Sino Analytica Fund Weekly Observation: The cooling inflation in the United States in July eased the pressure of aggressive interest rate hikes, and there may be adjustment risks in the short and medium end of the domestic bond market

Sino Analytica Weekly Observation: Pay attention to industry fundamentals, and policies still need to wait

Last week, the market fluctuated upwards in 5 trading days, with an average daily turnover of 988.1 billion yuan. In terms of increases and decreases, Wonderland Quan A rose 1.68%, the Shanghai Composite Index rose 1.55%, the CSI 300 Index rose 0.82%, the ChiNext Index rose 0.27%, the Small and Medium Board Index rose 1.42%, the CSI 500 Index rose 2.40%, the CSI 1000 Index rose 1.96%, and the Kechuang 50 Index fell 0.96%. A slight net inflow of funds from the north was 7.65 billion yuan. In the CITIC Tier 1 industry classification, the coal and petroleum and petrochemical sectors rose by 8.43% and 6.31% respectively in the context of overseas energy rise; the machinery sector rose 3.70% under the continued impetus of the robot concept; trade retail rose by 3.32% driven by weighted stocks; the consumer services sector fell 0.12% due to the impact of the domestic epidemic; the automobile sector fell 0.67%, or because the weekly data on automobile sales fell below market expectations; The agriculture, forestry, animal husbandry and fishery sector was affected by the decline in pig prices, down 2.07%.

Focus on: agriculture, forestry, animal husbandry and fishery, electricity and electricity new sectors, electronics, communications and computers and other science and technology sectors

Follow-up

The Fed's September interest rate meeting

Broken end of the property supply situation

Weekly observation of the Sino Analytica bond market: There may be adjustment risks in the short and medium end of the bond market

Last week, the bond market as a whole ran smoothly, money market yields remained low, DR007 continued to hover around 1.3%, mid-week was slightly affected by the remarks of people close to the central bank, the yield of interbank certificates of deposit due during the year was flat at around 1.5%, and the 1y-period interbank certificate of deposit rebounded about 10bp to 2% from last week. In terms of interest rate debt, the long-term end remained stable, and the short-term and medium-end sides adjusted slightly. In terms of credit debt, the overall level of volatility remained low.

On August 7, foreign trade data released by the General Administration of Customs showed that in US dollar terms, China's exports in July increased by 18.0% year-on-year, expected to be 16.2%, and the previous value was 17.9%; imports increased by 2.5% year-on-year, expected 4.5%, the previous value was 1.0%; and the trade surplus was 101.27 billion US dollars, an increase of 81.5% year-on-year. In July, the CPI rose by 0.5% month-on-month and 2.7% year-on-year, with the previous value of 2.5%, pig prices and vegetable prices rose significantly, and food items rose by 3.0% month-on-month, driving the CPI closer to the 3% warning line.

The second quarter monetary policy report released by the central bank in midweek said that in the next stage, it will increase the implementation of prudent monetary policy, give full play to the dual functions of the total amount and structure of monetary policy tools, take the initiative to respond, boost confidence, do a good job in cross-cycle adjustment, take into account short-term and long-term, economic growth and price stability, internal equilibrium and external equilibrium, adhere to not engage in "flood irrigation", do not over-issue currency, and provide more powerful and higher-quality support for the real economy.

The current market term spread is wider, there is room for compression, under the premise that the short-end interest rate continues to run at a low level, the curve still has the opportunity to flatten the bull market, if the short-term interest rate is expected to be unstable, the short-term or will usher in an adjustment.

Sino Analytica Overseas Week watch: INFLATION cooled in the United States in July, easing the pressure of aggressive interest rate hikes

Last week, all major asset classes around the world rose in tandem, with commodities leading the gains (Bloomberg Commodity Index up 4.54%), followed by equity assets (MSCI Global Equity Index up 2.82%), and finally bonds (Bloomberg Global Aggregate Bond Index up 0.42%). Among commodities, the prices of energy sources such as fuel, natural gas and crude oil have risen significantly, and the prices of agricultural products, including corn, coffee and wheat, have also soared, and gold prices have also achieved positive returns. In terms of stock markets, developed markets outperformed emerging markets this week; In developed markets, U.S. stocks rose about 5 percentage points, European markets rose nearly 2 percentage points, Japan rose 1.3 percentage points; in emerging markets, China's A-shares rose, Hong Kong stocks fell, and Brazilian and Russian stocks rose more than 4%, and Indian stocks rose about 2%. At the industry level, the rebound in oil prices and the stock market has made the energy sector perform ahead, followed by raw materials, finance, industry and other sectors; Value style is slightly dominant. In terms of bonds, global high-yield bonds performed better than global interest rate bonds; The US 10-year Yield closed at 2.84% this week, essentially unchanged from 2.83% in the previous week, with 2-year and 1-year Yields of 3.25% and 3.26%, respectively, and long- and short-term interest rates continuing to invert. In terms of exchange rates, the dollar index fell to 105.6788.

(Source: Bloomberg, Wonder, Date: 2022/8/12)

In terms of economic data, The U.S. CPI rose 8.5% year-on-year in July, lower than expected 8.7% and 9.1% previously, the core CPI rose 5.9% year-on-year, expected 6.1%, the previous value of 5.9%; U.S. inflation slowed more than expected, mainly due to the decline in energy and commodity prices, the energy and commodity sub-items in July were 32.9% and 6.9% year-on-year, down 8.6 and 0.2 percentage points respectively from the previous month; but food and service prices formed support, july food and services sub-items were 10.9% and 5.6% year-on-year, up 0.5 and 0.1 percentage points respectively from the previous month. After the release of CPI data, interest rates on the US dollar and US Treasuries fell, US stocks rose, and market expectations for the Fed to raise interest rates by 75bp in September fell. Looking ahead, there is limited room for further decline in energy prices such as crude oil, while prices for food and services including rents and wages will remain firm, and it remains to be seen whether U.S. inflation begins to decline. In addition, the early August value of the University of Michigan Consumer Confidence Index recovered from 51.5 in July to 55.1, a near three-month high, mainly due to moderate inflation and expected improvement in economic and personal financial conditions; The Euro Zone Sentix Investor Confidence Index recovered slightly in August but still fell short of expectations, and the German Investment Confidence Index reached a new low; Britain's SECOND quarter GDP shrank by 0.1% sequentially, a smaller-than-expected contraction, but the economic outlook remains bleak.

In terms of policy, this week, the US Senate and House of Representatives voted to pass the US Inflation Reduction Act, which, according to the US financial media CNBC news, totals about 430 billion US dollars, of which 369 billion US dollars will be used to combat climate change, with a goal of reducing carbon emissions by 40% by 2030; $64 billion was spent on lowering the price of prescription drugs.

Short-term view of the QDII fund

Sino Analytica Oil & Gas Energy: International oil prices recovered, cloth oil prices rose 3.40% to $98.15 / barrel, and WTI crude oil prices rose 3.46% to $92.09 / barrel.

As of August 5, U.S. crude oil production increased by 100,000 bpd to 12.2 million bpd, returning to early April 2020 levels; Commercial crude inventories rose 5.457 million barrels to 432 million barrels and strategic inventories decreased by 5.297 million barrels to 465 million barrels, resulting in a net increase of 160,000 barrels in total U.S. crude inventories. OPEC released a monthly report, the organization's crude oil production in July was 28.9 million bpd, an increase of 220,000 bpd from the previous month, the increase mainly from Saudi Arabia (+160,000 bpd). The output of the ten countries cut by 1.23 million barrels per day was lower than the agreed volume, mainly due to the insufficient production of Nigeria and Angola. In addition, the downward revision of global crude oil demand in 2022 increased by 260,000 barrels/day year-on-year to 2.7 million barrels/day, and global crude oil demand is expected to increase by 2.7 million barrels/day in 2023; Non-OPEC production is expected to increase by 2.14 million b/d and 1.71 million b/d year-on-year in 2022-2023, respectively.

Recently, oil prices have fluctuated greatly, mainly due to changes in demand expectations, but we believe that the current crude oil fundamentals have not changed significantly, there is still high uncertainty on the supply side, the demand side of the United States and the global economic growth rate remains resilient in the short term, and the total inventory of US crude oil (strategic reserves + commercial crude oil) has continued to decline this year; The term structure of crude oil futures remains the backbone structure; Europe's Rhine water levels have sharply increased uncertainty over energy supply. In the absence of significant changes in fundamentals, the average price of crude oil for the whole year is expected to remain at a high level.

Sino Analytica Global Gold Fund: The international spot gold price maintained its upward trend, rising 1.52% from $1775.50/oz to $1802.40/oz.

With the further advancement of the Fed's interest rate hikes, accompanied by the increase in the vulnerability of the US economy and financial markets, the recent US economic data has begun to weaken. At the same time, the major overseas investment banks and financial institutions have also lowered the us economic growth expectations, and it can be expected that the US economy will gradually enter a "stagflation-like" state from the second half of this year, and the volatility of the financial market will increase. Slower-than-expected inflation in the U.S. in July reduced the probability of an aggressive rate hike by the Fed. The HAwky interest rate hike of the European Central Bank on July 21 has somewhat eased the weakness of the euro, and the monetary policy of Europe and the United States has moved from divergence to synchronization. The possibility of the Bank of Japan starting a rate hike cycle is not ruled out during the year. From the perspective of monetary policy and interest rate level, the dollar index further strengthens and weakens the logic, and it is more necessary to pay attention to the expected changes in the economic growth rate of Europe, the United States and Japan.

Our judgment is that the impact of the Fed's current round of interest rate hikes on the US economy, corporate earnings and financial markets has begun to reflect one by one, and the US interest rate hike cycle may end early; The ECB has launched interest rate hikes, and monetary policy has tended to be consistent with the Fed, but it is necessary to observe whether there is debt risk in Europe; Recent geopolitical risks continue to ferment; Gold prices are expected to continue to recover and can be actively watched.

Sino Analytica Global Earnings Real Estate: THE FTSE DEVELOPED MARKETS REITS index rose 4.25 percent, outperforming developed market stocks. At the industry level, the hospitality and entertainment sector led the gains, followed by residential, healthcare and retail.

The FTSE Developed Markets REITs Index has 153 companies announcing second-quarter results, and from the disclosure, revenue and profit have exceeded market expectations; Among them, the profitability of hotel and entertainment REITs and diversified REITs was significantly better than market expectations, while the special types of REITs dragged down.

Looking ahead, the overseas REITs market is still facing macro factors such as inflation and interest rate hikes, and it is preferable to be sectors that are relatively less affected by interest rate hikes and have strong ability to transmit price costs. In addition, focus on industries with adequate valuation adjustments and still have high growth potential.

This article originated from the financial world