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Market Overview
US September PPI inflation increased beyond expectations, meeting minutes showed that Federal Reserve supports continuing interest rate hikes to limit growth level. On the eve of the release of the heavy CPI, Nasdaq rebounded again and failed, hitting a new low for more than two years in three consecutive days, and fell for six consecutive days with S&P , hitting a two-year low with chip stocks. The Dow Jones Industrial Average wiped out more than 210 points and turned to a decline. The U.S. dollar index continues to hit a high in the past two weeks. The minutes show that Fed officials support adjusting the pace of interest rate hikes, and the yield on the 10-year U.S. bond fell to a daily low. The Bank of England insisted on ending bond purchases this week but bought a large margin on Wednesday, with long-term British bond yields hitting a 20-year high and then repenting most of the gains. OPEC lowered its demand expectations, oil prices fell 2% for three consecutive days, the US government considered a complete ban on Russian aluminum, and London aluminum rose by more than 7%. The governor of the central bank reiterated that he maintained monetary easing, and the yen hit a new low in 24 years.
In the Chinese market, the Shanghai Composite Index returned to 3,000 points, ChiNext rose 3.6%, semiconductors and wind power surged strongly, and more than 4,500 stocks in the two markets were in red; Hong Kong stocks surged and fell, new energy vehicles and semiconductor stocks rose slightly, Tencent returned to HK$250.
Important News
The 20th National Congress of the Communist Party of China is scheduled to be held in Beijing on October 16, 2022.
Fed meeting minutes: It is necessary to continue to raise interest rates and reach restricted interest rates in the near future; many people believe that the cost of raising interest rates too little may be greater than that of raising interest rates too much; many people stress that it is important to regulate the pace of tightening in order to reduce the harm to the economy. The day before the announcement of
CPI, the US PPI, grew more than expected in September, and the Fed's expectation of another 75 basis points increase in interest rate hike in November; the Fed's former biggest dovish: the threshold for the Fed's interest rate hike is "very high".
US Treasury Secretary Yellen : Worrying that the US bond market will collapse due to lack of liquidity; admitting that interest rate hikes have global impact, the United States should prioritize controlling inflation.
The Bank of England announced that the bond purchase plan will still end this Friday, with long-term bonds falling sharply and yields hit a 20-year high in the session; the Bank of England rebounded after vigorously purchasing bonds, yields gave up most of the gains; the Bank of England's chief economist expected to take "major policy actions" in November.
html On March 3, the central bank governor reiterated that it maintained easing, with the yen hitting a 24-year low against the dollar, falling below the low level when the Japanese government intervened three weeks ago.South Korea restarted a 50-basis-point interest rate hike to defend the Korean won; when the stocks, bonds and foreign exchanges were killed three times, South Korea released a rescue plan and purchased 8 trillion won corporate bonds.
market closed at
US stock : Dow fell 0.1%, S&P 500 index fell 0.33%, and Nasdaq fell 0.09%.
European stocks: European STOXX 600 Index closed down 0.53%. Germany's DAX 30 index closed down 0.39%. The French CAC 40 index closed down 0.25%. The FTSE 100 index closed down 0.86%.
A shares : Shanghai Composite Index closed at 3025.51 points, up 1.53%, with a turnover of 306.9 billion yuan. The Shenzhen Component Index closed at 10838.48 points, up 2.46%, with a turnover of 401.7 billion yuan. The ChiNext Index closed at 2343.30 points, up 3.60%, with a turnover of 133.6 billion yuan.
bond market: When was closed by the U.S. stock market, the yield on the 10-year U.S. Treasury bonds was 3.90%, down about 4 basis points during the day. The two-year U.S. Treasury yield was 4.29%, down about 2 basis points in the day.
Products: WTI November crude oil futures closed down $2.08, down 2.33%, at $87.27 per barrel. Brent December crude oil futures closed down $1.84, down 1.95%, at $92.45 per barrel. COMEX December gold futures closed down 0.5% at $1,677.50 per ounce. International copper closed up 0.04% in the night trading, Shanghai copper closed down 0.05%, Shanghai aluminum closed up 0.97%, Shanghai zinc closed up 0.08%, Shanghai lead closed down 0.03%, Shanghai nickel closed up 0.42%, and Shanghai tin closed down 0.46%.
News details
Domestic macro
Communiqué of the Seventh Plenary Session of the 19th Central Committee of the Communist Party of China
Plenary Session decided that the 20th National Congress of the Communist Party of China was held in Beijing on October 16, 2022.
China Central Bank : Solidly carry out the pilot work of digital RMB R&D
Central Bank Digital Currency Research Institute issued a document pointing out that it will continue to promote the sustainable and healthy development of digital RMB business, support the advantages of digital RMB in the public fields such as finance, taxation, and government affairs, and provide advanced payment services for government digital and intelligent governance.
Ministry of Foreign Affairs: China-EU cooperation is rooted in a solid foundation of public opinion, with strong resilience and potential
Chinese Ministry of Foreign Affairs spokesperson Mao Ning said that China and EU are important economic and trade partners, and the cooperation between the two sides is mutually beneficial and win-win. Last year, China-EU trade volume exceeded US$800 billion for the first time, and the cumulative scale of two-way investment exceeded US$270 billion.
Domestic company
Yahua terminated its wholly-owned subsidiary and Canadian Super Lithium Company's equity subscription and mining rights investment matters
In the period when lithium prices were growing rapidly, Yahua Group chose to give up overseas lithium mine . Yahua Group said that based on its judgment on the current international environment, it is expected to have a greater impact on mining development, resulting in a longer period of mine development, and terminated the equity subscription and mining rights investment of Yahua International, wholly-owned subsidiary Yahua International and Canadian Super Lithium Company, which was previously decided on April 17.
Kweichow Moutai : Revenue in the first three quarters increased by 16.5% year-on-year, and net profit increased by 19.1% year-on-year
Kweichow Moutai issued an announcement stating that, based on preliminary calculations, the company expects to achieve total operating revenue of about 89.785 billion yuan from January to September 2022, an increase of about 16.5% year-on-year; it is expected to achieve a net profit attributable to shareholders of listed companies of about 44.399 billion yuan, a increase of about 19.1% year-on-year. Judging from the performance in the single quarter, Kweichow Moutai's revenue growth has accelerated, but its net profit growth has declined. According to the current progress, Kweichow Moutai still needs to achieve revenue of 36.1 billion yuan in the fourth quarter to achieve its annual target.
WuXi AppTec continued to accelerate month-on-month in the third quarter, and its revenue exceeded 10 billion for the first quarter
WuXi AppTec's revenue continued to accelerate month-on-month, and adjusted Non-IFRS net profit growth rate continued to exceed its revenue growth rate. The company expects revenue in the first three quarters of 2022 to be 28.395 billion yuan, an increase of 71.87% year-on-year; net profit of 7.378 billion yuan, an increase of 107.12% year-on-year; net profit excluding non-net profit of 6.232 billion yuan, an increase of 100.64% year-on-year; adjusted net profit attributable to shareholders of Non-IFRS was 6.772 billion yuan, an increase of 77.92% year-on-year.
Overseas macro
Fed meeting minutes: Restricted interest rates have been reached recently, and I am more worried about too little interest rate hikes. Many people stressed that the pace of adjustment is needed
Fed policy makers generally believe that interest rates need to continue to raise interest rates, and let interest rates reach a restrictive level in the near future, and then maintain this level. Many people stressed that even if the labor market slowed down, the stance of inflation should be maintained; many people stressed that the cost of raising too little interest rates may be greater than that of raising interest rates too much; many people pointed out that in order to reduce the harm to the economy, it is important to regulate the pace of future tightening.
The Fed's former biggest dovish: The threshold for the Fed's interest rate hike is "very high"
Next year FOMC voting committee member and Minneapolis Fed Chairman Kashkali said that the Fed has not seen much evidence that potential inflation is slowing down and there is still a long way to go before the turn; more likely, it will be suspended after the interest rate hike reaches more than 4%, and will remain at that high for a long time.
The US PPI in September increased by 8.5% year-on-year, and the Federal Reserve rose by 75 basis points, and
The US Producer Price Index (PPI) in September increased by 8.5% year-on-year, down from 8.7% in August, but higher than the expected 8.4%. The September PPI increased month-on-month for the first time in the past three months, an increase of 0.4% higher than the expected 0.3% expected by Wall Street . The PPI further heated the Fed's expectations of a 75 basis point rate hike in November, and it could provide some reference for the U.S. September CPI announced on Thursday.
US Treasury Secretary Yellen: Worrying that the US bond market will collapse due to lack of liquidity
Yellen said that the Treasury Department is working hard to support the US Treasury market. The core of the current problem is that the balance sheet capacity of market makers engaged in US Treasury trading has not expanded much, while the overall supply of US Treasury bonds is rising.
The Bank of England announced that the bond purchase plan will still end this Friday, with British bonds falling sharply, and long-term bond yields hit a 20-year high in intraday; British bonds rebounded intraday after vigorously intervened in bond purchases; Bank of England chief economist: "major policy actions" are expected to be taken in November meeting
A spokesman for the Bank of England said that the bond purchase plan is still scheduled to end this Friday. The 30-year British bond yield rose above 5% intraday. Analysis pointed out that financial stability takes precedence over all other targets, and the Bank of England may have no choice but to continue to support the UK Treasury market and postpone its quantitative tightening plan.
The Bank of England purchased a total of 4.56 billion pounds of bonds on Wednesday, the highest scale in a single day since the intervention was launched at the end of September.
BoE chief economist Huw Pill expects “significant” changes in UK interest rate policy next month to deal with the UK government’s fiscal plan. The UK government's "growth plan" and its support for the home and business energy bill will increase inflationary pressures in the medium term.
The UK economic data was sluggish on Wednesday, with recession warnings. The economy unexpectedly shrank in August, and industrial output slipped into negative territory.
The UK pension crisis has spread to the U.S. junk bond
The impact of the UK financial market crisis has hit a distant corner of Wall Street - the trillion-dollar mortgage securities market. The transaction size of pension and insurance companies' most commonly held CLO bonds has been around $13 billion in the past three weeks, reaching the highest level since the outbreak of the epidemic in 2020, with CLO prices falling to their lowest level since May 2020. Although it has barely stabilized, the pressure on selling has not diminished.
ECB Governor Lagarde insists that euro zone has not fallen into recession, and the wage situation avoids further boosting inflation
ECB Governor Lagarde said on Wednesday that the euro zone economy is still growing, such as factory data, which shows this. Europe may benefit from the cardinality effect in March next year. The current unemployment rate is the lowest ever. Wage growth has so far avoided the so-called secondary effect, which could threaten inflation and put high inflation at a high level for longer periods of time.
South Korea restarted a 50 basis point interest rate hike to defend the Korean won; when the stocks, bonds and foreign exchanges were killed three times, South Korea's rescue plan was released, and 8 trillion won to purchase corporate bonds
In order to defend the Korean won and calm inflation, the Bank of South Korea chose to restart a 50 basis point interest rate hike. The Korean Financial Services Committee immediately issued the rescue plan, preparing to launch the stock market stabilization fund, expand the corporate bond support plan to 8 trillion won, and plans to provide liquidity support in the foreign exchange market to stabilize the domestic financial market. In addition, South Korea is also studying a plan to ban from short selling .
yen hit a 24-year low against the US dollar during the session, falling below the September intervention level. The market is concerned about whether the Japanese government will take action again
Currently, traders regard the high of 147.66 in 1998 as the next key point of intervention. But some strategists said that the Bank of Japan may not intervene again, and the downward speed of the yen exchange rate will become the focus of attention.
OPEC Monthly Report: Economic uncertainty intensifies, sharply lowering oil demand expectations
OPEC significantly lowers the outlook for oil demand, citing global economic growth slows down and risks tend toward a downward trend. OPEC also expects crude oil demand will not exceed current levels by the fourth quarter next year.
Putin : Russia is still preparing to fulfill its contract to supply energy, and the EU side
Putin said that Europe may lose more than 300 billion euros due to the spot pricing mechanism of natural gas; it is possible to repair the "North Stream"; a branch line of " Nord Stream-2" is still in working state, and Russia is still preparing to fulfill its contract to supply energy.
Overseas companies
Pepsi continues to raise prices to cope with inflation, and Q3 revenue is better than expected, and the performance expectations are raised again
in the third quarter, Pepsi revenue is higher than market expectations, an increase of 8.8% year-on-year, thanks to the average product price increase of 17%. Net profit was US$2.7 billion, a year-on-year increase of 21.5%. Pepsi said that even with the increase in product price, its gross profit margin also declined in the quarter.
Microsoft launches new Surface devices: Pro 9 tablets are available for 5G, Laptop 5 battery life is up to 17 hours
Surface Pro 9 and 13.5-inch Surface Laptop 5 start at $1,000, and desktop Surface Studio 2+ start at $4,300. All three products are equipped with Microsoft Windows 11 operating system launched last year.
Industry/Concept
1, Flying Cars丨According to reports, Xiaopeng Huitian Flying Automobile Voyager X2 recently completed its first public flight overseas in Dubai . This is the first public flight display locally after the Dubai Civil Aviation Administration issued a license for X2. The Voyager X2 is the fifth generation flying car independently developed and manufactured by Xiaopeng Huitian. The X2 adopts a closed cockpit. In order to achieve light weight, the entire fuselage of the X2 adopts a carbon fiber structure and can carry two passengers. It is suitable for low-altitude flights in future cities, meeting the needs of short-distance travel in cities, and can also serve outdoor rescue, medical transportation and other scenarios.
Comment: As an option for future urban transportation development, the complementary between flying cars and ground transportation will play a positive role in alleviating congestion and improving travel efficiency. In March this year, the Ministry of Transport issued the "Outline of the Medium- and Long-term Development Plan for Scientific and Technological Innovation in the Transportation Field (2021-2035)", which mentioned that it is necessary to deploy the research and development of flying cars, break through technologies such as the integration of aircraft and automobiles, and free switching between flight and ground driving, in order to seize the initiative in the development of cutting-edge equipment. According to Morgan Stanley , the global flying car market size will reach US$300 billion in 2030 and will surge to US$1.5 trillion in 2040.
2, shipping丨According to reports, a battle for ships is underway as Europe rushes to stockpile gas to ensure winter supply, and on Tuesday, liquefied natural gas (LNG) ship freight rates hit a record high. The cost of leasing an LNG ship in the Atlantic basin now jumped to $397,500 a day, surpassing the record high set last year, according to ship broker data collected by Spark Commodities.
Comment: LNG shipping costs have soared since the outbreak of the Russian-Ukrainian conflict. Russia has cut off most of the natural gas supply to Europe. Europe is now seeking to import more liquefied natural gas to replace Russia's pipeline natural gas, and North Asia is also preparing for winter. As the hoarding wave continues in various countries, LNG shipping costs are expected to continue to soar.
3, solid-state battery 丨According to reports, NASA (NASA) announced that its researchers are carrying out the SABERS (improving the charging efficiency and safety of solid-state battery) project, and have achieved very good results, developing a power battery with an energy density of 500Wh/kg, with an energy density of more than twice that of the Hyundai electric vehicle battery.
Comment: Solid-state batteries are considered to be the most promising new generation of power lithium battery because they can fundamentally improve the energy density and security of the two core performances.
4. Digital People | The People's Bank of China Digital Currency Research Institute issued a document on the 12th stating that it supports the advantages of digital RMB in the public sectors such as finance, taxation, and government affairs, and provide advanced payment services for government digital and intelligent governance. Realize the interconnection between the digital RMB system and traditional electronic payment tools, so that consumers can "scan the code with one code".
Comment: As a major innovation and upgrade of the central bank's monetary payment system, one of the prominent aspects is programmability, and customized payments are achieved by loading smart contracts. Digital RMB smart contracts have been successfully applied in areas such as consumer red envelopes, government subsidies, retail marketing, and prepaid fund management. Anxin Securities Zhao Yang believes that the digital RMB is not only a technical means to deal with the SWIFT system in cross-border payments, but its essence is to meet the daily payment needs of the public, further improve the efficiency of the retail payment system, reduce the retail payment costs of the whole society, and create more application scenarios and needs.
5, photovoltaic | According to media reports, some provinces have issued the third batch of relevant documents of the Winter and Winter Base, all requiring the project to start construction before the end of this year and no later than the first half of next year, and be connected to the grid before the end of 2024.
Comments: China Securities believes that the fourth quarter has entered the peak season for photovoltaic installation throughout the year, and demand mainly based on domestic large bases is expected to increase significantly, and the industry will enter an upward channel for prosperity. From the supply side, the production capacity of 250,000 tons of polysilicon that was put into production in July has gradually been full, and 160,000 tons of polysilicon has been added from September to October, and it is expected that the output of silicon materials in the fourth quarter will be 270,000 tons, an increase of 35% month-on-month. At present, the prices of the industrial chain are basically supported by the upward demand that can be supplied by silicon materials. The subsequent release of silicon materials and the decline in industrial chain prices are inevitable events. As long as the investment yield meets the requirements, photovoltaic demand is expected to be continuously stimulated.
6, Information Innovation | Recently, Shanghai Stock Exchange focuses on key areas such as new generation information technology, high-end manufacturing, and technological innovation, and guided CSI Index Co., Ltd. to release and optimize 13 indexes including Shanghai Stock Exchange Information Security, Shanghai Stock Exchange Infrastructure, Shanghai Stock Exchange Elderly Care Industry, focusing on serving the national strategy in multiple dimensions to better meet the needs of medium and long-term fund allocation.
Comment: my country has proposed to build a national security system including 11 major categories such as information security. Pacific Securities believes that from an industry perspective, various institutions have accelerated their bidding and put forward localization requirements for bidding products. From the company level, various information and innovation companies have won bids and adapted domestically. As the absolute core of the information and entrepreneurship industry, IT infrastructure is still low at the current penetration rate of , and the growth rate is expected to be relatively fast. From the perspective of overall size, application software may be the largest information innovation link in the market.
Today's News Preview
- US September CPI.
- Number of people applying for unemployment benefits for the first time last week.
- Germany September CPI final value.
- U.S. EIA crude oil inventories last week.
- IEA released its monthly crude oil market report.
Master Class New
Recently, the policy of stabilizing real estate has been continuously strengthened. At the end of September, three real estate policies have been successively released. First, the lower limit of interest rates for first-home mortgages is temporarily relaxed, the second is to reduce the scale of personal income tax related to house transfers, and the third is to lower the interest rate for first-home housing provident fund loans by 0.15 percentage points. This is another national relaxation policy since the real estate relaxation cycle from 2014 to 2016.
The recent changes in real estate policies have on the domestic economic trends and even the bond market. The trend of long-term interest rates in the bond market is greatly affected by economic fundamentals. Will the combination of real estate policies take positive effects on economic fundamentals and thus enhance the trend of long-term interest rates? In this course, we invite Long Hongliang, a big name in securities companies, to analyze the following issues. Welcome to join in the study!
- Under the interest rate transmission mechanism, what factors affect the short-end and long-end trends of macro interest rates?
- What impact will the real estate policy concentrate on and what impact will it have on the bond market?
- How to establish a credit analysis framework for credit bonds?
course guest [Long Hongliang] head of securities asset management, doctoral student, CFA
Teacher Long has many years of investment and practical experience in fixed income field, and has authored two excellent works on bond investment research methods: "Bond Investment Practice" and "Bond Investment Practice 2". In this course, he will absorb the essence of the book, change the latest bond investment cases, investment research thoughts and experiences, and find the paradigm and driving logic of the rise and fall of bond market yields by taking us back to the changes in the Chinese bond market over the past 20 years. Looking forward to your joining!
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