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    Consumption, investment stabilization, real estate risk rise, wide currency will continue

    2019-03-14 13:55:38

    Haiqing FICC Channel Deng Haiqing Chen Wei

    Author: Deng Haiqing, chief economist at Wall Street knowledge; Chen Xi, Assistant Dean of Wall Street knowledge

    The industrial added value of January-February 2019 was 5.3%, excluding the Spring Festival factor of 6.1%, the market expectation of 5.6%, the former value of 5.7%; the total retail sales of social consumer goods was 8.2%, the market expectation of 8.2%, the former value of 8.2%; the growth rate of fixed assets investment 6.1%, the market expects 6.1%, the former value is 5.9%; the real estate investment growth rate is 11.6%, the former value is 9.5%.

    Economic data overall neutral weak

    The industrial added value is lower than market expectations. The industrial added value of “excluding the Spring Festival factor” is higher than market expectations. Consumption, fixed asset investment and market expectations are flat, real estate investment is higher than the previous value, and real estate sales and new construction have fallen sharply.

    Overall, the data is mixed. The good thing is that the industrial added value of the Spring Festival factor is better than the previous value. Consumption, fixed assets, and real estate investment have stabilized or rebounded. The difference is that the industrial added value has reached a new low since March 2009. Real estate sales and new construction started to fall sharply.

    Our overall view of the 2019 economy is bottoming out and weak shocks, and the risk of a sharp downturn in the economy is small, but the probability of a rapid economic rebound is also low.

    Industrial added value is more likely to bottom out

    The Bureau of Statistics has rarely published two industrial value-added data, one is 5.3% and the other is 6.1%. The former is the actual growth rate, and the latter is the growth rate after the Spring Festival factor is removed.

    Looking back at history, we can find that in 2011 and 2016, similar to 2019, there were cases where the industrial added value in January-February was lower than that in March of that year, which means that there is indeed an underestimation of industrial added value in January-February. . From this, we can infer thatThe probability of industrial added value in January-February 2019 is the near-term bottom, and the possibility of a rebound in March is very high.

    In terms of categories, compared with December, the growth rate of the mining industry dropped significantly, the growth rate of the manufacturing industry rebounded slightly, and the power thermal power dropped sharply. Historically, there has not been a year-on-year decline in the mining industry in 2016, and the decline in the growth rate of the mining industry is difficult to explain with the Spring Festival factor.

    From the point of view of PMI, it is basically in line with the seasonal decline in production in January and February, and the seasonal rebound in March. We speculate that the industrial added value will rebound in March.

    Consumption data slightly exceeded expectations

    From the total retail sales of consumer goods, the bottom 8.1% may have appeared in November 2018,December 2018 and January 2019 were both 8.2%.

    The growth rate of total retail sales of social consumer goods should actually be better than market expectations, because the multiple data during the Spring Festival and the high-frequency data of automobile sales all point to a further decline in consumption, but it has not appeared.

    The most surprising of these is the car sales data.January-February was -2.8%, while the average value of the fourth quarter of 2018 was around -8%. Car sales rebounded sharply year-on-year. However, China Automobile Association's car sales fell slightly from January to February compared with the fourth quarter of last year, a record low. From the base effect, the difference between the two is greater. January-February 2018 is the high base of the Bureau of Statistics. It is the low base of the China Automobile Association, but the result is completely opposite to the base effect. The Bureau of Statistics and China Automobile The car sales data of the association is quite different.

    Considering that the pressure on residential mortgage loans remains high and income expectations are uncertain, we believe that the strong rebound in total retail sales of consumer goods is less likely.

    Fixed asset investment continues to rise

    The turning point of the growth rate of fixed asset investment first appeared. In July and August of 2018, the recovery time has lasted for about half a year.The main reason is that the growth rate of fixed asset investment has been the longest, the largest, and the highest.

    But we can find thatThe rebound in the growth rate of fixed assets investment in this round is very weak.In the first half of the year, it only rebounded from 5.3% to 6.1%, which is completely incomparable with the investment growth rate that is much higher than GDP growth in history.

    This suggests that the weakness of fixed asset investment growth may become the norm.The main reason is that the Chinese economy has begun to shift from investment-driven to consumption-driven and innovation-driven. The slow growth of investment growth is a high-probability event, which is unlikely to have a significant pulling effect on the economy.

    From the perspective of the growth rate of infrastructure investment, there has indeed been a rebound, but the magnitude is weak.In January-February 2019, infrastructure investment growth rate was 4.3%, which was a rebound from the cumulative growth rate of 3.8% in 2018, but the range was very weak. The inflection point of infrastructure investment growth also appeared around August 2018, which was related to the acceleration of local bond issuance and wide fiscal plus, but in terms of effect, it actually continued to be lower than market expectations.

    From past experience, the growth rate of infrastructure investment> fixed asset investment growth rate> GDP growth rate is the normal state, and the current situation is completely opposite. The growth rate of infrastructure investment < fixed asset investment growth rate < GDP growth rate. The possible reason is thatThe tightening of implicit debts of local governments has made it difficult for Kaizhengmen to make up for the barriers. The changes in local government assessment methods have led to a decline in the enthusiasm of local governments and the improvement of China's high infrastructure investment dependency.

    For 2019, we believe that infrastructure is indeed an important factor in stabilizing the economy, but its pull may be lower than market expectations.

    Real estate data is seriously different

    The growth rate of real estate investment has rebounded significantly from last year.In 2018, real estate investment accumulated 9.5% year-on-year, and in January-February 2019, it rebounded sharply to 11.6%.This rebound may be related to the recovery of construction area.The growth rate of construction area has rebounded from 5.2% to 6.8%. From the perspective of type, housing is the absolute main force.showThere is indeed a peak in 2018, a construction after the peak of the new construction, and a rush to work in low stocks.

    However, real estate sales, new construction, and the growth rate of funds in place are all downhill. Generally speaking, these three are leading indicators.Real estate sales fell from the previous value of 12.2% to 2.8%, the new start from 17.2% down to 6%, and the in-place capital growth rate dropped from 6.4% to 2.1%. This indicates,Real estate leading indicators are indeed deteriorating, and real estate recovery in individual areas in January and February may be partial and case.

    Real estate is a key factor in whether the economy will stabilize and recover in 2019.The positive factor is that the inventory of real estate has dropped to the lowest since 2014, and the local government's policy of marginal relaxation and marginal interest rate are generally lowered, which is conducive to the recovery of the real estate market; but the unfavorable factors are high housing prices, high debts of residents, In the case of more than expected real estate sales in 2018, if sales decline in 2019, the overall expected real estate will deteriorate significantly.

    Avoid two misjudgments of the economic situation

    Based on the February economic data, we believe that we need to avoid two kinds of misjudgments:

    The first type of misjudgment is that the economic downturn is down, and then a strong stimulus is adopted.We believe that the current Chinese economy is shifting at a high speed to the medium and high-speed, and the decline of the economic growth center is in line with the changes in China's economic volume and development stage and development model. It should not be extremely pessimistic because of the economic slowdown, and then adopt strong incentives, resulting in Longer, bigger problems.

    The second misjudgment is that China's economy will recover quickly and be blindly optimistic about the economy.From the domestic point of view, it takes time for the growth of power to switch. No country can successfully transform itself in a short period of time. From the perspective of leveraged entities, whether private enterprise financing can be implemented remains to be seen. Real estate data has already appeared leading indicators to accelerate signs of deterioration, real estate risks. Intensified; from an overseas perspective, the global economy is expected to continue to decline, the US economy has been swayed, and the Chinese economy is rapidly recovering, and the possibility of a V-shaped rebound is very low.

    Reiterate that the bond bull market has not ended

    We believe that the possibility of maintaining a bottom shock in the economy in 2019 is high.The Lido factor includes the basic determination of the wide credit inflection point to support the private enterprise policy, the tax reduction effect gradually emerges, the infrastructure investment, fixed asset investment inflection point has passed, and the international trade policy conditions have improved; the negative factors include the infrastructure, real estate, residents, state-owned enterprises and localities The government has added leverage, and it is still difficult to judge whether the real estate is going up or down. It is difficult to change the trend of overseas economic deterioration.

    We do not believe that the economy will see a significant rebound in 2019, which means that the possibility of the central bank's monetary policy maintaining easing is very high.

    From the lessons learned in 2013 and 2016, if the central bank tightens monetary policy too quickly, it will easily lead to accelerated economic deterioration, which means that the central bank will spend more time on the currency than in the past.

    We do not deny that there are certain marginal improvements in the economy, which determines the possibility of a mad cow in the bond market is extremely low.In particular, the market value method, which is mainly fund and brokerage management, experienced the irrational behavior of swept long bonds and even long bonds after experiencing the painful lessons of the third and fourth quarters of 2016.

    However, we do not believe that the bond bull market is over.We believe that the most optimistic situation of the economy is that the bottom is stabilizing and slightly rebounding. This kind of recovery is inseparable from the support of a low interest rate environment, and the factors that deteriorate the economy beyond expectations are not completely negated.

    From the perspective of the central bank's monetary policy, we believe that under the background of the government's work report requirements, the central bank maintains the status quo is the base point. If there is risk, it may be more lenient, which determines that the long-term upside is small.

    Historically, the central bank's tight currency often needs two conditions: one is the economic recovery, and the other is the accumulation of risks. In the second half of 2013 and the third quarter of 2016, there was a significant economic recovery. In 2013, non-standard risk accumulation, and the third quarter of 2016 was the excessive expansion of bank balance sheets and inter-bank chaos.

    From the current point of view, the economy is more likely to stabilize the economy, but it is less likely to rebound. On the risk side, the only risk point is the arbitrage of the bill, but this has been basically contained and should not trigger the shift of monetary policy. The risk points need to be wide currency rather than tight currency, such as resolving local government implicit debt and real estate downside risks.

    From the perspective of currency transmission, the current policy of the central bank is to transfer the interest rate of the money market to other markets. If the overall interest rate of the bond market rises at this time, it will undoubtedly contradict the direction of strengthening the transmission of monetary policy. If the money market is transmitted to the bond market. It all fails, and we can hardly imagine what market the money market can transmit to.

    The spread between the money market interest rate and long-term debt is currently at a historically high level (excluding tight currency periods, such as the second half of 2013, the end of 2016-2017, etc.), if the central bank can maintain the current interest rate of the money market for a longer period of time. , long-end bonds already have a configuration value.

    We believe that the end of the bond bull market requires multiple factors, instead of just seeing the social turning point and the economy stabilizing, it will end the debt. We believe that the central bank will maintain the tone of the existing monetary policy for a longer period of time than the market expectation. The corresponding bond bull market will also last longer than market expectations. At the current time, the rational strategy is to buy more and more.

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    Editor in charge: Robot RF13015

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