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Fang submitted 2020-02-24 20:41:29

First, same as SARS, the negative impacts of the new coronavirus pneumonia epidemic on the shipping, warehousing, postal, the accommodation, catering, and other service industries are the most obvious. Assuming that the GDP of other industries remains stable in the first quarter of 2020 and the decline in the GDP growth rate of the above industries is consistent with the SARS epidemic, the new coronavirus pneumonia epidemic will drag down the GDP growth rate by 0.9 percentage points in the first quarter of this year, and the year-on-year growth rate of GDP in the first quarter will significantly decline to about 5%. Second, the impact of this epidemic on the level of total demand may be consistent with the characteristics of the SARS epidemic, that is, consumption demand has contracted the most. But unlike the SARS epidemic, current consumption is the ballast stone of the Chinese economy. In 2019, the final consumption expenditure contributed 57.8% to economic growth and the total capital formation contributed 31.2%, while they respectively contributed 35.4% and 70% in 2003. Therefore, from the perspective of the overall demand, the impact of the new coronavirus pneumonia epidemic on economic growth may be greater than the SARS epidemic. Third, from the affected areas, the epidemic is significantly less than the SARS epidemic. During the SARS period, the provinces with more than 100 diagnoses included Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia, and Guangdong. The above six regions accounted for 25.9% of the GDP of the year, but this time, the economic scale of the main epidemic area Hubei accounted less than 5% of the country. Therefore, from the perspective of the affected areas, the impact of the new coronavirus pneumonia epidemic on the national GDP may be less than the SARS epidemic. In short, the new coronavirus pneumonia epidemic will adversely affect the short-term Chinese economy, and the major affected industries in the early stage are concentrated in the service industry. The final impact of the epidemic on the economy depends on the duration of the epidemic. If there is a peak of new cases next week, the impact may be relatively affordable. The final impact also depends on the first-level response of the provinces in the country to prevent and control the epidemic, which has no precedent to follow. The disadvantage is that the SARS epidemic occurred in the rising cycle of China's economy, and the new coronavirus pneumonia epidemic occurred during the downward economic cycle, which may amplify the negative impact caused by the epidemic.

After the short-term market adjustment, the market risk premium returned to high levels again. In the medium and long term, the impact of the epidemic is only a disturbance. After the epidemic has calmed down, the market will still return to its own logic. Policies continue to be loose, and countercyclical adjustments are strengthened, and medium and long-term funds continue to enter the market. With the gradual easing of the epidemic, the risk appetite is expected to enter a period of repair, and the market may step out of the golden bottom and start to rebound. The triple driving force will lead the growth sector of science and technology to take the lead out of adjustment: 1) Risk appetite drive: Refer to the 2003 SARS epidemic. When the epidemic eases the market rebound, risk appetite is the main line of the market, and TMT has become the main force of the rebound, and the return has far exceeded the market. It is believed that when the epidemic eased gradually, the repair of risk appetite will also lead to the growth sector of technology to obtain significant excess returns. 2) Driven by liquidity environment: The recent supervision authority continues to release warmth and clearly protects the physical and capital market markets. With abundant liquidity, the technology growth sector has also benefited even more. 3) Prosperity-driven: On a fundamental level, technological growth also has strong support and prosperous advantages. Over all, although the current A-share market is undergoing drastic adjustments, we believe that the index is showing a golden bottom. From the perspective of risk premium, it has already moved to a position with a very high medium and long-term safety margin. When the epidemic eases and the market rebound, the growth sector of science and technology will be the first to go out of adjustment and rise again.

There are two main reasons for improving risk appetite before the holiday. The first is that the economy bottoms out and the second is that monetary policy is expected to be loose. The epidemic weakened the former and strengthened the latter. The technology industry prevailed previously, and the impact of the epidemic was only a short supply-side contraction, which did not change the logic of the strong sector. On the whole, under the impact of the epidemic, it has an enhanced effect on the comparative advantage of the technology sector. The evolution of the market may be divided into three stages: 1) Emotional shocks. valuations are generally under pressure, and strong stocks, cyclical stocks, and unrecoverable consumer stocks after demand restraint have a greater impact. It is advised to pay attention to medicine, utilities, gold, and computers (online education, teleconferencing) and games sectors during this stage; 2) The epidemic is improving and policy is expected to be loose. 5G, consumer electronics, new energy and other technology sectors are expected to dominate the style; 3) epidemic calming and policy easing is expected to heat up. Financial, real estate delivery and necessary consumer goods sectors are expected to follow the rise.

There are some positive points that can be seen from the logic, valuation, and trading levels. (1) The logic has not been destroyed: The logic that downward discount rate will drive the bullish market on the financial supply-side has not been destroyed by the epidemic, and some "daily additions" data of inflected or suspected diagnosis and medical observation turned downward. (2) Valuation is supported. The current relative returns on stocks and bonds are high, and stocks outperform debts. Before the slump on February 3, the overall valuation of A-shares was generally reasonable, and it was cheaper after the slump. The volatility of risk appetite is greater than the fluctuation of corporate profit expectations and interest rates, and now the epidemic is progressing steadily and the market response is gradually passivated. (3) Trading liquidity has eased significantly. The market liquidity was shocked on February 3, and the trading liquidity eased significantly in the next two trading days with enlarged trading volume, the decreasing number of companies on the limit stop, and the negative basis of the futures index converged. In addition, medium-term and long-term funds of northward funds, insurance and public funds has been allocated at the bottom, which helps stabilize market confidence.

The economic data of January was not greatly affected by the new coronary pneumonia. The most important interference factor is still the misalignment of the Spring Festival. The impact of the epidemic on economic activity will be concentrated from February. The weak recovery of economic fundamentals was temporarily interrupted by the new coronary pneumonia, but after the epidemic, economic activity will inevitably have a compensatory recovery. The uncertainty lies in the speed and extent of recovery, which is related to the control of the epidemic, the effect of policies during the epidemic, and the intensity of policies after the epidemic. If the epidemic situation is effectively controlled after mid-February, the hedging of the policy during the event is appropriate, and the demand for the post-event policy is moderately expanded, it can be expected that economic activities will recover faster. According to the information from all aspects, the probability of the epidemic being effectively controlled in the first quarter is the greatest, so the economic fundamentals are expected to gradually recover in the second quarter, and it may take around mid-year to fully return to the right track.

In January, the CPI rose by 5.4% year-on-year to 0.9%, and the PPI rose 0.1% year-on-year to 0.6%. Pork is still the core pricing variable of CPI this year, but the new coronavirus pneumonia will undoubtedly affect the rhythm judgment. The impact of the epidemic on CPI has structural characteristics, that is, the surge in stockpile demand and the short-term supply shortage of commodities have greater pressure on short-term price increases, but the overall inflation is dragged down by domestic demand, and the downward rhythm may accelerate. The epidemic caused high pressure on fresh vegetables in CPI foods and medical care in non-foods, but the impact was short-lived. Aggregate demand has been greatly impacted by the epidemic, and repair has been slower. The downward pressure on CPI non-food has increased. The high point of CPI may have passed this year. In the first half of the year, the food price remained high due to pork price constraints, and the non-food price constituted a pull-down factor. The CPI fell below 3% mar appear earlier than mid-year. In the second half of the year, the food price will fall rapidly due to the year-on-year drag on pork prices. The non-food price may remain weak, and CPI may present deflation risks. The epidemic situation may cause the pace of PPI to be interrupted and return to deflation. The epidemic has a major impact on industrial production and transportation, which in turn has a significant impact on industrial product prices. Affected by the epidemic, the domestic economy is stabilizing or "pressing the pause button", the global economy may also be dragged down, industrial destocking may be turned into passive restocking, and excess capacity will appear. In the short term, there are also obstacles to the return of migrant workers to infrastructure construction. On the whole, the pace of the rise in PPI was temporarily interrupted by the epidemic situation, or it was again tested in the deflationary interval. It is expected that the PPI will turn negative again in February, and downward pressure will increase in the short term, but it is expected to stabilize as the epidemic subsides, and it will be repaired quickly as the economy's retaliatory rebound and countercyclical policies increase.

For the A-share market, it is recommended to pay attention to the repair opportunities in some sectors after the epidemic, and focus on following two main directions. After the epidemic, domestic demand gradually stabilizes and picks up, and at the same time, companies resume work and resume production, and improved supply and demand may drive cyclic stocks repaired. Judging from the average daily coal consumption of power generation enterprises and the blast furnace operating rate of iron and steel enterprises, the epidemic has caused industrial enterprises to generally delay production, and it is expected that the extension may continue for about two weeks. 2020 is the decisive year for the moderately prosperous society, in order to mitigate the negative impact of the epidemic on the macro economy, there has been a demand from government departments to stabilize the economy after the epidemic. With the subsequent introduction of counter-cyclical hedging policies, cyclical industries such as steel, building materials, chemical, and machinery may be repaired. After the epidemic is over, consumer demand that was restrained in the early stage may meet explosive growth, and the recovery in demand will drive consumer companies' profit and cash flow to improve. Especially for service-oriented consumer industries such as movie, aviation, catering, tourism, commerce and trade, it is believed that the impact of the epidemic is only that consumers have postponed consumption, and as the epidemic ends, consumer demand will still be released intensively. Take the film industry as an example, the box-office revenue during the Spring Festival in the past years have shown explosive growth. For example, the box-office revenue during the Spring Festival in 2019 is as high as 5.8 billion. Affected by the epidemic this year, the box-office revenue during the Spring Festival film was only 6.4 million. However, after demand is suppressed for a short period of time, service-type consumer demand such as movies will remain explosive growth after the epidemic is over.

In the face of the impact of the epidemic, what will the policy do? We believe moderate monetary easing is inevitable, and subsequent attention will be focused on infrastructure construction and emerging consumption potential. First, From the perspective of the three horse-drawn carriages that drive the country's economic development, exports originate from external demand. Although the economic environment of developed countries has improved compared to last year, internal resumption of work still brings uncertainty to export growth. From the perspective of consumption, the epidemic has severely hit some tertiary industries, and business, tourism, catering, and entertainment have been significantly affected. From the perspective of investment, newly added private investment is also closely related to the development of the epidemic and the recovery of demand. The focus of the policy lies in the demand driven by the government's purchase. In fact, aside from the epidemic situation, infrastructure investment was already a definite option in 2020. The epidemic situation has played a catalytic role. After resuming production, the infrastructure-related industries will accelerate and accelerate, and the building materials, machinery, and construction industries are expected to have a concentrated boom. Second, consumption potential of the emerging market is an important option for consumer content. This year is a year of 5G construction. The information infrastructure construction and electronics consumption demand around 5G are highly certain. Although the epidemic has brought about a full impact on demand, such demand will only lag behind and will not be absent, especially for the policy on steady growth, and it may have a certain promotion and acceleration after the epidemic. Therefore, key enterprises in the communications, electronics and computer related industries will continue to benefit.

Most of the current valuations of various sub-sectors of growth stocks are at historical averages around. After excluding the goodwill-impaired companies from the 2018 annual report, the relative valuation of GEM is near the historical average. Since 2010, the valuation of GEM relative to CSI 300 has only broken through the average twice and continued to expand (in mid 2013 and early 2015). In 2013, growth stocks had both relative performance advantages and improved risk appetite. The 4G-based science and technology and M&A cycle started, and continued to optimize the growth stock risk appetite. Not only hedging the liquidity tightening caused by the "money shortage", but also further improving earnings expectations for growth stocks. In 2015, growth stocks also had relative performance advantages, and liquidity was looser than expected. In terms of monetary policy, 4 interest rate cuts and 6 reserve requirement ratio cuts, as well as additional funds through financing in the field and over-the-counter market brought into the market driven growth and expansion of valuations, and even triggered a "bubble." Meanwhile, the "funds from the virtual to the real" has also indirectly improved the liquidity environment of growth stocks. In 2020, growth stocks are expected to have a relative performance advantage over the CSI 300. The epidemic will drag down the profit growth of the main board to a certain extent, but will strengthen the profit advantage of counter-cyclical growth stocks. The epidemic will advance and strengthen the time and intensity of loose monetary policy.. It is expected that the science and technology innovation and M&A cycle represented by 5G and monetary policy will become the key variables for the growth valuation to continue to expand in 2020.

The impact of locust plagues on food prices depends on the magnitude and scope of the disaster. When the disaster reaches upsurge or plague stage, the risk of global agricultural product price rises greatly. Historically, each time the locust plague reaches the plague stage, it will cause a sharp rise in international food prices. For example, during the most recent (March 1986 ~ June 1989) disaster between March 1986 and June 1989, the price of grains increased by 21.2%, and the price of food increased by 6.9%. During the three locust climaxes of 1972 to 1973, 1992 to 1994, and 1994 to 1996, the CRB Cereal Price index rose by 45%, 6.9%, and 27.5%, respectively, which were higher than the CRB Composite Index's rise over the same period (26.1%, 5.3%, and 13 %). Due to the small volume of food exports, the locust plague broke out on both sides of the Red Sea between 1996 and 1998, which mainly affected Saudi Arabia, did not have a substantial impact on global food supply. But the financial crisis in Southeast Asia has hit the global demand significantly, and CRB cereals plunged 40.5%, and the CRB composite index fell 6.2%. From the perspective of global asset allocation, what might this locust disaster mean if it continues to be upgraded on a large scale? 1) First of all, higher agricultural prices and inflation expectations. 2) Higher inflation expectations may disturb expectations of liquidity easing. 3) The liquidity expectation disturbance brings potential volatility risks to equity assets that are currently at relatively high valuations and sentiments. If the subsequent disaster situation continues to upgrade on a large scale, it is recommended to pay attention to the risk hedging value of assets such as globally priced agricultural products, inflation-protected bonds, gold and VIX.

The new policy on refinancing will be the starting point for the diffusion of technology boom. First, in the short term, for the market, it may be different from when the draft of refinancing policy was released in November last year. At that time, the market risk appetite was extremely low. The market sentiment immediately reflected the increase in stock supply, so there was a short-term decline in A-share market. However, the current market environment is that excess liquidity has pushed up risk appetite, and short-term sentiment may reflect more positively on small and medium-sized stocks and securities firms. Second, the core factor that determines outbound M&A is the industry cycle itself (determines the willingness of the company to acquire), and regulatory policy is a secondary factor. However, 2020 happens to be a period in which the technology industry cycle and financial regulatory policy cycle overlap with each other. After 19 years of steady recovery, outbound M&A is expected to begin to exert momentum. Third, small and medium-sized companies in the technology sector have almost no chance from 2016. The industry cycle has been down, and financing and merger and acquisition policies have been tightened. Eventually, the prosperity has fallen for three consecutive years. Beginning in the second half of 2019, with the resonance of the global cloud service, semiconductor, and 5G industry cycles, not only head companies, but also small and medium-sized companies can enjoy the bonus, and the prosperity of the technology sector will spread with emerging M&A and financing policy. Fourth, not all small companies can rise indiscriminately. The current liquidity environment, market size, and investor structure are significantly different from that in 2014 and 2015. Considering that the market has undergone a round of merger and acquisition feasts turning into a mess, only a part of SMEs will have a better performance. Fifth, considering that it takes a period of preparation time from the relaxation of policies to the issuance of additional issuances, a preliminary prediction of the scale of private placement in 2020 may be about 1 to 1.2 trillion yuan. In this case, the market's stock supply will undoubtedly increase, forming a certain pumping effect. Combined with the overall measurement of capital, for 2020, the overall judgment is still a structured market or a bull market for a few companies. However, the bull market driving force of “a small number of companies” is already switching from consumer sectors to the technology industry cycle. At the same time, the technology stocks in a small number of companies will also spread the prosperity of the industry.

The new refinancing policy is looser on ChiNext. The restriction on the asset-liability ratio higher than 45% at last reporting period has been cancelled. As for the use of raised funds, the restrictions that previous raised funds shall be basically used up and the use of progress and effects are basically consistent with the disclosure has been cancelled. And ChiNext listed companies in private placement has lifted the two-year profit limit. The impact of the new refinancing policy on ChiNext is the most flexible. The private placement scale of the main board accounts for about 80% of the total size of A shares, and that of the small and medium-sized boards accounts for about 15%, and that of ChiNext accounted for about 5%. In 2015, the growth rate of the private placement scale of ChiNext was the highest, which corresponds to the relaxation of the policy in 2014. This policy easing is expected to have a relatively large elasticity of the growth rate of private placement scale of ChiNext. After the easing of this policy, the model of external performance increase is expected to repeat in A-shares. In 2013, the private placement scale of ChiNext has increased explosively. The scale has increased by 3.8 times in 2014, and in 2015, the scale has increased by 2.3 times, and it has increased by 40% in 2016. Along with this, the performance of the ChiNext has increased significantly, and profits of companies involving M&A accounted for 70% in the first quarter of 2016, and the net profit growth through M&A was 43%. This time, the easing refinancing policy is expected to repeat the story, and the private placement scale will return to growth, and the model of external performance increase is expected to repeat in A-shares.

On February 20, a new round of LPR (Loan Prime Rate) quotations was announced. The LPR for one year was 4.05%, a 10bp reduction from the previous month; the LPR for over five years was 4.75%, a 5bp reduction from last month. First, the one-year LPR interest rate is reduced by 10bp, which is the largest adjustment since the reform of the LPR pricing mechanism, and reflects the "downgrade of the entity's financing interest rate" in the counter-cyclical policy portfolio. Due to the MLF interest rate adjustment first, the LPR reduction is equivalent to the 10bp MLF interest rate reduction on February 17, which is in line with market expectations. Second, the five-year LPR interest rate was reduced by 5bp, which was slightly more than expected. The 5-year LPR is the benchmark for mortgage rates, and this operation shows that the policy is moderately stable and guided by real estate demand. As of the 18th, real estate transactions in 30 cities have been in single digits (units of 10,000 square meters) for 27 consecutive days, which was usually 7 days during the Spring Festival holiday in the past. It is simply calculated from this data that if March to December is flat last year (0 growth), the annual growth rate of transactions in 30 cities will be -5.7%. It can be seen that the current real estate sales pressure is greater. And the sales link will affect real estate investment through sales repayments, and further pass on FAI and macro aggregate demand. Therefore, it is necessary to keep the demand-side expectations stable. Third, the reduction of 5bp of five-year LPR shows that the marginal adjustment of policies has been restrained; and the five-year LPR adjustment will not immediately pass to the existing mortgage interest rate and will not significantly stimulate real estate demand, which is in line with the policy “housing is for living in, not for speculation”. Fourth, LPR has been adjusted downwards following the MLF, showing that the policy rate MLF is relatively effective in transmitting to LPR interest rates. Corresponding to the central bank's column discussion on the profit of commercial banks in the currency execution report, "appropriately reducing the excessive demand for short-term profit growth, giving up some profits to the real economy, and smoothing the virtuous cycle of economic finance". Judging from the current situation, the market expectation that the benchmark deposit interest rate reduction is not urgent and short-term necessary. Fifth, overall, monetary policy not only maintains the positive characteristics of stabilizing aggregate demand in the context of the epidemic, but also strives to achieve a "scientific management of the total amount." This is the main line for us to understand the characteristics of monetary policy at this stage.

The epidemic has not prevented the enterprise’s long-term loans scale from improving significantly, which led to a record of newly increased loans. Newly increased loans in January were 3.34 trillion yuan, slightly higher than the expected 3 trillion yuan, and the year-on-year increase was 100 billion yuan, indicating that the epidemic situation and the Spring Festival holiday did not affect the pace of corporate financing activities at the beginning of the year. Among them, the newly increased medium and long-term loans of enterprises were 1.66 trillion yuan, an increase of 260 billion yuan year-on-year, continuing the trend of improvement and expansion since the second half of 2019; on the basis of a high base, the newly increased short-term loans of enterprises still increased slightly by 21.6 billion yuan year-on-year; medium and long-term loans for residents increased slightly by 52.2 billion yuan year-on-year and continued the trend since 2019, reflecting the temporary impact of the epidemic on real estate sales has not yet been reflected in January; and under the advancement of the Spring Festival and the epidemic in late January, the monthly increase of short-term loans for residents was slightly negative, which was a year-on-year increase of 400 billion yuan. Financial data in January generally showed strong characteristics of strong medium and long-term financing. The medium and long-term loans of enterprises increased by 260 billion yuan year-on-year, and the issuance of special bonds in advance pushed up the increase in financing scale of government bonds by nearly 600 billion yuan year-on-year. Such a financing structure may ease the market's concerns about the constraints of the investment chain on corporate investment after the resumption of work. At the same time, in addition to the special bonds of 290 billion yuan in advance, and various regions have also introduced measures to help real estate companies improve financing and avoid capital chains tension, it is expected that corporate investment will improve significantly after the resumption of work. At the same time, in January, affected by the epidemic, the short-term loans for residents and the short-term repayments of companies presented by M1 data were at a relatively low level. Attention on to the schedule of resumption of work and the resilience of the subsequent consumption of residents may have a strong indication on observation cash flow of service companies such as catering and the activity of short-term loans for residents.


After the outbreak of the epidemic, the market is full of toughness, and the technology growth sector has rapidly rising. The core lies in the weakening of the "herd effect" of private investors and the strengthening of institutional investment which has become the assurance of the A-share market. The biggest opportunity and change in the A-share market in the future lies in the increase in the proportion of equity allocated from residents' funds, which changed from direct shareholdings to indirect allocations such as funds, insurance, and wealth management. Institutional investment will continue to increase and strengthen.

It is particularly noteworthy that funds have become an important channel for residents to enter the market and an important support for the growth of science and technology. The recent fundraising continues to be hot, accelerate the market recovery, and continue to provide financial support for the growth of technology. From the beginning of the year to February 16, a total of 22 stock funds, 43 hybrid funds, and 8 bond funds were established in the market, with a total size of 24.14 billion yuan, 102.30 billion yuan, and 4.78 billion yuan. Last week, 6 stock funds and 12 hybrid funds were set up, with a total issue size of 33.83 billion yuan and 38.56 billion yuan, respectively. From the perspective of current institutional positions, technological growth sector is the focus of new fund allocation. In particular, since the beginning of the year, a number of science and technology themed funds have been issued in a centralized manner, with a total scale of 68.24 billion, which has become an important "promoter" for the science and technology growth sector.

Although the recent gains have been huge, the general logic of technological growth has not been disrupted: 1) First, incremental funds will continue to flow in. There will be 206 equity funds that have already been audited and 38 equity funds that have been audited but have not been issued in the next 3 months, and they will bring 100 billion-level increment funds to the market in the future. 2) The easing monetary environment continues. 3) The refinancing easing cycle is coming, and technology growth sector is the most beneficial. 4) From a fundamental point of view, technological growth sector also has strong support and economic advantages.

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