Text: Yan Xiang, Xu Ruchun
Key conclusions:
There are three areas to focus on this week.
First, on July 30, the Political Bureau of the CPC Central Committee held a meeting to analyze the current economic situation and deploy economic work in the second half of the year. The meeting judged that the current situation is generally stable and stable, but at the same time, it pointed out that the adverse effects brought about by changes in the external environment have increased, the effective domestic demand is insufficient, the economic operation is differentiated, and there are still many risks in key areas. In terms of macro policy, the meeting required macro policy to continue to exert force, reserve early and launch incremental policies in a timely manner. In terms of fiscal policy, it is necessary to speed up the issuance and use of special bonds and make good use of ultra-long-term special treasury bonds; In terms of monetary policy, it is necessary to use monetary policy tools to increase financial support for the real economy and promote the reduction of comprehensive social financing costs. Recently, macro policies have stepped up. A few days ago, the National Development and Reform Commission and the Ministry of Finance issued the "Several Measures to Support Large-scale Equipment Renewal and Consumer Goods Trade-in" to coordinate about 300 billion yuan of ultra-long-term special treasury bond funds to support the renewal of large-scale equipment and consumer goods. Second, in July, the mainland's manufacturing PMI fell to 49.4%, indicating that the industry's prosperity has contracted to a certain extent. The production and new orders indices fell to 50.1% and 49.3%, respectively, due to the impact of the off-season, insufficient demand and extreme weather. The new orders index has been below the boom and bust line in the past three months, reflecting that there is still a lack of demand. This was followed by a significant decline in the price index, with the raw material and ex-factory price indices falling to 49.9% and 46.3% respectively. The pullback of these two price indicators reflects a decline in the overall price level of the manufacturing sector. In terms of inventories, finished goods inventories fell and raw material inventories rose. The import and export boom of the manufacturing industry has picked up, and the new export orders index has risen slightly to 48.5%. The PMI for large enterprises rose to 50.5%, but the PMI for small and medium-sized enterprises fell to 49.4% and 46.7%, respectively. The overall prosperity of large enterprises has also contributed to the stability of the manufacturing industry. The production and business activity expectation index fell to 53.1%, the lowest point since the end of 2022, indicating that macro policies need further support. Although the PMI of the construction and services sectors has declined, it is generally in the expansion range, and although the business activity expectation index has been lowered to a certain extent, the expectations of non-manufacturing enterprises remain generally optimistic. Third, on July 31, the Federal Reserve announced the results of its July interest rate meeting, keeping the federal funds rate unchanged at 5.25%-5.5%, in line with market expectations. The meeting was more optimistic about disinflation than before, and more attention was paid to economic employment pressures. Powell's speech was generally dovish, signaling a rate cut in September at the earliest: upside risks to inflation have diminished; On the economic (employment) side, there may be some signs of weakness, but the overall situation is not bad. Unemployment remains low and the labor market is more balanced, but downside risks are real. The market's interest rate cut expectation has risen from 68BP of the year's cumulative interest rate cut before the meeting to 72BP. In the short term, the United States economy as a whole is still in a marginal slowdown trend, easing transactions are expected to continue, and U.S. stocks and U.S. bonds generally benefit from the easing of liquidity; The global equity market has better allocation opportunities in the context of interest rate cut expectations and a weakening dollar. However, from a medium-term perspective, the risk of postponement of interest rate cuts from September may increase again: financial easing since June may lead to a rebound in the United States economy and inflation, while housing and resource price pressures still exist, indicating that this round of Fed interest rate cuts may be difficult to achieve overnight, and the risk may increase again from September, when market interest rate cut expectations do not rule out the possibility of correction, and need to continue to pay attention. Risk warning: geopolitical risks exceed expectations, economic data is less than expected, overseas markets fluctuate sharply, etc.
This article is from the report "Weekly Review and Outlook: Fed Rate Cut Expectations Rise Significantly" released by Huafu Securities Research Institute on August 4, 2024.
Analyst: Yan Xiang, S0210523050003 Xu Ruchun, S0210523060005 new book recommendation |《Pursuing the Road to Value: 1990~2023 China Stock Market Review》
This book systematically reviews the market trend of A-shares from 1990~2023 since the establishment of the Chinese stock market, and pays more attention to the use of quantitative empirical evidence to explain market changes. The author tries to construct a "four-in-one" analytical framework for review, that is, macroeconomy, corporate earnings, interest rate level, and asset price comparison. Each year's market review is divided into three parts: the first part is a review of major events, which provides a narrative description of key events affecting the capital market; The second part of the economic situation analyzes the macroeconomic situation and the changes in the earnings and valuation of listed companies; The third part of the market characteristics analyzes and explains the structural characteristics of the stock market in the current year. The last two chapters of the book provide an overview of the investment framework, methodology and key issues of the A-share market.
In order to do a better job in the review research, the new version of "The Road to Pursuing Value" has made a lot of revisions, including: first, it has continued to write the review of the A market in the last three years from 2021 to 2023; The second is to reconstruct the annual strategic topics, and the methodological part with universal significance is summarized in the last two chapters of the book for a framework summary, so that readers can better understand the basic logic of A-share operation; the third is to increase a large number of special columns to think and discuss many special issues; Fourth, add inductive tables and data summaries to highlight the reference book attributes of this book; Fifth, the content of the original chapters has been supplemented and revised to a considerable extent. Overall, no less than 40% of the new version has been updated and revised.
At a time when the mainland is speeding up the construction of a financial power, the era of a comprehensive registration system has begun, and the capital market has attracted widespread attention from the whole society, we sincerely hope that the new edition of "The Road to Value" can help readers better understand the historical details of the past A-shares, so as to rationally and scientifically judge the short-term, medium- and long-term trends of the future market.
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