20151116-光大证券-宏观经济周报_实体投资意愿不足_经济前景谨慎乐观_31页_1mb

China's Economy Summary

Core Content

• Economic Outlook: The Chinese economy remains weak, with both demand and supply foundations unsound. Despite the introduction of pro-growth policies, investment willingness in the real economy is still limited, and more easing measures are needed to support continued growth.
• Real Economy: Production remains weak, and the six largest power generation groups show a narrowing YoY decline in coal consumption, with the capacity utilization rate stabilizing at a low level. Real estate demand has declined, but supportive policies are expected to maintain recovery.
• Inflation: Inflationary pressure has eased due to declining food prices, particularly from pork and grain price reductions. CPI is estimated to be around 1.3% in October, while PPI is expected to decline further, though the pace may slow to about 5.8%.
• Capital Market: The capital market remains cautious and slightly optimistic about the economic outlook. The macro confidence index is at -0.70, indicating continued pessimism. However, the market strategy confidence index is up, suggesting optimism about the stock market and potential investment opportunities.
• Stock Market: The stock market experienced a small decline, with the Shanghai Composite Index falling 0.3% to 3,581. However, the financing balance continued to rise, reaching 1.16 trillion yuan.

Main Points

Real Economy

• Weak Investment: The real economy shows limited investment willingness, which weakens the effectiveness of loose monetary policies and restricts financing demand.
• Production: Despite pro-growth policies, production remains weak, with high-frequency data showing continued slow growth.
• Real Estate: Real estate sales growth in 30 major cities slowed to around 10%, but continued policy support is expected to maintain a recovery trend.
• Industrial Prices: Industrial prices continue to fall, with PPI declining 0.3% in the week of November 2-8, indicating persistent industrial deflation.

Capital Market

• Pessimistic Outlook: Capital markets remain pessimistic about the economic outlook, with a focus on weak domestic and foreign demand, and limited investment.
• Stock Market: The stock market is expected to form a slow bull market, with a slight rebound. The IPO restart may cause short-term volatility but is seen as an opportunity for investment.
• Recommended Sectors: Sectors with promising prospects (brokerage, insurance, high-speed rail, aviation), high-end manufacturing (big data, information security), and modern consumption (media, social services) are recommended.
• Themes: Themes such as 90s generation consumption and SOE restructuring are highlighted.

Liquidity

• Zero Net Injection: The central bank maintained a zero net injection in the open market, with a stable short-term interest rate at 2.31%.
• Future Policies: More liquidity injections and rate cuts are expected to counteract economic and capital outflow pressures.
• Exchange Rate: The RMB faces depreciation pressure but is expected to remain stable due to the absence of long-term devaluation fundamentals and a large foreign exchange reserve.

Inflation

• Food Prices: Food prices show a slight recovery, with a 0.1% week-on-week increase. However, overall inflationary pressure remains weak.
• PPI: Industrial prices continue to fall, with the PPI expected to decline further, though the pace may slow to around 5.8%.

Stock Market and Other Capital Markets

• Market Volatility: The stock market experienced a slight decline, with increased margin trading and a rise in the financing balance.
• Regulatory Oversight: The expansion of margin trading may lead to increased regulatory scrutiny to prevent systemic risks.
• Global Context: Global risk-avoidance sentiment and the European incident have impacted market sentiment.

Key Information

Policy Tracking

• Reform Focus: The deepening of reforms is emphasized, with the aim of improving the stock market and promoting economic structural reforms.
• Fiscal Policy: The fiscal policy is expected to expand the actual size of the financial deficit through budget stability adjustment funds and state-owned enterprise profit payments.
• Monetary Policy: Further rate cuts and RRR cuts are anticipated to maintain liquidity and support economic growth.
• IPO Changes: The IPO margin requirement has been increased to 100%, affecting market liquidity and investor behavior.

Economic Indicators

• Real Estate: Real estate sales in 30 major cities slowed to around 10%, with a recovery expected from continued supportive policies.
• Food Prices: Food prices showed a slight increase, with vegetable prices rising 2.0% and pork prices falling 0.7% week-on-week.
• Industrial Prices: Industrial prices continue to fall, with production materials prices dropping 0.3%.
• Exchange Rate: The RMB depreciation is expected to continue in a narrow range, with the central parity rate at 6.365 and the spot rate at 6.374.

Market Trends

• Interest Rates: Short-term interest rates remained low, with the 7-day repo rate at 2.31%.
• Bond Markets: Interest rates for government and policy-based bonds showed a slight upward trend, while credit spreads remained relatively stable.
• Futures Market: Futures prices generally fell, with the South China Index declining 1.2% and the CRB index falling 8.5.

Conclusion

The Chinese economy continues to face challenges with weak real economy performance and limited investment willingness. Despite this, there is a cautious optimism about economic prospects due to the expected continuation of loose monetary and fiscal policies. The capital market remains cautious, with a focus on the stock market and its potential for recovery. The RMB is expected to remain stable despite depreciation pressures, supported by a strong foreign exchange reserve and policy intentions. Inflationary pressure is expected to continue easing, with CPI and PPI both showing signs of slowing. The stock market and other capital markets are showing mixed signals, with a slight decline in the stock market and increased margin trading. Overall, the economic outlook is cautiously optimistic, with further policy support anticipated to stabilize growth.