Market & Operation Review
The sudden Russian-Ukrainian war in February and the subsequent sanctions imposed on Russia by various countries caused an unexpected shock to global macroeconomics.
In the short term: 1) the war and sanctions caused the tight supply of certain commodities, leading to the rise in prices, and exacerbated the inflation problem. Some commodity prices even raised ahead of the supply crunch due to the expectation, exacerbating the inflation problem the international economy was already facing, thus increasing the pressure for tightening the monetary policy; 2) Several countries initiated economic sanctions against Russia. However, the freezing of Russian assets, kicking some Russian banks out of the Swift system, the financial institutions selling Russia-related assets, etc. may trigger liquidity risk. Although the Fed has been aware of the problem and the short-term tightening attitude is eased, it is still worthwhile to pay close attention to the liquidity risk. In particular, it is difficult to predict whether the evolution of the Russia-Ukraine conflict will trigger further economic sanctions, if it does then the macroeconomic volatility and liquidity risk may further increase.
In the medium and long term, there is a more profound and important impact: the problems of international rule-making and private property protection revealed in the Russia-Ukraine conflict may influence the long-term pricing of assets.
In terms of domestic, the fundamentals of real estate have no overall improvement in February, but there are signs of improvement in the structure. Although several individual risk events continued to appear in February and increased the market volatility, generally speaking, the market is at the bottom region and the opportunities are larger than risks. At present, not only the policies have been introduced in the financing and pre-sale funds regulation of cooperates, but the local governments are also continuously loosening the restrictions to meet the normal demand for housing. There are more signs in dealing with the liquidity risk of real estate development enterprises, showing that the systemic risk has likely been controlled.
Investment Ideas & Market Outlook
It is difficult to predict the future of the Russia-Ukraine conflict, so we are focusing on coping with the market risk caused by the conflict and sanctions, and the core is to assess the fundamentals of specific companies and judge the valuation. At present, it is worthwhile tracking the liquidity risk that may be triggered by sanctions against Russia (which seems manageable for now). Despite the easing of the Fed's tightening pace, the conflict intensified the inflation problems, thus the subsequent tightening pressure still exists. The impact of the above effects on valuations needs to be taken into account.
Domestic macro: our view remains unchanged that the main theme of this year is to stabilize the growth. The two meetings recently held are important points to verify this logic.
Hong Kong stocks: maintain a bullish view
As an offshore market, Hong Kong is susceptible to various factors and has greater volatility, but all the companies we invest in are Chinese companies with historically low valuations, and they are significantly undervalued even in the global view, making them the most attractive investments at present.
U.S. stocks: despite the recent increase in macro disturbances, we remain optimistic about structural opportunities like Reopen, cloud computing, and high-end semiconductors. The financial reports disclosed in February also confirmed the strong fundamentals in these areas, and the companies have given positive outlooks.
Invest Direction
The core investment direction in the future remains big technology and consumption in both the US and China markets.
We are optimistic in several key directions:
investment opportunities in semiconductors and cloud computing under the digitization trend, and the potential investment opportunities of blockchain becoming a new infrastructure;
investment opportunities in the service industry (service platforms) under the overseas Reopen;
investment opportunities in the domestic service industry, such as property management, higher vocational education and other areas that have been wrongly killed and will be revalued.
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