For Fangguan City| "Ice and Fire" song - written at the beginning of the new year in 2018

At the beginning of the new year, there have been some new changes in China's macroeconomic environment. As a result of the intertwining of internal and external factors in the macro economy, 2018 will be the year of inflation.

The internal and external environment of the A-share market is undergoing profound changes this year. Retail investors are further marginalized, and the market is deeply understanding and digesting the connotation of "value investment".

At the time of market turmoil, Weifang Fund brings you an exclusive interpretation of the 2018 "Song of Ice and Fire"——

Retail investors are further marginalized

Looking back at the macro economy of 2017, it was somewhat unexpected that there was no "rapid recession" predicted by some economists. Indicators such as GDP, real estate, PMI, and exchange rate all show the "resilience" of China's macroeconomic growth and the level of government regulation, and the impact of the external environment on the domestic economy is also positive.

The "resilience" of economic growth is manifested in the capital market, that is, the SSE 50 has stepped out of the "slow bull" market, the large consumption represented by liquor medicine, the supply-side reform represented by steel nonferrous metals, the consumer electronics and 5G of Apple's iPhoneX series, the "big country heavy weapon" led by semiconductors, and the construction of Xiong'an New Area of the "Millennium Plan", etc.

Of course, it should be pointed out that the slow bull in 2017 is a structured market, and the "elephant dance" of the SSE 50 and the "mourning of the CHINext" exist at the same time.

The reason for this situation is not only the factor of policy guidance, but also the profound influence of the investment style and concept of overseas funds such as "Shanghai/Shenzhen Stock Connect" on the A-share market. Of course, the company's own industrial upgrading, concentration improvement and large-scale investment in research and development itself play a key role in "internal factors". Retail investors are further marginalized, and the market is deeply understanding and digesting the connotation of "value investment".

2018 will be the year of inflation

Entering 2018, There have been some new changes in China's macroeconomic environment:

Factors such as the loosening of the real estate purchase restriction policy in second- and third-tier cities, the increase in the governance and rectification of the financial industry, the undiminished intensity of environmental protection supervision, the economic recovery in Europe and the United States, the complexity of the situation in the Middle East and the listing of Saudi Aramco have prompted the international crude oil price to rise rapidly to $70 / barrel, and Trump's tax reform and policy of reviving the US economy have led to a weak US dollar, thus causing commodity prices to rebound.

The loosening of real estate policies will prompt a new round of "land grabbing tide" and the peak of construction construction, raising land prices/house prices; supply-side reforms and environmental protection supervision will not reduce the cost of raw materials and manufacturing for enterprises; the recovery of the European and American economies, the rise in crude oil prices and the weakening of the US dollar will promote the strengthening of chemical, energy and commodity prices, and will eventually be transmitted to the CPI, triggering inflation.

Thus, the result of the intertwining of internal and external factors in the macro economy in 2018: 2018 will be the year of inflation.

Where are the opportunities?

If inflation comes, where are the opportunities in the A-share market?

Simply put, there are opportunities for both industries and businesses with asset price attributes. Such as real estate jewelry, "coal flying color dance", precious Chinese medicine liquor and so on. Of course, starting from the background of the current lack of liquidity in the market, we should choose the leader, consider from the perspective of the margin of safety, and also consider factors such as valuation level, growth and cumulative growth.

Further analysis shows that there are certain opportunities in the building materials, decoration, furniture, home appliances and other industries pulled by the real estate chain.

Private enterprises involved in the "big refining" industry that cannot be entered will "reshape" the entire petrochemical industry, and there are investment opportunities for corresponding sub-sectors and companies.

The strong trend of the futures market for commodities such as copper, aluminum and steel represents investors' confidence in the global economic recovery and inflation expectations, which will be reflected in the performance of enterprises.

In addition to the main line of inflation, there is also the sub-main line of consumption upgrading; although its performance characteristics are not as obvious as inflation, they are more durable, growing and have a huge market space in the future.

After 1.3 billion people have solved the problem of food and clothing, the growth of the middle class and the inherent needs of pursuing a high quality of life based on the huge target population base will be a miracle that has never been seen in human history. Any investor who is optimistic about China's national fortunes should not miss this feast.

The demand for people's travel and vacation business brought about by the improvement of living standards and economic prosperity shows the characteristics: frequent, high-end, leading enterprises in aviation, hotels, tourism and vacations, culture and entertainment, education and training, medical care, food and beverage categories that advocate the concept of healthy life have long-term investment value.

In 2018, it is necessary to remind attention to the fact that the banking industry has been cleaned up and rectified, the new stock issuance has increased unprecedentedly since 2017, the continuous expansion of the market and the implementation of the "Hong Kong Stock Connect" and the rumors of the "Shanghai-London Stock Connect" are all tests of the liquidity and investment philosophy of the A-share market.

We believe that the internal and external environment of the A-share market is undergoing profound changes, and the concepts and practices of "small for beauty", "low-priced stocks below 5 yuan", and listed companies that have "told stories" and dazzling capital operations to increase their stock prices will not be able to gain a foothold and survive in the market.

Adhering to the concept of value investment: with the help of our professional advantages and reasonable risk control management system, Weifang Fund selects those value-based enterprises with excellent governance structure, huge product/service market space, core competitiveness, reasonable or undervalued valuation level, high return on net assets, strong endogenous growth momentum and outstanding industry status as alternative investment targets, independent and prudent, patient and diligent, integrity and calmness, and create long-term and stable value for customers.

Risk Warning: Investment is risky, and the choice should be cautious. This article is for knowledge sharing only and does not constitute any investment advice. Past performance is not indicative of future performance and investments may result in loss of principal. Anyone who makes investment decisions based on this is at their own risk.

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