The rise of Chinese assets around May Day is very amazing!
Let's look at the data first, during the "May Day" period, the Hong Kong stock Hang Seng Index rose by more than 4% to lead the world, and the Hang Seng Technology Index soared by more than 7%.
Looking ahead, the Hang Seng Index has closed higher for nine consecutive trading days, the longest winning streak since February 2018.
Since the January low, the Hang Seng Index has risen by 25%, properly entering a "technical bull market".
Although the growth rate of A-share related indices is not as high as that of Hong Kong stocks, it has also maintained a steady upward rhythm, and has maintained a trend of "second rush and breakthrough" since late April.
For this round of sudden market, I believe that many A-share investors are a little "confused".
I didn't expect it.
Let's talk about two fundamental data, one is PMI, and the other is a quarterly report.
In terms of PMI, the manufacturing PMI in April was 50.4%, although it was still in the expansion range, it fell by 0.4 percentage points from March.
In terms of breakdown, PMI expansion is mainly driven by the production index, while the orders index (demand) and real estate are the main drags.
This obviously does not bode well.
The second is a quarterly report.
As of the end of April, the first quarterly report has been released, and on the whole, it is not optimistic.
The net profit of all A-shares in Q1 2024 will be -4.7% year-on-year, with negative growth for four consecutive quarters, down 2 percentage points from Q4 in 2023, indicating that the performance growth rate is still bottoming out.
This dismal performance data also shows the cold reality -
It will take time for domestic demand to pick up.
If the above two trends cannot be improved in May and the second quarter, then the trend in the second half of the year is not optimistic.
Since the reality of China's economy is still cold, why have A-shares + Hong Kong stocks risen sharply recently?
The key is the expected change.
Today, we will analyze it from the perspective of the game between China and the United States.
As we all know, this round of U.S. stock bull market comes from the strong dollar effect brought about by the Federal Reserve's interest rate hikes, as the U.S. dollar continues to appreciate, driving a large amount of capital into the United States, pushing up the valuation of U.S. stocks.
At the same time, investment is booming, domestic demand is strong, unemployment remains low, and the U.S. economy is thriving.
In terms of international competition, the United States not only sucked up China's capital, but also caused China's GDP to fall below 65% of the United States again, widening the gap between the economic scale of the two countries and allowing the United States to maintain its competitive advantage.
Judging from the superficial data, Biden has "won" in the past four years.
As long as this situation continues until November this year, the road to re-election for the elder Biden is basically no suspense.
In order to achieve this "strong dollar effect", Biden did not hesitate to use all means to increase leverage during his tenure.
2021-2022 will be dominated by over-issuance of money, and 2023 will be dominated by fiscal expansion, and the scale and magnitude of leverage are rare in US history.
But the strong dollar effect also has side effects, if you smoke too much, you will become addicted, and it will become poison.
On the one hand, this will lead to a spike in the U.S. debt ratio, a decline in the marginal dividend, and an unsustainable increase in leverage.
On the other hand, it will also lead to the deformity of the structure of the US economy.
In recent years, as the strong dollar effect continues, the economic growth of the United States has been mainly driven by three aspects-
The first is the growth of the service sector.
For example, software industries such as AI + cloud computing, expansion of medical benefits, and education of international students.
The second is the rise in energy prices.
The United States is the world's largest oil producer, as well as one of the six largest exporters.
This round of energy price increases, the United States should not make too much money.
Looking at the states with the fastest GDP growth in the United States in 2023, they are concentrated in the central region represented by Texas and Alaska, and their main industry is oil.
Washington state in the upper left has benefited from the AI boom (Microsoft and Amazon are here), while Florida in the lower right has benefited mainly from the real estate boom.
The third is the growth of investment income.
Whether it is the rise in U.S. stocks or the rise in real estate prices, it has brought about the growth of wealth of the propertied class.
It can be seen that this is a typical process of "moving from reality to virtuality".
On the other hand, prosperity is the continued "deindustrialization".
Taking the data of the first quarter of this year as an example, from January to March 2024, the total value of U.S. exports of goods was 507.076 billion US dollars, a year-on-year decrease of 0.3%.
Under the strong dollar effect, it will definitely weaken the export competitiveness of US domestic goods, and the decline in exports is inevitable.
On the other hand, in order to remain competitive, U.S. companies will do everything they can to relocate their industries, even if not in China, to Southeast Asia and Mexico.
Although industrial transfer and deindustrialization do not affect the rise of U.S. stocks, after all, there are few manufacturing companies left in the U.S. stock market, and industrial transfer can also bring about lower costs and higher profits;
But in the end, there will certainly be one result - a rise in unemployment.
Looking at the U.S. economic data for the first quarter of 2024, the actual annualized GDP recorded 1.6% quarter-on-quarter, significantly lower than the Bloomberg consensus forecast of 2.5%, and the lowest growth rate since 2022Q2.
Among them, the biggest drag on the subdivision is the decline in the export side.
In April's latest employment data, new non-farm payrolls fell sharply to the lowest level in the past six months, the unemployment rate rose to 3.9%, and hourly earnings growth slowed month-on-month.
And job openings fell sharply in March, pointing to a clear trend of cooling in the U.S. labor market.
You see, the decline in exports + the rise in unemployment, coupled with the soaring debt ratio, will make it difficult to sustain leverage......
All indicators point to the fact that this round of the US economic boom is approaching an inflection point.
When the U.S. economy is no longer optimistic, international capital will naturally flow out to find more worthwhile assets.
Look at China again.
In this round of China-US game, China's strategy has been very clear, and the core is two sentences:
First, compete for strategic determination.
Second, you hit yours, I hit mine.
In the diplomatic war, the United States wants to create an Asian version of NATO, linking Japan, South Korea, the Philippines, and Australia in an attempt to increase the risk factor and force foreign capital to flow out of China at an accelerated pace through provocations in the South China Sea.
China does not entangle itself with it in the South China Sea;
Instead, they chose to make moves in the Middle East, thousands of miles away, and weakened the United States' position in the "petrodollar" through Iran-Saudi reconciliation, the Palestinian two-state solution, and the Red Sea incident.
In the trade war and technology war, the United States has continuously imposed sanctions and raised tariffs to suppress Chinese companies operating normally in the American market, such as the recent titok incident.
China will not entangle itself with these incidents and engage in tariff retaliation wars;
On the contrary, it has increased its efforts to open up, such as building the world's largest RCEP free trade area, promoting two-way visa-free travel in Southeast Asia and one-way visa-free access in Europe, and attracting European and American businessmen to invest in China.
Recently, Tesla has been approved for the FSD full self-driving program in China, and Musk also intends to increase investment in China, and the layout of the design and R&D center in China is one of the landmark events.
In the economic war, the United States has strengthened the dollar effect, intending to exacerbate China's economic crisis and trigger social unrest in China by sucking up Chinese capital.
China is also not entangled with it in currency and plays the leverage game;
On the contrary, it is bent on strengthening industrial investment and promoting the development of new quality productive forces and large-scale equipment renewal.
From February to March, the policy of new quality productivity has been pushed for a round, and the equipment renewal and trade-in policy in the second quarter are intensively moving.
Let's look at recent domestic policies, whether it's the local provinces and cities below, or the Politburo meetings above.
The core is just one keyword: "trade-in".
At the local level, the trade-in of industrial equipment, consumer goods, and automobiles in various provinces and cities is frequently landing.
Taking automobiles as an example, the purchase of new energy vehicles in various places can receive a subsidy of 10,000 yuan according to the policy, which is expected to bring an incremental scale of about 1 million to 2 million vehicles to the domestic market, that is, an increase of about 4-8%.
The Politburo meeting at the end of April brought something new.
The focus is on the sluggish real estate market, and the same "trade-in" strategy is used to deal with it, and new ideas such as government collection and storage, China's version of "two houses", and the National Housing Bank have been proposed.
At the beginning of April, Zhengzhou has fired the "first shot" of the implementation of the housing "trade-in" policy, and the multi-city real estate commercial loan and purchase restriction easing have entered a policy-intensive period.
At present, once the Zhengzhou pilot is successful, it will soon be promoted in more first- and second-tier cities to promote the recovery of domestic demand economy.
In this round of Sino-US economic game, you play with your currency to increase leverage, and I play with my industrial supply-side reform.
Those who play currency leverage will sooner or later face a stagflation situation similar to that in the United States in the 1970s, where inflation is always high and the economy has to be mired in a quagmire.
If you come out to mix, you will have to pay it back sooner or later.
Playing with industrial supply-side reform is slow to produce results in the short term, but in the long run, it is the ultimate prescription to enhance economic vitality.
It is believed that as long as China can maintain its strategic focus, it will surely usher in a reversal of the economic war in the future.
You see, the recent acceleration of international capital into China through northbound funds and the longing of Chinese assets is essentially a re-bet on this round of Sino-US economic game.