Guo Lei, chief executive of GF Securities: There is no need to be too pessimistic about the macro in the short term
Tencent News "First Line" author Li Hai
"In the short term, I don't recommend being too pessimistic about the macro picture, some positive signs are happening." On June 16, at the 2023 mid-term strategy meeting of Ping An Fund, Guo Lei, chief economist of GF Securities, said so. He believes that combined with PMI production and orders, the typical downward period may have passed.
The following is the full text of Guo Lei's speech:
At present, we are actually at a more critical point, we know that the capital market is currently in a very delicate state of the entire macro picture, everyone vaguely feels that there seems to be a change taking place, but the views are relatively divergent, I will also talk about a little personal view here.
First of all, in the short term I do not recommend being too pessimistic about the macro picture, some positive signs are happening. We are here to review with you the trend of China's economy since the beginning of the year. Two indicators are used here: PMI production and orders published by the Bureau of Statistics. After the easing of the epidemic at the beginning of the year, first of all, there was a rapid upward movement in orders, which was in January. In February, when companies saw this situation, production began to catch up. In these two months, there is no disagreement about the economy, and in March, orders began to flatten, at this time, in fact, the differences on the economy began to rise, March is an industrial season, why did orders begin to flatten? I personally feel that there are many factors involved. For example, in the past three years, a lot of our local investment has actually formed a certain amount of debt, so the social financing at the beginning of the year seems to be very large, but in fact, you are facing the total demand for recovery, and the second is actually some debts have also formed a certain siphon effect. In April, demand and supply began to resonate downward, which is a further superposition of three factors: the first factor is that this year's GDP target is not high, this year's GDP target is set at 5, everyone knows that last year's GDP was 3, this year's 5 is equivalent to 4 in previous years. The second factor is the pace of finance, with special bonds approved in advance in the first three months for the entire financial investment, and a second batch of special bonds after May, with a gap period in the middle of April. The third factor is that we can also see that the latest sentinel hospital data released by CDC two days ago, and April was at the peak of influenza. So the combination of these factors led to a sharp pullback in supply and demand in April.
If we look back, in fact, January and February exceeded expectations, March and April were low expectations, and March and April were equivalent to the early version of the industrial off-season, equivalent to the previous May and June. After May and June, it was back to square one. From the high-frequency data, the downward momentum of the economy has weakened, and it is no longer sinking as quickly as in April.
I will show you an indicator here: the truckload freight flow, which counts how many trucks of more than 3 tons in China carry every day, and there are daily data. You can think of a truth, in a sense, it is equivalent to a small GDP, my consumer side has a large number of retail stores, do I need to ship goods? Industry and construction also need to be shipped, and our exports need truckload freight from factories to ports, which is an increase in January and February this year, and the overall is still weak. It reached a high in early March, and there was a round of declines from March to April. If we look after mid-April, it basically hovers at a low level and no longer typically sinks. This indicator is based on 2019, that is, you see that April and May are about ninety, which means that it has not yet recovered to the level of the same period in 2019, and the low is definitely relatively low, but in terms of trend, it is no longer typically sinking. This is the conclusion we want to emphasize here: the typical downward period may have passed.
Does the asset react to this process? We understand that from stocks to bonds, the response to the economic slowdown since the beginning of the year has actually been relatively sufficient, here to show you an indicator to solve copper, we know that from the framework, oil, asphalt corresponds to infrastructure, rebar corresponds to real estate, copper corresponds to manufacturing, so if the elasticity of infrastructure real estate is not too high, copper should represent a complete expectation of the Chinese economy. For example, from November to May this year, copper and domestic assets moved basically the same because it represented expectations for the Chinese economy. Looking at the middle chart, the yield of ten-year government bonds in the bond market, and the stock equity on the right (see PPT), which is basically highly consistent. There have been two phases of adjustment since the beginning of the year of copper, the first from early February to mid-April, which I understand reflects the end of the post-pandemic high-slope repair phase. The second round, from mid-April to late May, reflects a lack of aggregate demand and, in a sense, a downward revision of policy expectations. After May 24, copper has quietly begun to stabilize and recover, which I understand reflects the low stabilization of high-frequency data after May.
From a medium point of view, there is currently no single line that can significantly drive the economy down. If we sort out this year's economy from the middle view, its differentiated structure, differentiated recovery, is relatively better.
1. Contact service industry, for example, we often travel to know that the hotel may not be fixed a few days late, hold a meeting, you see a lot of showrooms have been booked. Including many pavilions and celebrity concerts, it is because this area has been the most damaged in the past few years, and the current degree of repair is relatively high. However, the degree of capitalization of this piece is relatively low, and the feeling of the capital market will be relatively limited.
2. Finance-related areas, such as infrastructure for major projects, and some new infrastructure. For example, we see that the prosperity of the industry such as special equipment and electrical machinery has been okay since the beginning of the year, why? It is because many new energy projects during the "14th Five-Year Plan" period are major projects, and its landing has brought prosperity to this line.
3. Real estate sales. Although many people think that it may not be very good, it is actually much higher than expected at the end of last year.
There are three areas of relative depression:
1. Real estate investment, rebar, excavators are not very good, mainly related to real estate investment.
2. Consumer electronics, which should be one of the sources of the adjustment of the entire new industrial chain, is that the shipment of mobile phones is too low.
3. Cars. In the first quarter of this year, automobiles are in a process of mutual reinforcement between price reduction expectations and destocking expectations.
The exit is probably somewhere between good and bad. This is the structure of the current economic differentiation. Among them, we believe that the real estate sector is in a state where the upside and downside risks are not too large. Do you know how many fewer post-90s people in China are than post-80s? The post-80s generation is 220 million people, the post-90s are 185 million, and the post-90s generation is 17% less than the post-80s, but last year our real estate sales fell by 26%, which is basically a hard landing, because of the superimposed many factors, including regulation, and the epidemic, from 1.79 billion square meters down to 1.49 billion square meters, the intergenerational switch basically completed the clearance. Some people say that the needs of the post-00s generation are not less than those of the post-90s? Yes, China's post-00s are close to 20% less than the post-90s, but the post-00s are not yet the age to buy a house, and the oldest born in the 00 generation is now 23 years old, and the youngest is 14 years old. When to buy a house after 80? If we use the golden time from 2005 to 2015 to go backwards, it is almost 25-28 years old. This is basically the most central age of the normal distribution of house purchases across generations, 25-28 years old, and if you expand it further, it is actually 20-30 years old. So we can imagine that after 5-8 years, real estate may go to the next level due to generational switching, but at least this round should have been roughly reflected. At the same time, our policy conditions are changing, mortgage loan interest rates have gone down, everyone see the left figure, we put the mortgage loan interest rate backwards, two quarters behind, basically the same as real estate sales (see PPT). In the first half of this year, we saw a stabilization in property sales, reflecting a decline in mortgage rates in the second half of last year. Similarly, since the beginning of this year, loan interest rates have continued to decline, which should logically support property sales in the second half of the year. So we see that the real estate sales of 60 cities are now relatively weak, the original seasonal downline is going, but the year-on-year is basically around the growth rate of 8-10, this we understand that the corresponding upward and downward risks are not too big, the interest rate is too low, it is difficult to imagine that in this case the entire sales have a rapid downward. Investment is weaker than sales, just now we also mentioned this, because investment in a sense more like a financial industry, the rate of funds in place is the core indicator, if the dismantling of funds is related to sales, such as sales collection, mortgage loans have been significantly reduced, but only one piece is relatively weak, that is, self-financing, why is the developer's self-financing weaker? In fact, this mainly reflects two logics, one is that the credit environment is still constrained, that is, if an enterprise wants to issue bonds normally, the real estate enterprise has no conditions to issue it. The second is that the willingness to invest has not been fully recovered relatively speaking, and there is no way to fully turn the sales collection into investment. So in terms of investment, we expect it to be weaker than sales, and the whole year may be roughly in the center near zero growth, because the base in the second half of the year is also lower. Under our understanding, the whole real estate is normalizing, and the intergenerational demand of the post-90s generation corresponds to a relatively weak sales and investment cycle, which is currently normalizing.
Another area is automotive. The car is destocking in the first quarter, which the price reduction expectation should be one of the very important inducing factors, we know this optional consumption, for this durable consumer goods, once the price is reduced, many people will wait for it to fall further, which will induce further destocking. By April, when we look at the data, dealer inventories have fallen to a seasonal low. At this point, the pressure is reduced. Looking at retail sales in May, the month-on-month performance of automobiles has improved. Of course, this does not mean a substantial improvement, a substantial improvement also requires two conditions: first, manufacturers' inventories have also fallen to a relatively low position, and second, residents' income is expected to improve, which requires further economic stabilization, but the most stressful stage may be passing at present. Automobile is a very important industry in the midstream, we estimate that it accounts for almost 10% of the entire input-output table, and its early adjustment is the reason for the volume and price adjustment of many industries in the midstream, so the improvement of this piece should still have some significance.
The third piece is exports, the pressure has not yet been lifted, we estimate that the price contribution of exports at the end of the second quarter bottomed out, and the volume of exports in the third quarter bottomed, do you know how to judge exports from experience? There is an indicator that I personally judge the export favorite indicator, is CRB (commodity year-on-year), this empirical regularity is more than logical, from the historical data, exports and trends and it is highly correlated, the reason is very simple, exports are value-containing indicators, first of all, there is a price bottom, and then exports are determined by the inventory of overseas importers, overseas importers need to see the price bottom, no longer fall before deciding to expand imports. From a price point of view, we judge that the middle of this year may be similar, because this involves the deduction of CRB.
The key is the quantitative point of view, we are here to show you an indicator, that is, the United States manufacturing inventory, the United States from January last year began to inventory, up to now to inventory has been close to 6 quarters, its inventory growth rate has dropped to about 2% position, relatively low, is currently consumer goods part of the acceleration to inventory, but the inventory of capital goods is relatively low, the future inventory will continue to fall, but we estimate that a quarter or so may be about the same, that is, to the end of the third quarter, At the current inventory level and downlink rate, it may fall roughly to a low level. So why the World Bank recently revised the US economic data upwards, is because he has reached the second half of the de-inventory cycle, in theory the third and fourth quarters of this year is the last risk period of the year, and now its unemployment rate is relatively low, for this consumption-oriented economy, the unemployment rate is low wages are slow, wages are slow, the economy and inflation are slow, the risk of recession is actually not large. We estimate that our exports will also bottom out sometime in the third quarter as it finishes destocking. So the price bottomed out at the end of the second quarter, and the volume bottomed out in the third quarter, which is our understanding of the approximate rhythm of this piece.
The fourth variable is policy, policy is currently opening a round of stable growth, I personally think that this round of stable growth should still have a certain systematic, two reasons:
First, think about it, what has the central bank been doing some time ago? The central bank has been lowering the deposit rate, and this logic should not be the whole policy logic, because reducing the deposit rate is equivalent to acting on the liability side of the bank, and I reduce the entire cost of liabilities, then I can only return it to the entity through the decline of the loan interest rate or the expansion of the amount of financing, otherwise I am only equivalent to helping the bank broaden the entire profit margin. The decline in loan interest rates is LPR, and the expansion of financing demand is to use policy-based development financial instruments to support financing demand, and either of these two should be logically reasonable. I estimate that the probability of both is relatively large. Therefore, after the policy that acts on the liability side of the bank, there must be an asset side that acts on the bank, so from this point of view, the current policy is definitely not finished
Second, this year is the year when the policy framework of China's modernization is implemented, and we need to establish a modern industrial system, which is likely to be the most important thing in the future Third Plenum. This is for the next ten years, before this matter, we must guide the micro expectations to have a round of stability, our micro expectations can not be too pressure, local fiscal pressure is too much if many new things can not be done, if the third quarter micro expectations do not have downside risks, the end of the second quarter and the beginning of the third quarter should logically be the last period of policy introduction. So from these two perspectives, this round of steady growth of policy is currently the beginning. So we estimate that the relatively weak economy in the second quarter should be the bottom of this year, with a two-year compound economic growth rate, last year's base is relatively low, with a two-year compound look at the first quarter is 4.65 announced by the Bureau of Statistics, the second quarter is 4, the third quarter is 4.3, the fourth quarter is 4.6, this is our general judgment of the economic trend, the whole growth rate is not too high, but it is currently at a low point.
In addition to the volume, there is also a factor is the price, we know that the current PPI in the deep negative growth range, May is -4.6%, we estimate that May to June should be the bottom of this round of PPI, this is a more important judgment, it is possible to have released data in May, or it may be that there is no data released, not finished in June, but we estimate that there is a relatively high probability of forming the bottom of this round of PPI before July. Some people say why the PPI will not enter a negative growth hover, as it did in 2013 and 2015. What is the most sensitive part of China's economy? We have the world's largest manufacturing capacity, for example, our GDP is less than the United States, but your manufacturing GDP is the world's largest, this manufacturing capacity is naturally prepared for the world, the whole industrial chain, the only whole industrial chain under the United Nations standards, is to build anything, the lowest cost, the highest efficiency, and the huge scale. This is naturally prepared for the world, so our economy is more afraid of overseas deflation, and if overseas deflation is domestically it will be overcapacity. Domestic overcapacity triggers domestic deflationary pressures, which create an internal and external resonance. We look at 1997 to 1999, 2013 to 2015 are such a logic, 1997 to 1999 is the Southeast Asian financial crisis, triggering China's overcapacity, 2013 to 2015 is the European debt crisis, causing China's overcapacity, and this round of the situation is different, according to our understanding of the US economy just now, it has reached the second half of destocking, the economy still shows a relatively strong state, inventory normal bottoming out imports will bottom, overseas as a whole is an inflation pattern , even the Japanese economy has been brought up for so many years, so the probability of entering the PPI in this position is not large. What is the biggest significance of PPI? In a sense, it represents corporate earnings, our current companies are accelerating destocking, and if PPI bottoms can be formed in May and June, we estimate that this round of inventories at the end of the third quarter may see a bottom. In April, companies were accelerating destocking, and inventory fell by more than 3 points in a month. At present, our inventory is only five o'clock in April, and it is definitely lower in May and June. At the end of the normal cycle of the third quarter, this round of inventory will usher in a bottom.
This corresponds to our gradual destocking from the fourth quarter and next year to replenish the inventory period, this also corresponds to the entire most stressed stage of the economy will gradually pass, if we look back at this round of the entire economy, in 2021, although there is an epidemic, but our exports are better, the two-year compound growth rate of the economy is 5.1, should be one of the highs of this round, last year is a low point, GDP is only 3, this year according to our expectations, the two-year compound of the whole year may be in the range of 4.3-4.5. Next year we estimate that GDP could be roughly around 5 with the transition from destocking to replenishment. We look at the expectations of the World Bank and the IMF for the Chinese economy, the whole logic is exactly the same as ours, except that his forecast for next year is slightly conservative, such as 4.7, 4.8, but it is still higher than this year's two-year compound, which means normal deduction, neutral deduction is to gradually step from this round of destocking cycle to replenishment cycle. This will mean that we should not be too pessimistic about short-term assets.
This is the basic law of history, we call it PPI fixed trading, you will find that PPI and Wande equity The entire trend has a high degree of synchronization, this is the past 7 years, what is the reason? Quite simply, PPI represents corporate profits, PPI is the price of finished products produced by industrial enterprises, the price itself constitutes the contribution of profit, and since you can raise prices to prove that you will raise prices when your volume is relatively good, there is a positive correlation between the two. No matter how complex the stock market pricing is, corporate earnings are a foundation, so there will be such synchronicity. What does this mean? This means that a basic caution should be maintained for the market at PPI highs and a basic optimism for the market at PPI lows. But human nature is the opposite, we are generally more cautious at PPI lows and more optimistic at highs. This round of eight quarters of corporate earnings decline accompanied by the bottoming of PPI, we feel that there will be a trough, from the perspective of earnings will provide a support for the market. So our conclusion is relatively clear, short-term macro, the natural bottom of the economy, coupled with the steady growth of policies, we will usher in a bottom of PPI, which corresponds to the trough of corporate earnings, and the beginning of the entire replenishment cycle, we estimate that PPI is at the end of the second quarter, and the inventory may be until the end of the third quarter.
In addition, I would like to share with you about the medium term, which we are talking about in the next 5-10 years. We are in the midst of a switch in the policy framework that will have far-reaching implications for our economy. As we all know, China's economy first revolved around the word "growth", and the economy will grow steadily, and the economy will prevent overheating. The last 10 years have been the first big switch in the entire policy framework, and we have started to revolve around another word called "development", what is development? Development is growth + structural goals, so in the past 10 years we have been in structural optimization, that is, shadow banking, financing platforms, two highs and one surplus, real estate, each round of 2-3 years, add up to 10 years, this 20th National Congress determined a new decade, our policy framework is called Chinese-style modernization, what is modernization? Modernization is development plus strategic goals, that is, we have changed from the adjustment structure of the past stock to incremental strategic upgrading. What is Chinese-style modernization? There are three relatively successful modernization models in the world: the American model, the European model and the East Asian model, we have done research, 28 countries in the world have successfully crossed the middle-income trap from $10,000 to more than $30,000, some of these 28 countries are very small economies, with a population of less than 10 million, if deducted, about 13 countries have successfully achieved the leap, these 13 countries are distributed in the American model, the European model and the East Asian model. Chinese-style modernization is the fourth model, what is our difference? The policy clearly points out that overseas modernization is a series of development, what is series development? It is first industrialization, then urbanization, then agricultural modernization, and then informatization, step by step, and the Chinese-style modernization we want to create is a parallel pattern, everyone notes, this represents the lowest level of policy thinking, under this framework, the entire policy system will undergo very profound changes.
First of all, we understand that in the model of series development, urbanization is a key, in the past, local governments did economic development zones first, that is, infrastructure construction first, many statistics show that local governments do infrastructure ROA is very low, can not make up for capital costs, why do it? Quite simply, doing infrastructure is equivalent to an acceleration of urbanization, my infrastructure itself is not profitable, but I can cultivate manufacturing and service industries, and I can achieve an endogenous value cycle through taxation and land value-added. So in a sense, under the link of urbanization, we are equivalent to the credit expansion of a land as the underlying asset. Now the thinking is different, and the "four modernizations" should be promoted in parallel. Industrialization + informatization is a key here, so our underlying assets will change from land to industrial value and enterprise value. For example, if we look at the Anhui model, it cultivates the industry through the fund of funds, and then realizes the value-added of the investment. On this basis, the classification transformation of urban investment will be promoted in the future, including the statements of the Ministry of Finance and relevant departments, and the classification transformation of urban investment will be gradually promoted in the future. Third, the parallel promotion of industrialization and informatization is the key to the parallel connection of the "four modernizations", and I understand that all the big documents of the Ministry of Industry and Information Technology are based on this. For example, the digital economy, under our policy framework, informatization is to serve industrialization, we cannot be satisfied with C-end innovation, we can only improve the efficiency of the B-side, promote the efficiency of the industrial sector, the policy believes that this is my goal to achieve, this is very different from overseas thinking. Therefore, on this basis, we must establish a modern industrial system that can best represent the direction of the industrial sector and the efficiency of the industrial sector, and the promotion of this process has just begun. In the future, we may drive the formation of the entire modern industrial system through industrial clusters. If this promotion will be relatively smooth, then the underlying elements will change, in the past we are the land, the future is not clear, but if all industries are based on industrialization, information parallel connection, then you can imagine that data will be a relatively important element, so our 20th National Congress also attaches great importance to data. Including this year, we have seen that we have initially formed a framework, that is, the ownership, use and management of data is separated, and we can imagine that if this value is really formed with the formation of the industrial system, the future will be particularly large, and it can also have a resource value.
Local government leverage will also change, this year's fiscal budget new increase of 550 billion debt, the central government bears the vast majority, my understanding, the future local government leverage may gradually return to a more standardized way, such as special bonds or policy development financial instruments, one will achieve risk controllable, the other is to think about the essence of this matter, leveraged underlying assets, land as collateral, its elasticity has declined, so the future this piece will definitely have a decline in leverage elasticity. For the entire economy, one end of the land is the local government, its leverage capacity is down, the other end is the residents, the residents to leverage is to buy a house, it will certainly not be the direction of encouragement, in the medium and long term. In theory, there are only two parts of leverage, one is the central government, the other part is the enterprise, we understand that this should be one of the very important backgrounds of this round of central state-owned enterprise reform, that is, in the context of the second account of finance, that is, land transfer, its financial flexibility and strategic flexibility are declining, expand the financial flexibility and strategic flexibility of the third account. Therefore, we must deeply understand this time the reform of central state-owned enterprises, it has just begun, this time the two goals, one is called improve the core competitiveness, this is corresponding to the financial goal, that is, "one profit and five rates", improve ROE. The second is called enhancing core functions, which corresponds to the forward-looking, strategic industrial layout mentioned by the State-owned Assets Supervision and Administration Commission, and I personally tend to think that the latter is the focus, because it is equivalent to the grip of the entire modern industrial system, and the process has just begun.
The last piece is to establish a more adaptable financing system, we know that the global financing system is actually divided into two types, one is the United States, its advantages to solve the past almost not let go of any innovative track, the other is the German model, Germany is based on the bank system, its advantage is that there has not been a major financial crisis in the past 30 years, the development of East Asia, such as Japan and South Korea, you can see that basically combine the two models, indirect financing as the main body, and then gradually expand the proportion of direct financing In fact, we should also be such an idea at present, and we are gradually forming such a structure. A very important aspect of improving adaptability is to help the construction of a modern industrial system and help industrial upgrading, and we understand that the whole process has actually just begun.
Therefore, in the next 5-10 years, with the modernization of China, especially the promotion of modern industrial system, the entire macro policy framework will undergo a big change, and likewise, the pricing logic of the capital market will also undergo a big change. Of course, in the process of switching the policy framework, we have also seen some problems this year, which have also affected the pricing of stocks and bonds this year, and we understand it as three aspects:
First, because in a certain sense we have a strategic goal, this strategic goal replaces the short-term growth target, such as the local government to build a development zone, originally can bring GDP, now think about whether I am a new and old kinetic energy conversion, at this time if everyone does this, the total demand may be a little insufficient in the short term, such as this year we can see signs of this lack of aggregate demand, as long as the price goes down, from the logic of economics, As we all know, the total demand is lower than the total supply, and the Austrian school understands this thing very simply, that is, the demand is lower than the supply or the demand is greater than the supply, and this involves not only actual growth, but also nominal growth for bond investors, and we think that if the demand is lower than the supply, the price will not be too high in theory. For example, this year, the nominal GDP may be only about 5 or 5 points, which will bring the momentum of the interest rate center to sink. In the past 5 years, the nominal GDP divided by the ten-year government bond interest rate is about 2.6 times, and the nominal GDP of this year's 5 is lower than expected, so in theory, there should be a downward revision of the interest rate, and whether this will continue in the medium term is a matter of observation.
The second is the phased imbalance between supply and demand. Our resources are concentrated in a part of the new industry, these new industry investment growth is very fast, many in more than 20%, which means that the production capacity can be doubled in two and a half to three years, but many industries are in the middle and upper stream, is no way to digest their own, new energy is G-end and B-end consumption, new energy vehicles are C-end consumption, mobile phones always have to be bought, semiconductors are sold to consumer electronics, the growth rate of the payer is related to GDP, so it will bring a problem, the growth rate of supply is relatively fast, But there will be a problem of demand, such as looking at this year's automobiles and consumer electronics, in a sense is the presentation of this problem, my supply is still growing rapidly, but because of the lack of downstream demand, downstream demand is determined by household income, and household income is determined by employment and GDP. Therefore, in the first few months of this year, fixed asset investment in high-tech industries grew rapidly, to more than ten percent, but the added value did not grow fast, because the latter was determined by demand. So this is a question that needs to be balanced in the future.
The third is the short-term pressure of finance and employment, finance is related to the real estate industry chain, employment is related to the service industry chain, and we all know that our service industry should absorb 350-400 million jobs. Its output gap will lead to certain employment pressures in the structure, which will form a feedback to the upstream industry through household income.
In this context, the Central Financial and Economic Commission meeting on May 7 emphasized the issue of economic equilibrium, which I personally think is quite beyond expectations, that is to say, our policy actually has a relatively clear understanding of the economy, the Central Financial and Economic Commission meeting on May 7 pointed out that we must adhere to the three industrial integration development, avoid separation and confrontation, we must adhere to the promotion of traditional industry transformation and upgrading, can not be regarded as a low-end industry simply exit, adhere to open cooperation, can not be closed doors. This is actually equivalent to paying attention to the balance of the economy, as I just said, semiconductors are high-end manufacturing, but the downstream of semiconductors is sold to consumer electronics, the downstream of consumer electronics is residents' income, the downstream of residents' income is employment, the downstream of employment is the vast service industry, so only integrated development, there will be a larger foundation, there is such a development basis, which is the most important coordinate for our observation of the economy in the medium term.
So on this basis, finally briefly talk about the view of the stock and bond market, for the stock market, in the short term, I think the main clue is the marginal stabilization of the economy and the steady growth of policies, because this year's stock market once had no pricing anchor, this year is in the absence of exogenous cycles, GDP fell for the first time to a two-year compound 5 below, for the market there is no previous year can be used as a reference, so it lacks a pricing anchor. And once the policy is shot, I think the main significance is not how much it can pull up the entire GDP, but that it has such a pricing anchor, for the market he will feel that my past experience has not been completely broken, my policy has a bottom line, and it will extrapolate this expectation to the assumption of a series of years in the future, so in the short term we think we should remain positive in this process.
However, in the medium term, the overall macro picture is not particularly clear, and we need to further observe the landing of the entire modern industrial system and the hard standards we just mentioned, whether economic equilibrium can be formed. For the bond market, the medium term seems to be relatively more favorable, because the nominal GDP is low, in a sense there is a certain endogenous, we have just explained this logic, but in the short term interest rates may have two lines of risk, one is the PPI bottom we just talked about, which is equivalent to the logic of the economy. The other is the steady growth of policies. If one of these two can be true, it may have a certain upward driving effect on interest rates, and if the two resonate, it may bring the risk of interest rate rises in stages, so there should be some vigilance in this position.