Dr. Ma Hongman, a well-known financial host and financial commentator, recently shared the top ten predictions for 2024 given by CICC, a well-known top brokerage firm in China.
Anyone who cares about finance and economics should be deeply impressed by the top ten predictions for 2023 released by CICC at the end of last year. Some netizens commented on this, "CICC bought it in reverse, and the villa was by the sea."
In the first three quarters of 2023, CICC achieved a net profit attributable to the parent company of RMB4.61 billion and an operating profit margin of 26.5%.
Let's take a look at CICC's top 10 predictions for next year, and at the same time, I will analyze whether the prediction can be correct.
The first and second of the top 10 forecasts are related to China's economy and A-shares. CICC expects China's economy to stabilize and rebound in 2024, and A-shares will improve with policy easing and liquidity improvement.
Economically, I agree. It is almost a certainty that China's GDP growth rate will achieve the 5% target set at the beginning of the year in 2023, and this year is the first year of the post-epidemic era, and many things are recovering, and it is not a big problem to achieve stable growth and continue to stabilize and rebound in 2024 after a smooth transition. It is worth noting that the mainland's GDP will be roughly around 127 trillion yuan in 2023 and will exceed 130 trillion yuan in 2024.
Can the A-share market improve?
From a policy point of view, it is worth looking forward to. Internally, monetary and fiscal policies continued to exert force, and externally, the Federal Reserve ended its monetary tightening policy, and the dollar flowed back to the world. Both inside and outside are positive, and theoretically 2024 can at least usher in a calf.
However, we can't use common sense to infer that A-shares, in the case of market confidence is not fully restored, no amount of positive may not work, just like this year's policy is actually good, but the Shanghai Composite Index fell below the 3,000-point mark, and the three major stock indexes all ended in the negative line throughout the year.
The third and fourth projections are relevant to the United States.
CICC believes that the U.S. economy will recession next year due to the Fed's tight monetary policy. In addition, the U.S. recession has adversely affected U.S. stocks, which is bearish on the U.S. stock market.
I have reservations about these two projections.
First, the Fed did not raise the federal funds rate again in the second half of this year, and it is almost certain to cut interest rates in 2024, depending on whether the first rate cut will be completed in the first half of the year or the second half of the year, so there is no tight monetary policy, at least not tighter than this year.
Second, the US GDP in the third quarter of 2023 rose by 4.9% quarter-on-quarter, and the growth rate in the fourth quarter will slow down, and it will be difficult to maintain the "anti-sky" data in the third quarter of this year next year. However, a narrower rise and a recession are two different things. Economically developed countries have high GDP quality and a large base, and it would be good if they could maintain a growth rate of more than 2%. It is not much of a problem for the United States to reach this level in 2024 after monetary policy has eased.
Third, this year's Dow Jones index hit an all-time high, and the Nasdaq is not far from the previous high. In the short term, U.S. stocks may adjust, but in the long run, U.S. stocks in 2024 will not be too bad based on the Fed's interest rate cut, and may even hit new highs.
The fifth prediction is that there is a certain upside in Hong Kong stocks, and it is bullish.
I remember that CICC's forecast for 2023 is to be bullish on Hong Kong stocks and Hong Kong stocks to outperform A-shares in stages, but it was slapped in the face, the Hang Seng Index fell by 14% for the year, and if it is calculated from the January high, it will fall even more, losing to A-shares in the "ratio difference".
I am still not very optimistic about Hong Kong stocks in 2024, even if there is an expectation of dollar easing, the reasons are more complicated, and I will not spend a lot of time in this article.
CICC's sixth and seventh forecasts are about the exchange rate of the RMB and the US dollar, which roughly means that in 2024, the RMB exchange rate will rise and the US dollar index will be bearish.
In my opinion, these two items are probably the most likely to be accurate, but why do you say that? The reason is simple, it has to do with US monetary policy.
The strength of the US dollar this year is mainly due to the fact that the Federal Reserve continues to raise interest rates, and when capital sees that the interest rate on US dollar deposits is so high, what do they do when they invest in assets in other countries, just exchange them for US dollars and deposit them on a regular basis, and "buy US dollars and sell foreign currencies" has become the first choice of capital.
The Fed's interest rate cut in 2024 will cause the yield on US dollar assets to fall, and "sell dollars to buy foreign currency" will become the mainstream choice, which will cause the dollar index to fall, the dollar to depreciate, and the currencies of other countries, including the yuan, to appreciate.
CICC's eighth biggest forecast for 2024 is that U.S. inflation will continue to fall, and that's fine.
The US CPI rose 3.1% year-on-year in November, down a lot from the 9.1% year-on-year increase at the peak of last year, and the continued high interest rates basically suppressed prices in the United States. At the same time, next year's price comparison base is this year, and the high base effect will help stabilize the US CPI. CICC's prediction has a high probability of coming true.
The second-to-last forecast is related to the domestic property market. CICC believes that the overall policy is favorable, and China's real estate market will stabilize and recover in 2024, benefiting leading real estate listed companies.
I believe that this is not recognized by most people, the main reason is that everyone is overwhelmed by high housing prices, and deep down hopes that housing prices will continue to decline, and oppose any view that the real estate market will stabilize and recover.
It is recommended that everyone should avoid emotionality, don't be preconceived and stubborn, just like Dong Yuhui said, "Don't care, don't must, don't be stubborn, don't be me". In fact, it is unlikely that the country will let the property market land hard, and there are ways to use it, not to use it because it is worried that once it is too strong and returns to the era of soaring housing prices, the efforts and costs paid in the past few years will be wasted.
As long as the real estate market is unstable, favorable policies will continue to come out, and negative policies such as real estate tax have been put aside, but more than a year ago, it was still huge, and it feels like it will be introduced soon, and now it is not even mentioned.
With the continuous increase of policies, the real estate market will usher in a bottoming out and stabilizing in 2024. Of course, stabilization does not mean that housing prices rise, the rebound in transaction volume is the focus of the policy, and the "soft landing" means that housing prices will not fall sharply, and time is exchanged for space, and housing prices are passively reduced through the increase of social income.
Therefore, CICC's prediction is not as complete nonsense as everyone thinks.
The last prediction is about the brokerage industry, which has little to do with you, so I won't analyze it.
What do you think of CICC's outlook for 2024 compared to the top 10 predictions for 2023? I think it will be better than 2023, with a high probability of accurate judgment and a few that need time to be answered.