I dare not think that so many negative things will force out many vigorous policy expectations?
Author | Xie Xiaobai
This weekend, the wind is blowing.
First, the CPI and PPI both fell, which was a big surprise, and then the China-EU talks, which did not even wait for the joint statement, which made people break the defense.
Then Wang Shi Abu Dhabi's speech was 404, as well as the president of a bank who suddenly jumped off the building in Tianjin...
I have to say that the news gives me a feeling that black clouds are crushing the city.
If you add all the details of the market on Friday, such as: the micro-cap stock index fell sharply, setting a record for a one-day decline this year.
The CSI 500, CSI 300, and SSE 50 all recorded gains.
This makes me even more alarming:
With so many bearishness, how strong will policy expectations be forced?
01
Let's first look at the unexpected double decline in CPI and PPI.
Whether this data is good or bad, everyone will look at the following, and you will know it in your heart.
Specifically, the CPI in November fell by 0.5% year-on-year and 0.5% month-on-month, which looks like the decline is not large in absolute terms, but has returned to the level of November 2020.
It is especially worth noting that this slowdown is very fast, so let's make a picture for you to feel:
No, it took us only two years to reach the "low" level of CPI-0.5 that took the Japanese economy five years after 90 years.
The good news is that such a slowdown could mean that the value of our currency is increasing and consumers are able to buy more at lower prices.
However, the bad news is that it will be more difficult for us to make money, after all, the pressure on manufacturers to make profits will increase, and they will have a considerable incentive to seek to "reduce costs and increase efficiency".
In addition, the continuous decline in CPI and PPI may exacerbate the debt burden, affect corporate earnings and household consumption, and then drag down economic growth.
Of course, this is something that has already happened, and the capital market has already "priced" and even begun to digest it.
So, I'm more concerned about what measures we will take to make relevant adjustments, and in this process, which sectors will benefit?
However, in the course of my inquiry, I was shocked by the results.
02
Former central bank governor Yi Gang also predicted in June:
CPI is expected to gradually rebound in the second half of the year, and the year-on-year growth will be above 1% by December;
Coincidentally, at the press conference of the State Council New Office on July 14, Liu Guoqiang, deputy governor of the People's Bank of China, said:
There is no deflation on the mainland at present, and there will be no risk of deflation in the second half of the year.
CPI is expected to start gradually rising after August, and is expected to move closer to 1% by the end of the year.
This shows that there was a miscalculation!
Of course, the miscalculation here is actually a good thing in my opinion, because it means:
A stronger and more practical fiscal policy will be implemented.
The reason is not complicated, and fierce medicine can cure scabies.
After all, at this stage, it is imperative to boost consumer and investor confidence, increase domestic and external demand, promote economic recovery, and prevent the situation from deteriorating further.
So the question now is, to raise domestic demand or external demand, which represents a different path choice.
03
The just-concluded China-EU summit did not turn out to be satisfactory.
You must know that even the joint statement was not accepted this time, which is in stark contrast to the sporadic results after the Sino-US meeting.
This shows that there is a high probability that the two sides have failed to reach any effective consensus this time.
It should be noted that in order to be able to talk about the results, we have done a lot of homework in the early stage, such as:
Before the summit, our side lifted sanctions on Lithuania, sending a signal of détente.
So, we see that the press release on our side has a very high positioning of the EU, emphasizing:
"Mutual respect and support between the two sides, as well as the docking of development strategies".
But the EU side obviously does not accept this set, and the former President of the European Council, Michel, withdrew early, and then there was a press release that contradicted the tone.
In the press release, the EU noted the importance of maintaining a balanced trade relationship and called for joint efforts to ensure that Russia stops its aggression against Ukraine.
It also urges us to make improvements on issues such as transparency in the business environment, predictability in supply chains, industrial subsidies and trade barriers...
It's just a pot that doesn't open and which pot to mention.
Overall, the positions of the two sides on key issues remain far apart.
I have to say that the photovoltaic and new energy that were pinned on high hopes before have a bad fate!
04
At this time, when reviewing last Friday's trading situation, we will clearly know why:
Will the market style switch significantly?
Specifically, the collective decline in small-cap and micro-cap stocks contrasted sharply with an increase in overall market volume.
The sharp drop in the micro-cap index, in particular, was the biggest one-day drop of the year, which is often seen as a precursor to an imminent market rally.
This is clearly a mysterious force betting on policy expectations.
After all, in the context of pressure on external demand, domestic demand must be raised.
In addition, against the backdrop of the central bank's failure to introduce a monetary policy that effectively boosts CPI in the second half of the year, the possibility of a RRR cut and interest rate cut in December is already unlimited.
This is also the reason why when I reviewed in the circle, I proposed that "3,000 points are expected to be regained next week".
epilogue
In the current market, confidence is more important than gold.
Next week, there are several good opportunities to build consensus and restore confidence, such as:
The statements of the meeting, the adjustment of central bank policy and the trend of US Treasury yields will affect the choice of the market and the new main direction.
This determines the direction of the new main line after 3000 points in the market.
I'll help you keep watching
In addition, those contents that are not conducive to unity, I put in my "circle"
Congratulations, I am Xie Xiaobai, who hopes that your wealth is free.
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