Pan Xiangdong： How will the epidemic affect the stock and bond markets？
Pan Xiangdong: How will the epidemic affect the stock and bond markets?
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Source: Macro of the New Era. This is Dr. Pan Xiangdong, Chief Economist of the New Era Securities. The conference call for investors on the evening of January 31, 2020 replaced the minutes.
Dear guests, friends, good evening!
First of all, I would like to say goodbye to you over the phone!
Today on the phone, I will analyze the impact of the upcoming new coronavirus pneumonia on the national economy and financial markets, and predict how the country will respond in the future. Of course, it will also provide investors with some operational suggestions.
The question involves eight aspects.
1. From the perspective of time and space, the impact of this epidemic on the economy is relatively large. Of course, most of us are not experts in public health and it is difficult to give our own opinions. But we went from Wuhan to the WHOSpecial attention must be paid to the characterization of the epidemic.
Many of us have experienced SARS in 2003. At that time, everyone was very nervous and very pessimistic. The five golden flower quotes that A-shares had at that time also died because of the emergence of SARS.
But in hindsight, I was worried about excessiveness at that time. The Chinese economy experienced only a small quarter of adjustment, and then sang along.
After this epidemic emerged, two views have now emerged. Those who have not experienced SARS are relatively pessimistic and those who have experienced SARS are relatively optimistic.
Everyone who knows how to invest knows that we often experience success and failure.
SARS appeared that year, but first-tier cities such as Beijing and Guangzhou were relatively nervous, and even Shanghai and Jiangsu and Zhejiang were not affected much.
It was once and twice that Hubei was affected. Except for Xinjiang, Tibet, Qinghai and other western provinces, the country suffered less. The other provinces and cities, whether urban or rural, were under strict control, and economic activity was almost half stopped.
From this perspective, future outbreaks will be effectively controlled.
From the perspective of time, it has been more than two months since the outbreak, and it is still in the intensive period of the outbreak of the population. From the public information available, individuals are expected to need a period of effective relief.
Therefore, from the perspective of time and space, the impact of this epidemic lasted for a long time and the coverage was wide. SARS is incomparable with this.
2. If the epidemic situation is controlled in this way, the impact on the supply side will be relatively limited. In China, the Spring Festival itself is a vacation season. Generally, adequate arrangements will be made on the supply side before the Spring Festival.
Therefore, even during the Chinese New Year, the impact of production on the control of population movements is relatively limited.
In the first quarter, there were two sessions after the Spring Festival. The north was still in the cold season, and production activities were not very active.
Judging from the composition of China’s GDP, the proportion of GDP in the first quarter was relatively minimal.
Although the proportion of previous consumption expenditures to GDP has increased, judging from the data, the extent of the passive increase in the first quarter is still relatively limited.
Of course, if the outbreak lasts longer, it will inevitably affect industrial production and construction.
Therefore, we need to pay close attention to the data changes in the coming week. If the supplementary diagnosed cases are effectively controlled and the trend will decline, it is expected that some factories and construction sites will enter production and resume work, then the impact will be relatively small.
3. The epidemic mainly affects the economy through the consumption sector. The proportion of consumption is significant. An increase in this proportion is a passive increase because investment has fallen rapidly.
During the Spring Festival, it is the peak consumer season.
In order to control the epidemic, from the information learned, the existing government’s control of the epidemic can be said to be unprecedented.
In some cities in the eastern and central regions, some communities have stopped allowing strangers to enter and leave, and some public transportation has stopped operating.
The people’s government in the rural areas also checked and restricted personnel step by step. The most active gatherings and gatherings during the Spring Festival in rural areas were banned by local governments.
Some tourist attractions, theaters and clubhouses originally belonged to the peak season this season, but they were closed to thank guests.
From the perspective of consumer psychology, these activities will gradually resume only when the epidemic situation is fully controlled and no new cases appear in some cities.
The impact on tourism, film, logistics, catering and other industries is expected to be relatively large, and these consumptions are lost, and it is difficult to make up for them.
4. The new coronavirus pneumonia epidemic has constituted a “PHEIC” (public health emergency of international concern), which has aggravated the impact of external demand on the economy. On the evening of January 30, WHO Director-General Tan Desai announced thatThe ongoing epidemic of new coronavirus pneumonia has constituted a “PHEIC” (public health emergency of international concern). The decision is valid for three months. In the event of a major change in the epidemic, the Director General has the right to hold an early meeting to lift the state of emergency.
This decision determines that it can bring more human, financial and medical resources to the expectation, and help to gradually improve and better fight the epidemic, but it also triggers countries’ restrictions on their travel, trade and international investment.
The Air Force WHO made five similar announcements, including H1N1 flu in 2009 (announced one month after the outbreak and was quickly controlled at the time), polio in 2014, and Ebola in West Africa in 2014.Zika virus in 2016 and Ebola outbreak in DRC in 2019.
Of course, Tan Desai also said that because “the Chinese government has taken very powerful measures”, “restrictions on international trade and travel are not currently recommended”, and the wording is relatively mild.
However, we must see that the United States and the United Kingdom have implemented controls on China’s flights. As a result, of course, in the short term, it will recognize that the Chinese economy has an external impact. Before it is cancelled, China will still face international travel, international trade, and international investment activitiesBasis and restrictions.
5. The current economy is fragile and the lethality of external shocks. In 2003, when SARS appeared, the Chinese economy had begun a new growth cycle since 1999, and it was in a period of acceleration and acceleration.
But now, the Chinese economy has been in the economic clearance cycle since 2008, and it is still in the most difficult period of clearance. Many companies have only one breath to support in the conflict.The number of defaults can be polished.If they are made worse by the impact of the epidemic, they are likely to fall.
Enterprises are not like engineering projects. Engineering projects can be postponed because of external forces.
This also shows that the longer the epidemic lasts, the destructive power will change, and the destructive power to the economy will show a non-linear characteristic.
If we must compare the same experience with history, we can consider the 1997 Southeast Asian financial crisis, when the developing countries’ economies continued to clear, and that round of economic clearing bottomed out in 1999.
6. Impact on the financial market If there is no effective policy tool hedging before the opening of A-shares next week, the impact on the financial market will be relatively large in the short term. After the Chinese New Year holiday on the 23rd, the A50 futures index 13910 will fall to 16:00 today.12830, down 7.
Observe the development of the epidemic after a short-term shock.
If there is a downward trend in suspected supplementary cases and complementary medical observation cases next week, the A-share market may form a middle bottom area.
If there is no effective suppression, then we need to look at our policy tools again. Without a lasting policy tool, the market will still be under pressure and seek a mid-term bottom.
Commodities will also be under pressure in the short term, and LME’s copper, aluminum, zinc, etc. have experienced long-term declines in the near future.
The trend of BDI also shows the interests of investors. From January 17th, it has fallen from 768 points to today’s 500 points, which has dropped by nearly 35%.
Due to the short-term pressure on the economy in the future, investors expect monetary policy to become accommodative, and due to the sharp contraction in demand, the pressure on prices will ease in the future, which will form a short-term positive for the bond market.
Therefore, for investors, if they are short-term operators, then the short-term trends still need to be observed. If they are medium- and long-term investors, this change can be ignored, and on the contrary, it will give everyone an opportunity to increase their investment.
7. The impact of the epidemic on A-share industries In the short term, the affected industries are mainly concentrated in offline consumption, catering, logistics, film and television, food and beverage industries, and many people are afraid to go out and consume because of the fear of the epidemic.Everyday consumption is simple at home.
These infringing industries will be lost in the short term, and there will be no deferred extensions. This is not like production, engineering construction, and consumption of durable goods such as housing. These are deferred and delayed, and the short-term epidemic will not worsen.They have the effect of cracks, and the epidemic situation will be resolved in the future. They can also make up by working overtime.
Therefore, the performance of these industries this year is expected to be affected by the impact of interference.
Of course, everyone does not go out, and it will have a positive impact on online consumption, software development and online entertainment, especially online games, hot videos (like vibrato).
Due to the emergence of the epidemic, biomedicine will have a positive short-term impact, and everyone’s understanding of health will also change. Therefore, the impact on this sector is medium and long-term.
Relative to the extent and duration of the impact of all these sectors, this depends on future data. When supplementary suspect cases and supplementary medical observation cases show a trending decline, these short-term shocks have already occurred.
So investors need to pay close attention to changes in these data.
8. The final policy proposal. In the face of external shocks, we feel that we can reduce interest rates as soon as possible, reduce the quota and issue special government bonds in 2008. The launch of the 4 trillion yuan in 2008 has been criticized by many people.The sequelae are “three poisons of medicine”, because the economy stabilized later, and there was no collapse, so all we see afterwards are the “three poisons of poison”.
The main reason for this is that it is difficult for economic operations to perform preliminary experiments in the laboratory.
Let’s think about it, what would happen if we didn’t do that?
Of course, it is controversial that the intensity of the operation can be not so great, which is all hindsight.
Many of today’s listeners are investing. When you look at the stock market trend afterwards, you can see it clearly and a lot of it can be explained clearly. But what about the future?
The only relief of this epidemic situation is that it provides policy space for our steady growth. Monetary policy can choose to cut interest rates and lower the quota as soon as possible.
Of course, interest rates have been reduced, and the pressure on fiscal repayments has eased, and the space for operation has also opened up.
After tax reductions of around 2 trillion yuan in 2019, coupled with continued economic downturn, fiscal pressure is distorted.
Judging from the budget goals of the two local congresses, the budget revenue growth rate has generally been reduced, let alone spending. Some provinces and cities have directly adjusted to negative growth. The central government has also called on everyone to prepare for a tight schedule, that is, to save expenses.
The tax cuts that were expected previously can drive the economic recovery, but it is not significant at present. Whether the Laffer curve is effective in China remains to be verified.
Of course, in response to this emergency, the central government may consider initiating the issue of special government bonds.
Due to the impact of African swine fever last year, meat prices have increased to varying degrees, and the CPI growth rate has continued to reach new highs. Due to constant concerns about the 北京夜网 impact of rising pork prices, monetary policy has maintained vigilance on prices in operation., Mainly through spicy powder (MLF) and wife meat (LPR) in small steps.
The emergence of this epidemic has greatly suppressed some consumption. As the supply was relatively well prepared a few years ago, the result is that the worry of rising prices will be lifted.
Relative to the Internet, some areas in Hubei have increased the prices of supermarkets due to restrictions on some commercial activities. This is only a temporary phenomenon in some regions. The increase in external supplies will ease the phenomenon of hoarding and prices will fall.
Since there is no need to worry about future prices, monetary policy can remain relatively aggressive, and interest rate cuts and RRR cuts can be considered as soon as possible.
The 杭州桑拿网 direct effect of cutting interest rates is to reduce the capital cost of enterprises, reduce the cost of debt of local governments, and provide strong confidence to both enterprises and financial markets.
Especially for the short-term, it will help to partially resolve the worries of financial markets brought by the epidemic.
Even if the interest rate cuts correct the real estate market and the foreign exchange market, which have undesired effects, we can consider suppressing them through administrative reforms. They cannot affect the overall situation of stable growth because of them. Moreover, from a medium and long-term perspective, only economic growth is stableIf we stay, the foreign exchange market can stabilize, and the real estate market can hope to maintain relative stability.