In the post-epidemic era, how will the market interpret it? Invesco Great Wall Fund Manager's latest interpretation

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In the second year of the large-scale impact of the new crown pneumonia epidemic on the world, the A-share market has encountered greater twists and turns and differentiation. We have experienced the prosperity and retreat of large consumption areas such as food and beverage, and also witnessed the bright sunrise of new energy vehicles, semiconductors and other track markets. We have bumped into the lost bumps of the new economy such as the Hong Kong stock Internet, and also waited for the dead wood of the "old economy" such as steel and mining.

The epidemic has brought profound changes to the world and marked the capital market with the brand of the times, but we believe that the epidemic will eventually pass. In the post-epidemic era, how will the economy develop, how will the market be interpreted, and where will the investment opportunities be? We talked to a few fund managers about their views on the capital markets in 2022, about growth, about the pandemic, about the transformation of the energy mix.

Liu Yanchun, deputy general manager of Invesco Great Wall, judged: "2022 is most likely the beginning of the end of the new crown epidemic. Liu Yanchun believes that from a global perspective, the investment side that lags behind the recovery of consumption is expected to gradually return to normal. In the early stage, China took advantage of the time window for the rapid increase in export share to fully reduce the macro leverage ratio, adjust the economic structure, and digest long-term risks, laying a good foundation for the sustainable economic development in the post-epidemic era.

Liu Yanchun said that China's economic growth has been under the potential growth rate, it is expected that wide credit, stable growth, and boosting domestic demand will be the focus of policy next year, and those companies that have been mispriced due to short-term economic fluctuations will be the focus of the next stage of layout.

However, the subsequent impact of the epidemic seems to be difficult to quickly eliminate.

Yang Ruiwen, executive director of the equity investment department of Invesco Great Wall, believes that overall, due to the huge impact and damage caused by the epidemic on the production and consumption of various countries, the balance sheets of residents of various countries have been continuously damaged.

Globally, there is still no possibility of a significant recovery of liquidity through interest rate hikes. Yang Ruiwen believes that the possibility of a comprehensive market is very low, and it is more likely to be a structurally differentiated market. The follow-up is more likely to be a relatively weak economy and excess liquidity, and the focus of the market will be more inclined to technology and manufacturing.

Yang Ruiwen said that it is difficult to accurately judge the direction in the short term, but from a longer perspective, the high-quality technology leader white horse stocks and the small and medium-sized market value leaders represented by specialized special new are full of opportunities, and the subdivision direction includes semiconductors and electric smart cars.

"There is a certain downward pressure and local risks in China's macro economy has been unanimously expected by the market, the negative impact of the economic downturn on the industry and companies has been gradually reflected in stock pricing, policymakers are also aware of this change in the Chinese economy, we believe that the means of stable growth will gradually increase, the macroeconomic hard landing risk is not large, and the overall systemic risk of the market is small." Zhan Cheng, deputy general manager of the research department of Invesco Great Wall, believes.

Yu Guang, assistant general manager of Invesco Great Wall and general manager of the stock investment department, expects that 22Q2-Q3 will see the low point of profit growth in this round, and the profit is expected to gradually stabilize in the second half of the year under the wide credit transmission, but the annual growth rate is not expected to be too high.

Deng Jingdong, manager of the Invesco Great Wall Reform Opportunity Fund, believes that the urgency of stable growth, the high base of exports and the pro-cyclical characteristics of the manufacturing industry have led to a weak role in the economic pull of the two, and real estate investment needs to observe the trend of policies, so the main force for stable growth next year is infrastructure investment and consumption.

In fact, policy seems to be coming a little faster than expected. On December 3, the top management said that "China will formulate policies around the needs of market players and reduce the RRR in a timely manner." On December 6, the central bank announced its decision to cut the reserve requirement ratio of financial institutions by 0.5 percentage points on December 15, 2021 (excluding financial institutions that have implemented a 5% reserve requirement ratio). The RRR cut released a total of about 1.2 trillion yuan of long-term funds.

Invesco Great Wall investment research team believes that since the RRR cut is a continuation of the july wide currency signal, the follow-up interest rate reduction policy may keep up with the background of stable growth demands next year. Around the Spring Festival is the time window for interest rate cuts in the open market in previous years, which can be kept in mind.

Zhan Cheng said that the 2022 meeting will focus on the allocation of new energy, semiconductor materials and equipment, military and other directions that conform to industrial trends and policy trends at the same time, and continue to rise in prosperity.

"We are now at a big inflection point, and the situation is complex. China is facing two transformations, one is the transformation of its economic structure and the other is the transformation of its energy structure. These two transformations affect demand one and one affect supply. Bao Wuliang, director of the equity investment department of Invesco Great Wall, made the above judgment on the current era background.

Bao Wuwei believes that the characteristic of economic structural transformation is that the proportion of investment in GDP has fallen to a reasonable position. The most important thing in investment is real estate, this year is the first real estate sales area decline in recent years, considering the higher leverage ratio of Chinese residents, the direction of real estate sales decline is clear, but do not know the amplitude and rhythm. In the emerging demand, various digital, aging, and service needs are thriving, and the growth of these needs has its own internal motivation and will last for a long time.

The transformation of the energy mix will have a long-term impact on various manufacturing industries as well as inflation. The original fossil energy is the lowest cost and most convenient energy source. In the context of carbon neutrality, we will greatly increase the proportion of new energy used, and the current new energy is poor in cost and ease of use, and the energy cost of the overall society will show an upward trend. Due to the lack of long-term demand for traditional energy, traditional energy companies are very cautious about capital expenditure on the original business, making the supply growth of these products very limited. However, the overall economy is still moving forward, and its demand for traditional energy products is still growing steadily, and the contradiction between supply and demand will cause the price of these products to be firm for a long time.

In this context, Bao Wuwei believes that investing in stocks needs to start from the selection of individual stocks. Barriers are the most important consideration in future investments, as demand fluctuates at any time, and the approach of adhering to high barriers will remain constant. There are two kinds of barriers that we recognize, one is an unrepeatable resource, and the other is a competitive advantage that is far ahead of the industry, and the existing positions meet this standard.

"We consider ourselves very lucky to invest in China. Although there will be various headwinds in the economic development, the depth of investment in the Chinese market is very large, and it is always possible to tap into the high-barrier companies that continue to improve. It is believed that by holding these companies for a long time, the return on the entire portfolio will be very substantial. Bao had nothing to say.

The essential consumption and optional consumption sectors have been greatly affected by the epidemic, and the core consumer assets that have been unique at the beginning of the year have not performed well this year. After a sharp adjustment, for investors, is the opportunity for left-side layout consumption coming?

Yu Guang believes that it may be difficult to have an index-level market in 2022, but the probability of a sharp decline is not large, the market is likely to continue this year's structural market, and the direction of macro credit structure expansion will also bring more alpha opportunities. Specifically, first, under the transition economy, scientific and technological manufacturing and large consumption have long-term excess returns. The second is the convergence of PPI-CPI scissors difference, and the repair of mid- and downstream profitability. It is recommended to focus on consumer blue chips with strong price increase ability or large industry space and sufficient valuation digestion.

Liu Su, general manager of the research department of Invesco Great Wall, believes that at present, the overall market in 2022 is still a shock pattern, mainly looking for opportunities from the bottom up. At present, the high-prosperity industry has higher expectations, and it is expected that there will be operational differentiation between subsequent enterprises, and among the low-prosperity companies with relatively inferior operating performance due to short-term external environment, there are also opportunities for profitability and valuation increase after operation repair.

In terms of configuration, Liu Su is currently focusing on some strongly competitive enterprises that have maintained or even expanded their inherent competitive advantage due to weak short-term operating data, and their long-term business prospects have not changed significantly.

This year, many industries are subject to industrial policy regulation, cost rise, macroeconomic downturn triple bearish impact, in 2022 these bearish will be marginal relief, especially the demand is relatively resilient, competitiveness is still strong enterprises, next year's stock price repair probability is larger, which focuses on A-share and Hong Kong stock consumption, pharmaceutical, Internet and other core assets of the industry. In the medium and long term, scientific and technological innovation and consumption upgrading is still the most certain investment direction, and the market will be relatively balanced in 2022, and the portfolio will adhere to the idea of balanced allocation and actively look for investment opportunities with better cost performance.

Dong Han, manager of the Invesco Great Wall Prosperity Growth Fund, also believes that after the valuation digestion of this year, the consumer industry has the opportunity to earn performance growth gains after the domestic policy is implemented.

In terms of medicine, Jiang Xueting, manager of Invesco Great Wall Medical and Health Fund, is optimistic about the high-end pharmaceutical manufacturing industry represented by exports, including CXO and companies with product internationalization potential, mainly considering several aspects: 1, in terms of medium- and long-term industry development, China has a comparative advantage in cost efficiency; 2, the innovation and transformation of research and development is also the general trend of the development of China's pharmaceutical industry; 3, the performance of CDMO is affected by the new crown oral drug production outsourcing orders, and the certainty of next year's performance is very high. First-tier companies directly enjoy large new crown orders, and second-tier companies will also have order spillover effects. In terms of innovative and international pharmaceutical manufacturing industry, although there is still policy price pressure in China, after all, China has objectively grown into the world's second largest pharmaceutical market, relying on the scale advantage formed by the domestic market, we still have strong confidence in the pharmaceutical manufacturing industry with internationalization potential.

The growth style represented by new energy and semiconductors has performed well in recent years, and the new energy index and semiconductor index have risen by 186.66% and 161.40% respectively in the past two years. (Source: Wind, 2020.01.01-2021.12.07) After so much, is the growth style still worth looking forward to in the future?

Zhan Cheng believes that most of the growth directions have been fully deduced, and the probability of profits continuing to exceed expectations next year is low.

Dong Han believes that looking forward to 2022, under the pressure of overseas inflation, global liquidity is facing contraction, and the overall valuation of A-shares has no room for expansion. Industries that are in line with the direction of industrial upgrading have risen more fully this year, and there are only phased opportunities for sub-industries. After this year's valuation digestion, the consumer industry has the opportunity to earn performance growth gains after the domestic policy is implemented. In the direction, we are optimistic about the new energy vehicle industry, the semiconductor industry, and the national security field.

Zhang Jing, manager of Invesco Great Wall Strategy Select Fund, believes that the current market is in the inventory upward cycle since the second half of 2019, during which the overall macro production capacity has not expanded significantly, and the macro supply and demand structure has remained stable. Capital expenditure is mainly concentrated in areas where demand for new energy, semiconductors and other areas continue to improve, while the investment in midstream manufacturing and upstream raw materials is less, which plays a certain support for the business environment during the downturn of the future inventory cycle, and has a limited impact on profitability.

In the direction, Zhang Jing continues to be optimistic about the photovoltaic sector, the market space is large, the long-term demand is determined, the market concentration is constantly improving, the medium and long-term investment value of leading companies, and the related material companies with higher barriers in the industrial chain are also worthy of attention; for the plates with high certainty, good prosperity, but relatively sufficient expectations and high valuation levels, there may be internal differentiation, and it is necessary to study and sink these plates, and look for investment opportunities in the field of industrial chain segmentation, such as electrification, electronicization, energy conservation, Lightweight-related supporting auto parts sector; industrial upgrading, domestic substitution, new materials and other fields of characteristic companies deserve attention.

As Yang Ruiwen said, the epidemic has brought huge impacts and damage to the production and consumption of various countries, and has continuously damaged the balance sheets of residents in various countries. Just as the epidemic has brought great changes to investment, the end of the epidemic may also bring new investment opportunities and changes. Are you ready for 2022?

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