has been partially alleviated, and the Federal Reserve and the Ministry of Finance are doing their best to avoid the social credit chain from breaking. However, the stabilization and rebound of the stock and bond markets will not be smooth sailing, especially given that the recent market performance of oil prices may be unprecedented, and U.S. stocks may still experience a new round of large fluctuations.
As far as domestic policies are concerned, Zhang Anyuan said that cash payments to specific groups are worth looking forward to. Since economic growth and wealth creation are currently stagnant, it is more urgent to rely on changes in fiscal policy to adjust income distribution. He suggested that all levels of finance should issue cash or consumer vouchers, provide subsidies for target groups or specific commodities, and provide individual tax refunds and exemptions. But this will not be a positive for the market.
Finally, Zhang Anyuan also mentioned his views on the equity market, saying bluntly, "It is difficult to see a definite direction for A-shares in the second quarter." He also believes that from February 21 to now, U.S. stocks and A-shares have a strong correlation. The coefficient reaches 91% at its highest. If there is another round of fluctuations in the US stock market in the future, it will be difficult for A shares to be immune. But it may still continue the previous trend, such as US stocks falling by 10% and A shares falling by 2%.
"The real benefit to the A-share market may be in the second half of this year. This is consistent with seasonal factors, economic recovery and the domestic policy cycle." Zhang Anyuan said.
Ding Luming: The A-share main board may restart its rebound in May, and it is recommended to overweight the GEM
Ding Luming analyzed the operation of A-shares in the second quarter and the outlook for global major asset classes on the morning of the 22nd. Regarding A-shares, he suggested focusing on overweighting the A-share GEM and being wary of the extreme impact of the first quarter report on the A-share main board. He believed that the main board market would consolidate in the short term before the end of April, and then resume a second wave of rebound in May. In terms of industry configuration, technology is the core theme throughout the year, and large-capitalization industries focus on real estate and securities companies. Their common feature is that interest rates are falling.
Ding Luming's prediction of US stocks is slightly different from the above view. He believes that the restoration of panic in the return of US stock valuations has been completed (the first period of rise), and the second period of rise will start after the third quarter. The U.S. stock index, which has undergone continuous substantial adjustments, is mainly caused by the dual concerns of the direct impact of the epidemic and the potential domino-like impact of the economic impact of market concerns. Following the stimulus of historic US policies, the 20% decline in panic has been basically corrected, with the remaining 20% Part of it needs to wait for the economic recovery after the U.S. actually resumes work, and it is expected that the rebound will continue after the third quarter.
’s view on crude oil assets. Based on current crude oil supply and demand calculations, Ding Luming judged that the reasonable price is US$20-25. Crude oil pricing after September this year is balanced and reasonable. Futures prices in November and December are above US$30, and there is uncertainty. In the short term, tight storage is the core factor in crude oil discounts. From the perspective of the Compo cycle, the historical Compo depression period was a period of low volatility in oil prices. However, low oil prices will lower inflation and the cost of interest rate cuts. From this, we can judge that the pace of interest rate cuts in China and the United States has not stopped.
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