It is worth noting that singing long a shares has become the latest trend of most foreign investors, and foreign capital has also become an important index affecting the trend of a shares. According to the data, from January to July, the net inflow of northward funds was close to 130 billion yuan. Among them, April and June became the peak of foreign capital inflow, with net purchases of 53.258 billion yuan and 52.679 billion yuan, respectively.
Goldman Sachs points out that China has a large space for policy implementation
According to media reports, Goldman Sachs pointed out in this report that there are three characteristics of the type of monetary policy easing implemented by the Central Bank of China in the first half of 2020. First, some policy instruments are very short-term liquidity reserves. Second, some of the figures refer to total loans, not net loans. Third, many easing measures are targeted in nature. The funds are dedicated to sectors hit hard by the epidemic, small businesses and self-employed people who face the greatest challenges in access to credit, and at a time when the epidemic has the greatest impact on the economy. In view of this, the combined impact of these easing measures on the central banks balance sheet is not significant and may not last for a long time.
In its report, Goldman Sachs believes that in order to promote lending and fight the worst recession since the great depression, the Fed must substantially increase its monetary base, while the Central Bank of China can resort to more direct tools, such as targeted easing and window guidance, to increase bank lending. This means that China does not need to expand M2 substantially to support the economy, as the United States did.
But Americas economic recovery is still weak. The US labor market continued to recover in July, but its growth slowed down, according to non farm data released by the U.S. Department of labor. Non agricultural employment increased by 1.76 million in July, higher than the expected increase of 1.48 million. The unemployment rate fell to 10.2%, slightly higher than the peak at the time of the financial crisis in 2008. Although the decline was more than expected, it may not reflect the real situation of the labor market. The U6 unemployment rate, which measures a wider range, may be more appropriate. The U6 unemployment rate calculates the unemployed people who give up looking for jobs because of losing confidence and part-time workers who cant find full-time jobs. However, this indicator is still at a high level of 16.5%. Coupled with a small drop in labor force participation rate, we can see that market confidence is low.
According to media reports, compared with the United States, Goldman Sachs believes that Chinas economy performs best in the context of the epidemic, and there is still much room for Chinas fiscal policy to be implemented. In its report, Goldman Sachs pointed out that Chinas central banks balance sheet as a share of GDP peaked at 65% in 2009. At the current level of 37% of GDP, if the previous peak of 65% is taken as the upper limit, there seems to be room for the central banks balance sheet to expand.
On the other hand, Chinas deposit reserve ratio is still at a high level relative to many other economies, with the exception of a few emerging market countries considering exchange rate factors, which means that there is room for downward adjustment if necessary. However, it should be noted that the role of deposit reserve ratio in Chinas monetary policy has been declining in recent years. Before 2014, when the trade surplus led to a sharp rise in foreign exchange reserves, the instrument played a central role in absorbing excess liquidity, but this year, the role of open market operations (Omo) and various lending instruments in the PBC toolkit has become increasingly important.
Strong recovery of made in China activates raw material Market
How good is the rapid recovery of Chinas economy in the epidemic situation? Trade level data also support the gradual recovery of Chinas economy from the epidemic and back to normal. Lets take a look at an export data of Australia.
Data released in early August showed Australian exports rose 3% in June, partly due to the sharp rise in iron ore and gold prices. Among them, Australias exports to China reached a record high of 14.6 billion Australian dollars (about 72.8 billion yuan); as of the first half of this year, Australias total exports to China in the past 12 months reached a $151 billion. In addition, Australias trade surplus in June was a $8.2 billion, with a trade surplus of $23.4 billion in the second quarter.
Market participants pointed out that Chinas increased industrial activity supported demand for Australian iron ore, an important steel-making raw material, with imports reaching a record high in June. Imports of commodities from India, Ukraine and Russia also hit new highs, according to Platts energy information.
As of August 7, 2020, due to strong demand, iron ore prices have soared to US $120 per ton. According to the data of the General Administration of customs, iron ore imports hit a new high again: in June, iron ore imports reached 101.68 million tons, up 16.8% month on month and 35.3% year-on-year. From January to June, the total import of iron ore was 546.91 million tons, with a year-on-year increase of 9.6%. This is largely due to the role of the Chinese market as the locomotive of the world economy, especially the strong recovery of Chinas manufacturing industry, which has boosted the export market of raw materials.
Is Goldman Sachs the spokesperson for Chinas A-share bull market?
The report of Goldman Sachs has been reliable since the beginning of this year. At the end of February, the most tense period of Chinas epidemic situation, a report released by Goldman Sachs said that it had lowered its expectation of economic growth in the first quarter of this year in mainland China. However, the highlight of this report is that Goldman Sachs emphasizes that it is very optimistic about China and predicts that Chinas economy will be supported by resolute policies It rebounded rapidly in the second and third quarters of 2020. At the same time, Goldman Sachs did not adjust Chinas GDP growth forecast for the whole year, but other countries were significantly lowered.
In line with Goldman Sachss emphasis on Chinas rapid rebound in the second quarter, on July 16, 2020, Chinas National Bureau of statistics released data showing that Chinas gross domestic product (GDP) increased by 3.2% year-on-year in the second quarter. After squatting in the first quarter, the recovery of growth in the second quarter shows the strong resilience and great potential of Chinas economy. Many foreign media are concerned that China has become the first major economy to achieve growth since the new outbreak. Chinas economy took the lead in turning from negative to positive, which was regarded as good news to promote the global recovery.
While Goldman Sachs continues to be bullish on Chinas economy, the Wall Street firm has been bullish on Chinas A-share market since this years epidemic, and has used Chinese stocks as a haven for assets. Wang Yajun, CO director and managing director of the stock capital market of Goldman Sachs Asia (except Japan), said in an interview with a media earlier this year that with the continuous promotion of deep reform in Chinas capital market and the recent prominent safe haven effect of A-share, the attraction of A-share IPO will be significantly enhanced, and there is room for refinancing and large-scale stock trading market.
In July this year, Goldman Sachs continued to support the booming market of Chinas A-share market. According to a report released by Goldman Sachs in early July this year, a number of factors, including Chinas strong economic recovery, the risk of re outbreak of the epidemic under control, and favorable macro policies, etc., support the recent A-share rise. It is expected that the liquidity driven upward space can reach 15% in the next one to three months.
Goldman Sachs believes that the factors of the A-share bull market include that the mainland economy is fully recovered and the risk of re outbreak of the epidemic is under control, which makes it easier to restart the economy. In terms of policies, monetary instruments and credit policies have eased the financial situation in the past few months, corporate profits have shown an improvement trend, low stock valuations and increased retail investors participation are conducive to the rise of the stock market.
What is worth pushing is that Goldman Sachs is not only a variety of wind blowing, but also putting real gold and silver into Chinas A-shares.
According to a sub - Section submitted at the end of June 2020, Goldman Sachs emerging market equity fund managed by BasakYavuz and HirenDasani bought large amounts of Chinese mainland and China Taiwan stock. The fund returned 12% last year, surpassing 82% of its peers, with a five-year annualized return of 7%, according to data compiled by Bloomberg. The largest holdings include Tencent, Alibaba and TSMC, accounting for about 22% of the portfolio. In response to its heavy position in Chinese stocks, Goldman Sachs explained that Sino US trade frictions would not have a significant impact on Chinas stock market and would continue to maintain its view of over allocation of Chinese stocks.
According to a previous report of China Securities Company, even under the background that some Chinese A-share companies are included in the list of American entities, the American Wall Street institution will invest in Chinas A-shares, which is called the charm of money can make the devil move the mill by many market participants.
According to Hikvisions half yearly report, the well-known QFII Goldman Sachs bought 46.22 million shares in the second quarter of 2020, ranking the ninth largest circulating shareholder of the shares. According to the average price of 30 yuan in the second quarter of 2020, Goldman spent 1.4 billion yuan on this.
Taking Hikvision as an example, Goldman Sachs also picked up a bargain because the second quarter of 2020 was almost a golden pit. At a time when almost all the leading stocks and technology stocks of a shares enjoyed the bull market this year, the stock price of Hikvision fell down in the first quarter, and then fell down for three months in the second quarter. Therefore, when the A-share market continued to rise and began to make up the market, Hikvisions share price rose easily by 34% from June 30, 2020 to July 31, 2020.
Foreign investors emphasize that Chinas technology stocks are the best opportunity
In fact, it is a common consensus that foreign institutions are optimistic about Chinas A-shares.
According to media reports, Kevin Russell, chief investment officer and fund manager of UBSs asset management company, recently said that Chinas technology stocks are the best investment opportunities in the world. Ubsconnor, a US $2.2 billion Multi Strategy hedge fund, made a major investment in the Asian market in July this year. The fund has invested about $1.4 billion in the Chinese market, including a shares. The fund manager at UBS said Chinas technology stocks with small and medium cap market capitalization are the best investment opportunities in the world because China is actively developing its own supply chain in industries such as semiconductors. Ben Powell, chief investment strategist for Asia Pacific region of BlackRock Investment Institute, also recently said that the stock and bond markets of China and its Asian trading partners (such as South Korea and Japan) will outperform the global emerging markets in the next 6-12 months. Source of this article: Yang Bin, responsible editor of securities companies in China_ NF4368
According to media reports, Kevin Russell, chief investment officer and fund manager of UBSs asset management company, recently said that Chinas technology stocks are the best investment opportunities in the world.
Ubsconnor, a US $2.2 billion Multi Strategy hedge fund, made a major investment in the Asian market in July this year. The fund has invested about $1.4 billion in the Chinese market, including a shares. The fund manager at UBS said Chinas technology stocks with small and medium cap market capitalization are the best investment opportunities in the world because China is actively developing its own supply chain in industries such as semiconductors.
Ben Powell, chief investment strategist for Asia Pacific region of BlackRock Investment Institute, also recently said that the stock and bond markets of China and its Asian trading partners (such as South Korea and Japan) will outperform the global emerging markets in the next 6-12 months.