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- Year two of normalization with similar trading range. The biggest normalization of 2023 is that China emerged from COVID. An extended period of seclusion naturally breeds confusion. But with improved communication, as evidenced by high-level exchanges between both sides and increased international traffic, foreign relationship should improve.
At the darkest hours of last October, we were the lone voice for optimism and forecasted that the Shanghai Composite should trade between ~3,000 and 3,500, while the Hang Seng should trade between ~16,000 and 23,000 in the following 12 months. The actual trading range was 2,924 to 3,419 for Shanghai, and 15,945 to 22,700 for Hang Seng. We look for an extension of this trading range in the coming 12 months.
- CNY weakness/China-US yield gap at extremes and set to normalize. As the Fed tightens relentless while the PBOC eases to support the Chinese economy, the China-US yield gap has widened to its largest in history and comparable to the level in early 2006. Such wide and stable yield gap presents a carry trade opportunity for speculators, and weakens foreign confidence and investment return from Chinese assets.
Fortunately, the CNY REER has reached its cyclical lows, and the market is starting to price in four Fed cuts in 2024. As such, the historic weakness of the CNY should trough, while the yield gap should narrow. Such normalization should alleviate the pressure on fund flows and Chinese assets, and spur intermittent market rebounds and rallies.
- PBOC sterilization to wane after strong liquidity growth; fiscal policies coming. The PBOC does not appear to be shortening its balance sheet, with higher foreign assets holdings and steady free reserves. This is not a balance sheet of heavy FX intervention, despite capital outflows. Strong deposit growth, or “excess saving”, is in tandem with China’s surplus in goods trade vs current account.
That said, property malaise will likely take a few years to heal, given the current inventory buildup. As such, deposits balance will unlikely be allocated systemically towards property or stocks, leaving an impression of an economy beset by weakness. In 2023 property statistics worsen further from 2022, with halved land sales, falling property investment and tepid sales growth. but China still manages 5% growth. It is likely to muddle through again in 2024.
As liquidity growth normalizes, fiscal policies will likely take over as a more important stabilizer of growth. Local government debt can be swapped for central government bonds, its maturity can be extended, and interest rate can be cut. For the embattled developers, they need to plan for an extended period with annual sales well under 10 trillion RMB, as the breakneck urbanization pace normalizes and demographic ages. These changes will create headline risks for the market, making any rebound more capricious to trade.
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- 复常的第二年，交易区间延续。2023年的复常大事当属大国重启。隔离之日难免陷于彷徨。但随着交流复通，一如双方高层对话不断和跨境往来频增所示，都将促进成就相互的理解。
在去年十月底的至暗时刻，我们是市场上唯几的坚定看多的声音，并预测彼时12个月内，上证交易区间为约3,000点至3,500点，恒指交易于约16,000点至23,000点。在随后的十二个月里，上证实际交易区间为2,924点至3,419点，恒指实际交易区间为15,945点至22,700点。我们预计未来12个月里，这一交易区间将延续。
值得一提的是，今年十月二十日的首席经济学家论坛上，我发表了主题演讲，称当天上证的2,940点是这轮行情的重要低点。迄今，中国市场已开始有所修复，虽然修复之路一波三折。
- 人民币弱势/中美利差臻至极点，并应均值回归。随着美联储大刀阔斧收紧货币政策，而中国央行保持货币宽松以提振国内经济，中美利差已扩大至历史最宽，并与2006年初的历史水平等量齐观。如此平稳而宽厚的利差为投机者创造了套利交易的机会，并弱化了外资的信心和投资回报。
所幸的是，人民币实际有效汇率已然触及周期性低点，且市场开始计入明年美联储的四次降息。故此，人民币的历史性弱势理应开始筑底，而中美利差也应收窄。这一息差复常有望缓和资金撤离和中国资产价格的压力，并助力市场间歇性反弹和修复。
- 流动性充足，央行冲销力度减弱在即；财政政策有望发力。央行并未缩减其资产负债表，其持有的海外净资产有增无减，储备也保持稳定。尽管有资金撤离之忧，但央行的资产负债表看上去并不像是一张大规模外汇干预的表。强劲的存款增长，也就是所谓的“超额储蓄”，与中国货物贸易的顺差和经常账户顺差之差衔枚疾进。
尽管如此，鉴于当前的库存积压，房地产很可能需要数年时间方可痊愈。如是，存款余额很难一如既往地系统性地配置到房产或股票，进而给市场留下经济看似疲软乏力的印象。其实，2023年地产统计数据较2022年已经低的基数每况愈下，土地销售减半，房地产开发投资下降，房屋销售增长不温不火。但中国仍有望实现5%的经济增长。明年也将能应对。
随着流动性增长正常化，财政政策很可能会被委以重任，成为更举足轻重的增长压舱石。地方政府债务可以被置换成国债，偿债期限可以延长，利息负担亦可以调降。对于左支右绌的开发商而言，随着城镇化进入深水区和人口老龄化，他们需要为未来相当一段时间内年销售额远低于2021年17万亿元销售峰值的新常态未雨绸缪。这些变数都很容易产生新闻标题的负面舆情，从而令市场反弹难以择时，陡增交易难度。
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- 中国重新审视防疫政策；“双循环”的驱动双轮力有不逮。中国调适防疫政策之际，正值出口增速29个月以来首现负增长、社零增速由正转负的关口，二项数据均剑指国内外需求的同步消退。然而，在岸市场却从2020年3月时疫情爆发之初的低点附近展开反弹，锐不可当。
中国出口周期为七年一轮的中周期，并已于2021年2月见顶。这意味着经常账户余额相对于GDP的累积速度日趋放缓。出口周期创造宏观流动性，也因此与中国股市周期紧密相连。据此，出口中周期见顶与市场共识的“新的长期牛市”的逻辑相悖。
- 经济短周期接近拐点，但房地产复苏非一日之功。以房地产投资周期衡量的经济短周期正接近其转折点。但处于拐点的短周期仍需一剂催化因素的助力在未来一年里以开启新一轮周期。
当下的境况与2014年初有诸多相似之处。譬如，这两个时期都见证了美联储大刀阔斧收紧货币政策和中国房地产市场的趔趄前行，而决策层最终伸出援手。这两个时期的市场走势亦重规叠矩。譬如，上证在2014年的前几个月间进退维谷。
与此同时，美国经济短周期正从峰值回落，但尚未能恰如其分地反映美国经济所面临的衰退风险。由于中美经济东鸣西应，交错相依，美国的宏观波动性将通过汇率、大宗、股票和债券外溢至中国乃至全球市场。
- 上证曲折交易于约3-3,500点，恒指约16-23,000点。渐进倾向于周期性、成长型板块相对于防御性、价值型板块。我们的基准情景是，中国将一波三折、循序渐进地重启，中国房地产行业将在政策支持下缓慢复苏，而美国将在2023年步入衰退。如这三项不确定因素中任何一项好于我们的基准情景，譬如重启加速、房地产市场迅速恢复抑或美国经济避免了衰退，都将有力提振基准情景下的投资收益。
中国的利润率周期正再度扩张，这预示着周期性和成长型板块相对于防御性和价值型板块的表现前景向好。直观地说，随着中国重启和房地产恢复元气，对周期性板块的需求理应有所改善，增长也将受益。
诚然，风险因素在于中国继续延缓重启，房地产持续低迷，而美国如期陷入衰退。这三重冲击同时发生将招致近似于我们在2022年所经历的一类风险情景。本文无须赘述。即便如此，今年的史诗级波动表明，我们应该已经见证了上证以及恒指在本轮周期的最低位之一。
任尔东西南北风。无论我们在2022年遭遇了多少暗流险滩，眼下是时候重振旗鼓，举步向前了。
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- China finetuning “COVID-Zero”; flames of “Dual Circulation” turning blue. The Chinese authority is finetuning “COVID-0”, at a juncture when negative exports growth for the first time in 29 months and negative retail growth are suggesting receding demand both home and abroad. Yet onshore market rebounded strongly – from a similar level last seen at the onset of COVID in Mar 2020.
China’s export cycle, an intermediate economic cycle running every seven years, has peaked in Feb 2021, and has translated to slowing accumulation of current account surplus compared with GDP. The export cycle correlates closely with China’s stock market cycle via the liquidity created via its export cycle. Thus, a peaking export cycle argues against a “secular bull market” suggested by consensus.
- Economic cycle near turning point, but arduous property recovery likely. The short cycle as measured by the property investment cycle, however, is nearing its turning point, but still needs a catalyst to initiate a new cycle over the course of next twelve months.
There are many similarities between now and early 2014. For instance, both periods saw Fed tightening and Chinese property struggling, and the authority eventually came to the rescue. There are also analogs in the market trajectories in both periods. For instance, the Shanghai Composite struggled in the first few months in 2014.
Meanwhile, the US short economic cycle is receding from its peak, but not yet appropriately reflecting the recessionary risks confronting the US economy. Given the intertwining of the US and Chinese economies, US macro volatility will find its way to Chinese markets and onto the world via exchange rate, commodities, stocks, and bonds.
- Shanghai ~3-3,500, Hang Seng ~16-23,000, with bouts of volatility. Easing into Cyclicals/Growth over Defensive/Value. Our base case is that China will reopen gradually with zigzags, its property sector will recover slowly with policy support, and a 2023 US recession. If any of these three uncertainties is better than expected, such as faster reopening, swift property recovery or no US recession, it will add to our base-case payoff.
China margin cycle is re-expanding and bodes well for the relative performance of cyclicals and growth over defensive and value. Intuitively, if China reopens and property recovers, cyclical demand should improve. And growth, too.
Of course, the risk is China stays a hermit, property continues to ail, and a US recession. Such triple whammies would render a risk scenario similar to what we have been through in 2022 – no need to elaborate further. Even so, the epic volatility in 2022 suggests that we should have seen some of the lowest points in the Shanghai Composite and the Hang Seng Index in the current cycle.
It is time to look forward.
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