has been three years since the outbreak of the new coronavirus. With the decline in the toxicity of the new coronavirus and the increase in the vaccine vaccination rate, many overseas countries have made adjustments to their epidemic prevention policies. Just recently, The State Council’s Joint Prevention and Control Mechanism released measures to further optimize epidemic prevention and control, proposing to prevent the epidemic while minimizing the impact on economic and social development and people’s livelihood service guarantee as much as possible.
Image source: Health Commission, Huaan Securities
National Bureau of Disease Control and Prevention stated in public that in the future epidemic prevention and control measures, if there are only sporadic infections in the local epidemic, the transmission chain is clear. When there is no risk of community transmission, the nucleic acid test for all members is generally not carried out according to the administrative region; when the epidemic is at risk of spread, the epidemic area can conduct a full member nucleic acid test once a day based on the risk assessment results. After nucleic acid tests are not found in for three consecutive cases, the nucleic acid test for all members will be conducted again within 3 days. No social infection can stop the nucleic acid test for all members.
With the structural adjustment of China's epidemic prevention and control policies, the focus in the field of epidemic prevention and control in the future will seek a balance in the fields of epidemic prevention and people's livelihood. What impact will the loose epidemic policy have on the social and economic side? From the perspective of investors, how should we think about the opportunities brought by changes in epidemic prevention policies?
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3 The rebound of the epidemic is inevitable, and the critical illness rate is the focus
First of all, it should be noted that the premise of adjusting the policy of COVID-19 prevention and control is not a compromise made due to economic damage, but a missed policy response to the epidemic, so adjustments need to be made. In fact, the COVID-19 pandemic has continued to the third year, and the toxicity and transmission of the virus and the public's immunity to the new coronavirus have changed significantly. Extensive vaccination of vaccines has reduced the infection rate, while mutation of strains has made the post-infection harm far less than before. In this regard, many countries have optimized and adjusted their epidemic prevention policies to adapt to changes in the virus.
However, when adjusted to the domestic market, the huge domestic population base has made its vaccination rate slower than other countries, and the imbalance in medical resources has also led to a more serious impact after blind release. According to data provided by the State Council’s Joint Prevention and Control Mechanism, China’s resources in intensive care units are far inferior to those in overseas countries, and there are also slight flaws in the vaccination level of the elderly population. Therefore, after the epidemic is liberalized, it is likely that the rebound in the number of infections will be inevitable.
There is a prerequisite for the relaxation of epidemic prevention and control, that is, the proportion of asymptomatic and mild cases is high, and there are few severe patients, which will not cause a run and paralysis of medical resources. At the same time, the government does not need to spend too much energy on prevention and control, which will help revitalize the economy and allow most people to return to normal life. The necessary condition for opening up epidemic control is that the severe morbidity rate of the new variant is low enough, and the municipal government can treat it as ordinary flu .
For example, as an "excellent student in epidemic prevention", Singapore began to continuously adjust its epidemic prevention policies and goals after one and a half years of strict epidemic prevention, and gradually embarked on the path of "coexisting with the virus". In April 2022, Singapore announced a series of management measures for the epidemic, including relaxing restrictions on social population, further relaxing cross-border travel restrictions, and reducing mandatory wearing of masks. With excellent medical resource diversion and control policies, as of now, the proportion of asymptomatic and mild cases in Singapore's latest epidemic data is 99.8%, 0.2% requires oxygen inhalation, 0.03% severe cases, and mortality rate is 0.02%. Under this premise, the impact of the epidemic can be suppressed to a minimum.
Referring to Singapore's epidemic prevention policy process, its relaxation speed is not achieved overnight, but is promoted based on a gradual and high vaccination rate. Before Singapore fully liberalized, its epidemic prevention measures have begun to gradually relax, and policy expectations have been made for the future.Although the reason for Singapore's liberalization is related to its socio-economic structure (there are many foreign workers and the vacancies have far-reaching impact on society), on the other hand, the policy adjustment and implementation of "small and few people" are relatively efficient.
In fact, after the epidemic prevention policies of the United States, Japan, the United Kingdom, Germany and other countries were completely relaxed, the number of new confirmed cases also rebounded to a certain extent, but the epidemic prevention policies did not tighten significantly. Therefore, the focus of this article will focus on the time after the domestic epidemic prevention policy is liberalized. On the premise that China's prevention and control policies are gradually being liberalized, what is the impact on macroeconomic ?
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3 Recovery of demand drives confidence, beware of the impact of labor shortage
Judging from the economic data in the past three years, strict epidemic prevention and control has had an impact on both supply and demand sides, but the focus is to be more inclined to constrain the demand side. Supply and demand are mandatory to ensure people's livelihood, but demand will decline due to travel restrictions and prevention and control policies. The demand for online industries can be said to be gradually generated because offline demand is restricted. Therefore, after the subsequent transition stage and the further relaxation of epidemic prevention policies, the rebound on the demand side may be the initial abnormal movement.
In terms of the scene, it can include all aspects from catering, travel to entertainment consumption. The rebound of large gatherings, entertainment consumption and exhibitions can drive travel consumption, and in turn drive the clothing, cosmetics and other industries. With the relaxation of epidemic prevention, the demand for home treatment, including social health, home preparation and medical consumables, will also drive the demand side.
For enterprises, the relaxation of epidemic prevention policies means a reduction in corporate operating restrictions and a decrease in epidemic prevention costs, and the risk preference of enterprises in has been significantly improved. As market confidence improves, investment growth rate will gradually improve during the transition period and will further increase in the stage of complete relaxation. For enterprises, overall investment confidence will be improved, and the improvement of corporate economy will drive the improvement of residents' current income and future income, further feedback on the growth of consumer demand.
At the same time, the relaxation of epidemic prevention policies will help support export demand, including relaxation of domestic logistics and production restrictions, increasing confidence in overseas buyers placing orders, and optimization brought about by convenient entry and exit control, which will help alleviate the pressure of export order outflow. After Singapore's relaxation, the year-on-year growth rate of exports in April-July increased to more than 20%.
But it should be noted that the relaxation of epidemic prevention and control may lead to a significant rebound in the epidemic and an increase in the base of the sequelae of the new crown. The impact still has large variables. It is true that with the high vaccination rate of the epidemic, the impact of the new crown (sequelae of the new crown) has decreased, but as mentioned above, domestic medical resources are not balanced. If a large-scale epidemic spreads in areas with shortage of medical resources, it is not impossible to cause the new crown base to increase and lead to labor shortage.
In fact, after the epidemic is relaxed, the labor participation rate of the United States has not returned to the pre-epidemic level so far, and the decline in labor rates has also triggered a cycle of US inflation- interest rate hikes -economic recession since 2022. my country's population base and density are different from that of the United States, but it has certain advantages in vaccination rates. Therefore, the slowdown in epidemic policies should be adjusted at any time according to the domestic situation to avoid falling into the quagmire.
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industry from point to surface, " bull market " is expected to gradually form
From the perspective of the stock market, with the relaxed supervision of the epidemic, the main line of consumption may rebound, but it may not be the main line. Because in the early stage of the relaxation of epidemic prevention and control, what drives the market is more about guiding confidence. Against the backdrop of the severe epidemic, no matter how relaxed the policy occurs, it is optimistic and favorable to market expectations, which will drive the stock price to rebound.The recovery of consumption data takes time to reflect, so in the fourth quarter of November, the consumer industry may not strengthen all the way, but will have differentiation and game attributes.
Medical consumption is an area worth paying attention to after the epidemic prevention and control is relaxed. Considering that the expected increase in influenza cases and the number of new crowns has been expected to rise after the precise liberalization of Singapore, Taiwan and other places, the recovery of medical services, influenza/new crown diagnosis and treatment and drug demand has been significantly boosted. Drug companies including cold medicines/new crown drugs, or medical services related to medical diagnosis and treatment and health care products, are expected to benefit in this scenario.
consumer electronics , automobiles and other high-end consumer products may not be able to rebound and recover after the relaxation. The factors affecting their prices are not only consumer demand, but also involve the problem of penetration rate in the semiconductor industry and the industry itself. The growth rate expectation and valuation repair may not lead to the rise of stock price .
Supply and Marketing Cooperative concept is a newly generated track since November. The concept of production, supply and marketing integration may become a substitute for the theme of rural revitalization, bringing significant improvements to the income and medium-term profit margins of related industries.
Infrastructure and utilities real estate industries may be driven by the growth rate of domestic social financing and investment within a period of time after the epidemic prevention and control is liberalized. With the improvement of market confidence, the investment growth rate gradually improved during the transition period, and new employment in real estate and manufacturing industries rebounded rapidly, while government investment in public facilities has declined significantly. At the same time, the strengthening of the infrastructure industry will drive the upstream materials industry to rise, and steel, materials, transportation and other fields are expected to improve.
Judging from the economic data and market performance of neighboring countries, the market is forward-looking for the economy, and the market bottom will be earlier than the economic bottom. In the early recovery process, there may be fewer industries/tracks that can be touched, but as the economic recovery drives the market upward, more and more sectors will be involved and a chain effect will be produced. The "bull market starting point" may be too early to say, but the marginal improvement of confidence and sentiment can bring sufficient benefits to the market.
