The real estate market may be beyond the imagination of the market!
Last Friday, the real estate continued to release, but the market once appeared "domestic capital responded flatly, foreign capital responded positively" situation, many people in the industry are still bearish. This morning, the China Financial Times, the central bank's leading media, once again voiced: the mortgage interest rate will drop significantly in the future.
The leading brokerage CICC said this morning that aside from the short-term game and event factors, the real estate market itself is running in the direction of slowing down the downward slope, and the recent package of policies will help the current cycle usher in a faster turnaround in the 6-12 month dimension.
The benefits of real estate seem to be being passed on to the real thing. In early trading today, the consumer sector surged sharply. The futures market is even more crazy, and most of the main domestic futures contracts have risen. Shanghai silver rose more than 7%, soda ash and alumina rose more than 4%, and Shanghai copper and Shanghai nickel rose more than 3%.
It is worth noting that the logic of inflation also began to work at this time. This morning's data shows that on May 20, the price of pigs in most parts of the country has risen to more than 8 yuan, with the highest price rising to 8.3 yuan and the lowest price rising to 7.3 yuan.
The deduction of real estate logic
The logic of real estate lies in the blessing of the equity market is very obvious. Although the response of domestic investors to the recent real estate policy is relatively flat, from the perspective of foreign investment, it is a blockbuster positive. On May 17, such funds bought nearly 14 billion yuan.
In early trading today, we can see two types of real estate-related assets outperforming. Looking at the secondary market, consumer stocks are clearly stronger.
Looking at the futures market, the performance is even crazier. Among them, it has to be said that soda ash is closely related to real estate, the product rose nearly 5% today, and Shanghai silver and Shanghai copper are also sharply stronger (although there are international factors, but it is also related to the demand caused by domestic real estate policies).
Guotai Junan Securities released a research report saying that the current policy strength will help improve the expectation of real estate fundamentals, and the follow-up will pay attention to the use of fiscal means and the promotion of local "trade-in". It is estimated that the acquisition and storage of new houses will reduce the inventory of real estate enterprises to the desired level within 6 months, which may require a capital scale of 2.6 trillion to 4.4 trillion yuan, while the original price acquisition may require a fiscal discount of 0.8 percentage points.
CICC said that aside from the short-term game and event factors, the real estate market itself is moving in the direction of a slowing downward slope, and the recent package of policies will help the current cycle usher in a faster turnaround in the 6-12 month dimension, so as to end the rapid adjustment phase since 2021 and transition to a relatively stable stage. As the real estate cycle stabilizes, the sector is expected to see a considerable round of revaluation. Although there is a certain amount of front-loading in recent trading, the sector gains (about 40% cumulatively) may not have overdrawn the potential height of this round, so we can maintain a positive attitude. If the subsequent stock price pulls back and consolidates, the allocation can be further increased.
The China Financial Times issued an article saying that from the perspective of promoting the marketization of mortgage interest rates, the current is a good time window, the economic recovery trend is increasing, and all parties have a deeper understanding of the major changes in the supply and demand relationship of the real estate market, and further optimizing the relevant policies is to follow the trend. Brokerage China reporters understand that many local governments want to cancel the lower limit of local mortgage interest rates. Industry insiders judge that if the lower limit of mortgage interest rates is canceled in most cities across the country, mortgage interest rates will drop significantly in the future, which will help continue to release rigid and improved housing demand and ease the pressure on real estate companies to collect payments.
The fulcrum of the logic of inflation
The positive logic of real estate will boost income expectations, and the reversal of income expectations is an important fulcrum for the strength of the price index. Therefore, this is also the starting point of the logic of inflation. And the fulcrum of the inflationary logic is "pork". In early trading today, the pork index in the secondary market also rose sharply.
The logic of pork is to rise. According to the data of agricultural industry and economic information, on May 20, the price of pigs in most parts of the country has risen to more than 8 yuan, the highest price has risen to 8.3 yuan, and the lowest price has risen to 7.3 yuan. Specific to various regions, the pig price in East China rose to 7.8-8.2 yuan, the pig price in the southwest region was 7.4-7.9 yuan, the pig price in Central China was 7.6-8.1 yuan, the pig price in North China was 7.7-8.0 yuan, the pig price in Northeast China was 7.6-8.0 yuan, and the pig price in South China was 7.3-8.3 yuan.
Data from Tianfeng Securities shows that on the supply side, the slaughter of large pigs in the early stage is basically over, and the current large pig inventory is at a low level (May 2024 is different from the trend of previous years, the standard fertilizer price spread is still positive in mid-May, and the price of large pigs is relatively firm), and the average weight of slaughter last week fell to 125.30kg (125.41kg last week). On the demand side, due to the strong performance of Tuesday breeding last week, the phenomenon of second breeding and slaughtering enterprises rushing to buy pig sources for many days has occurred, and the weekly average slaughter volume of sample enterprises decreased by 2.11% month-on-month, and the storage capacity rate of frozen products in slaughterhouses last week was 17.18%.
Huatai Securities believes that looking forward to the market outlook, supported by short-term (pressure fence / Eryu continues to enter the market) and medium-term (tightening supply and demand pattern), pig prices are likely to rise and fall. Considering that the continuous rise in pig prices may drive the stock price, the increase in pork prices will drive the CPI or the inflation expectations generated, and the sow inventory will be difficult to repair in the short term, etc., or drive the pig price to exceed the expected opportunity.
How does the market play out?
At present, most funds may not be aware of the implications of this intensity of property policy. The expectations released by these policies may not be limited to the real estate sector, but to support the entire economy. This also means that if the follow-up policy effect is less than expected, there will be stronger measures. In this process, the equity market does not rule out a process of spike.
Guotai Junan believes that the expectation will no longer be revised downward, and the uncertainty will fall, which is the key driving force for China's stock market to rise. Different from the situation of high expectations and high positions in the stock market in 2023 but optimistic expectations continue to be disappointed, after years of adjustment and stock market volatility in early 2024, the stock market is characterized by low expectations, low expectations and low positions. The low consensus implies potentially unexpected room for returns and a more positive response to marginal positives. The key change in the current market is the decline in uncertainty from the economy, policy, and equity markets, which will drive investors' risk acceptance, expectation repair, and position covering. Despite the great uncertainty of the past, there is still behavioral and thinking inertia, which is manifested in weak data and stock market volatility. However, the marginal combination of RMB stability + domestic demand policy + rising reform expectations has smoothed the logic of China's assets. In the middle of the year, the investment opportunities dared to reverse the layout, and the stock market fluctuated and rose.
Mu Yiling of Minsheng Securities said that he should be more optimistic about resources and increase opportunities in the large financial sector. In the process of "moving from virtual to real", there has been a change in China and the United States: in order to maintain financial stability, there is room for the rise in the price of real assets. After a brief underperformance in relative returns, the logic of resource stocks is strengthened: copper, coal, aluminium and precious metals, oil, resource transportation (oil transportation, dry bulk, etc.). In the "definancialization" world, if the financial sector achieves tail risk resolution, then the combination of rising profits + killing valuations in the past ten years will be transformed into opportunities for earnings bottoming + valuation repair: banking, insurance and real estate.
Editor-in-charge: Wang Lulu
Proofreader: Li Lingfeng