20151216-光大证券-宏观经济周报_经济现企稳迹象但回暖并不稳固__汇率波动加大而中枢水平稳定_26页_2mb

Macroeconomic Research Summary

Core Content

Economic Recovery and Fundamentals

• Economic Stabilization: The real economy shows signs of stabilization with production and demand sides experiencing some recovery, as indicated by increased industrial added value and investment growth.
• Unstable Recovery: The recovery is not stable, as high-frequency data reveal continued declines in coal consumption and real estate sales area growth, suggesting a weak and uncertain economic foundation.
• Policy Support Needed: Continuous improvement in the real economy still requires accommodative policies. The lack of investment willingness has limited the impact of recent easing measures, and further monetary easing, including potential RRR cuts and interest rate reductions, is expected.
• Fiscal Policy: Fiscal policy is expected to play an increasingly active role, with increased investments in special financial bonds, local government debt exchange, and PPP projects.
• Real Economy Conference: The upcoming real economy work conference is a key window for policy changes and is expected to boost investor confidence and support economic recovery.

Exchange Rate Volatility

• RMB Depreciation: The RMB has weakened significantly, with the onshore USD-RMB spot rate rising to 6.46 from 6.32 in late October, and a sharp depreciation of 533bps last week.
• Volatility Increase: The RMB's exchange rate against the USD has become more volatile, influenced by the Fed's upcoming rate hike and capital outflow pressure.
• Stable Median Rate: Despite increased volatility, the median RMB exchange rate will remain stable. The PBOC and Premier Li have reiterated the commitment to maintaining RMB stability.
• SDR Basket Focus: The PBOC aims to shift market attention from the RMB-USD bilateral exchange rate to the effective exchange rate against the SDR basket, which is expected to provide more stability.

Main Views and Key Information

Capital Market Outlook

• Confidence Index: The Everbright Macroeconomic Confidence Index closed at -1.0, showing continued pessimism about economic growth.
• Capital Market Sentiment: The Everbright Securities Market Strategy Confidence Index was at 0.15, indicating a modestly optimistic outlook for the stock market.
• Stock Market Trends: The stock market continued to fall, with the Shanghai Composite Index dropping 2.6%. Stock financing also contracted further.
• Market Conditions: The market is expected to continue in a consolidation phase, with a focus on sectors with high growth potential and policy support.

Price Trends

• Inflation: Vegetable prices rose sharply due to abnormal weather, but inflation is expected to remain weak overall. CPI is projected to grow at 1.5% in December.
• Industrial Prices: Industrial production prices continued to fall, with a 0.6% decline in production goods prices. PPI is expected to continue its downward trend, though the decline may be smaller due to base period effects.

Liquidity and Monetary Policy

• Monetary Policy: The PBOC has been conducting reverse repo operations, with a net withdrawal of 500 billion yuan in the open market.
• Interest Rates: Short-term interest rates are expected to remain low, with the 7-day repo rate at 2.36%.
• RRR Cut Likelihood: The likelihood of a further RRR cut is increasing due to capital outflow pressures and the need for additional liquidity.

Key Sectors and Themes for Investment

• High Growth Industries: Artificial intelligence, new Internet applications, media, healthcare, education, sports, tourism, and culture.
• Policy Support Sectors: Environmental protection and transportation.
• Short-Term Defense Sectors: Finance and real estate.
• Thematic Investments: Sponge Cities, new-energy vehicles, SOE reform, and underground pipelines.

Policy Tracking

• Deepening Reforms: The 19th meeting of the Central Leading Group for Comprehensively Deepening Reform focused on achieving the goal of building a moderately prosperous society.
• Stock Registration Reform: The government plans to implement stock issuance registration within two years.
• Economic Growth Target: The National Bureau of Statistics expressed confidence in achieving a 7% growth target for the year.
• QFII Policy Relaxation: The State Administration of Foreign Exchange relaxed QFII's capital inflow restrictions and changed the principal withdrawal process to a pre-approval system.
• Capital Project Liberalization: The PBOC supports capital project liberalization in the Tianjin, Guangdong, and Fujian free trade zones.
• State-Owned Enterprise Reforms: Accelerated disposal of "zombie enterprises" and ten reform pilot schemes are expected to be released.
• Industry Reforms: Reform plans for industries such as oil and gas, salt, and others have been submitted to the State Council.

Summary Table

Conclusion

The Chinese economy shows signs of stabilization, but the underlying fundamentals remain weak. The RMB has experienced significant depreciation and increased volatility, but the central bank's commitment to maintaining stability suggests the median rate will remain stable. Capital markets remain cautious, with a focus on sectors with strong growth potential and policy support. The upcoming economic policy conference is expected to provide clarity and boost investor confidence.