Mainland Policy Tightening Will Exceed Expectations

The report pointed out that China's GDP (GDP) growth rate, electricity generation, vehicle output and crude steel output in the first quarter of this year all exceeded the trend value. This shows that the economy has overheated, and over the next three to six months, with the acceleration of fixed asset investment and the continuous improvement of exports, this overheating risk will further expand.

　　加大整顿地方融资平台 

Against this background, it is expected that the state will take more austerity measures, including strengthening the consolidation and rectification of local financing platforms, and strictly implementing differentiated credit policies.

Although many policy markets have been expected, but if the introduction, it is expected to cause short-term impact on the market, worthy of vigilance.

On Monday (April 19th), the A shares fell sharply. The report thinks that the main reason is that the tightening policy has exceeded the market expectations, leading to the spread of panic. At the same time, investors expect the style pformation to fail, thus concentrating on selling large stock cycles.

In addition, a series of tightening measures adopted by the central government in order to prevent the rapid economic overheating and curb the excessive expansion of the real estate price bubble is reasonable, which is conducive to the steady and healthy development of China's economy, preventing the inflation level from losing control and the risk of asset price bubble bursting.

Under the tightening policy, the overheated risk of the economy will be gradually eliminated, but this means that China's economic growth rate will experience a downward trend in the next three to six months.

From the current market consensus on the growth rate of A shares this year, it is still at a higher level of over 30%, and the risk of downgrading is bigger in the future.

　　A股市场走势不容乐观 

For the recent A share market trend, the report believes that after a single day of sharp decline, the market may have a slight rebound, but in general, the trend is not optimistic.

On the one hand, investor sentiment and market valuation will continue to be restrained by policies. On the other hand, the deterioration of earnings outlook will become the main concern of the next stage.

Investors should continue to be cautious when the risk is not yet fully released.

In terms of industry allocation, the report recommends avoiding the related industries of the real estate industry chain and the large market capitalization stocks.

Continue to be optimistic about the varieties of consumer and low-end consumption related industries such as food, beverage, Chinese medicine, clothing and retail, as well as some new industries with practical growth and relatively low valuation, such as software, energy saving and emission reduction.

For the H-share market, it continues to be optimistic about insurance, aviation, shipping, highways, new energy and medicine, and is relatively optimistic about consumption and TMT (software plus hardware) industry.