China Merchants Bank, have the opportunity today to China Merchants Bank, and we communicate about the future of our second half, or longer period of time changes in economic trends and market trends in some of the views, the place does not speak, but also criticism please correct me. I probably use 70-80 minutes to start my statement, and then there are still about half an hour to do an interactive and communication. Next to enter the contents of my formal statement today.
the content of my presentation today, including that of several two aspects: first, the view of the economy. Second, the capital of view. Third, the views of market trends. Fourth, some thoughts on inflation.
First, we answer on the economy some basic judgments. From a macroeconomic point of view of the trend, I think if three months ago, six months ago, the market of public opinion are quite general pessimism, and there are enormous differences in economic trends, with the second quarter disclosure of data after another on economic trends in the second quarter, we achieved a high degree of consensus. China's economy has indeed been achieved V-reversal, the bottom of the first quarter of this year reached about, and now V-economic growth has been in the right side, very fast rebound and climb channel in. Last June, we have been stressing this wave of adjustments in the short term China is likely to end V-trend, although the possibility of W-type movements in the earlier time is difficult to exclude, but the trend is a big V-probability event. We more confidence now that economic development has been fully realized V-reversal. and from the perspective of economic growth, economic growth will continue to climb at least the first half of next year, next year, economic growth in the second half for some reason there may be some decline , fall down, the level of economic growth rate may be between 9-10, the growth rate compared with the annual growth rate 2005,2007 may be slightly lower, so we say that V-right shoulder is lower than the left shoulder However, the growth rate of nearly 10% of the Chinese economy is a very satisfactory level, at this level, the various resources, coal, electricity, infrastructure support capabilities, ability to support the labor supply point of view, not to the macro-economic zone to enormous pressure.
support economic rebound in the strength of V-type long ago we are very clear, from the second quarter economic data, determine the reversal of V-economic data in the second quarter can be largely verified. V inversion strength so far, mainly large-scale fiscal stimulus and business inventory adjustment, inventory adjustment end. This is regardless of study or investigation of fixed-asset investment growth in fixed assets investment in the industry composition, regardless of study of industrial production changes in composition or changes in industrial production, we see very clearly that the fiscal stimulus associated with many industries, such as transport equipment, steel, building materials, cement and so many industries in February to enter the fast climb stage, and this climb so far appears to be no end. about the future from the May, we see a lot of industries, including textile industry, computer and information equipment sectors, electrical machinery industry, and their relatively rapid growth rate also appears increased, the rise and companies inventory and to replenish stocks ended a relationship. Even if we know that a few months ago to promote the V-reverse stock end of the main forces and large-scale fiscal stimulus. A few months ago we suspect that the impact of inventory and the impact of fiscal stimulus medium to long term can not be sustained. from the fourth quarter of fiscal stimulus and the impact of inventory adjustments will boost economic growth dropped substantially, a few months ago was widely suspected question is in this context, the economy may be a secondary probe the end of the pressure, W-type movements may occur. The situation now, though concerns remain that, but the risk has been greatly reduced, because we can at least see the power of three has the rise in the fourth quarter of this year, or both rising , the power of three will take over the baton to support economic rebound. three forces at the grassroots level is also very easy to see, first, the overall increase in investment in real estate development. There is no doubt dependent on the real estate market in sales aspects of pressure to eliminate reverse and real estate stocks, which is at least first-tier cities across the country are generally seen within. With the real estate stocks fell, we saw the real estate cash flow improvement, lower inventory and compare the real estate business active participation in land auctions and subscription, of such a relatively clear trend in real estate development and investment means that the reversal is just a matter of time, but from the time point of view, the turning point of this reversal should not be later than the fourth quarter of this year. From the second quarter of this year in terms of real estate development and investment data, the real estate development and investment seems to have started from a relatively low level upwards, if we are to observe the new construction area, observe the completion of the construction area or area of observed cases, real estate development investment has been fully point increase in new construction area, or to determine a number of physical quantities such indicators, has not been very well recognized. real estate new construction area and in the construction area growth is a matter of time, and the next few months we are sure to see this turning point. and we know the real estate development and investment has been accounted for the entire Chinese economy is about 9% of GDP, a level near that in this context, a comprehensive real estate development investment on the economic impact of reversal will be global in nature. along its production chain, we can see more than 40 industries, directly or indirectly affected by the real estate development and investment. And from the perspective of the real estate purchase and consumption, the real estate sales growth will lead to a lot of related products, sales growth, such as buildings decoration materials, furniture, household appliances, etc., and this positive change, with real estate sales pick up, we have generally seen. and such a support role is largely self-sustaining, and will promote economy in the medium term to maintain a relatively high growth level. we have seen, and there are relatively large to grasp the power to judge is the second major exporter of appointment from time to stabilize in the coming months, and from gradual recovery later this year, growth in the fourth quarter. Now we can not expect, and exports are expected to be less likely to return to 2007 an average of 25% growth rate before and even harder to return to the year 2002 the average growth rate of 15%, but exports from this year in the fourth quarter during the gradual return to positive growth is entirely possible even close to double-digit growth. to promote the strength of a rebound in exports is relatively clear, from the macro and micro level, we think we can have three aspects of evidence to support such a decision: the first From now on the growth of global manufacturing, global manufacturing is now a leading indicator from the point of view, the end of this year, the global manufacturing industry will resume positive growth, although in terms of trend is still relatively weak, but the global economy to return to growth track, on China's export growth is raised to at least the interval. The second aspect of the force in the end of last year, since late last year, in order to steady expansion of exports, central authorities have introduced a series of policy measures, from credit facilities to offer export tax rebate adjustment, but also other supportive measures. These measures should help to gradually achieve results. The third reason is that it? China's export industries, especially the export sector to adjust the low end in particular about the second half of 2007 so far So far about market pressure and spontaneous adjustment has been going on for two years, in the past few months, in the context of the dollar, in fact, the RMB exchange rate in 2008, under enormous pressure has been greatly reduced, the pressure on the exchange rate basket improvement, coupled with grass-roots level about the export sector has been very close to 2 years to adjust the depth, this adjustment means that in the not too distant future, the industry's adjustment at a relatively low level should have been ended, has stabilized, and gradually upward into a positive growth track. Because these three aspects of development, we are confident that the larger the fourth quarter of this year, China's exports resumed growth, and this growth will affect the output of export industries, will affect the export sector employment and investment, which has the overall economic impact.
economic rebound in the fourth quarter of this year, in fact, has already played some strength in recent months. The third force is the non-residential areas to some extent, private investment has resumed . from the first quarter of this year, situation, or situation from the fourth quarter of last year, a huge risk factor, a huge area of uncertainty in a wide range of private sector investment is almost at a standstill, we do not know what will happen tomorrow, we do not know this disaster there will be more serious in a very wide range of areas, private sector investment almost at a standstill. But over the past few months, as the government adopted a series of stimulus measures to gradually bear fruit, as the global financial market to gradually stabilize With a wide range of risk reduction, private sector investment in the frozen state at very low gradually restored, so that the recovery in the sector constitute a level of investment in fixed assets within a certain range we can see, we can see that the recovery of investment . particularly from the perspective of private equity investment in environmental protection, new energy, electric vehicle, and many other related fields, in fact, has become quite active in investment activities, and these changes mean that non-residential areas, at least in some industries or some sector, investment activities are gradually becoming active again, but such a change on economic growth in the medium term there are still significant supporting role.
mainly due to these reasons, we can speak even though short-term economic V inversion strength is mainly short-term, including financial incentives, inventory adjustment, but in the medium term, with the rise of residential investment, with private investment from the state of very low and gradually began to recover, and with the gradual recovery of export growth, the economy climb up the recovery process will become more and more to maintain. And from the perspective of economic growth, economic growth rate of the first half of next year, more than 11% should not be too surprised. next year to achieve annual economic growth level of 10% next year second half of the economic growth rate reached 9% level. This means that the momentum of last year's adjustment has been checked. in the context of rapid increase in economic growth, we can expect now at the grassroots level, you can gradually see more and more industries More and more cyclical industry profitability and earnings growth has been reversed or will soon climb to appear very quickly, such as iron and steel, non-ferrous metals, petroleum refining, construction machinery and so the field, we have seen or will be gradually see the reversal and recovery. If the economic growth process, or at least the first half of next year before the end of next year, and its recovery is sustainable, profitable growth and recovery in the same range is basically maintained. This is from an economic growth perspective.
Second, After discussing the situation of economic growth, we also want to specifically discuss the point of liquidity from the capital or from the point of view, this is an important aspect of the reasons why liquidity changes on stock market, real estate market trends will have a profound impact on the other hand, lies in the current economic environment, changes in flow or reversal of the trend of economic growth will also have a huge impact and even direction, in this context we consider Whether economic growth point of view from the observation, or from the observation of the capital market or the basic trend of the real estate market perspective, to grasp the fluidity of the basic trends and patterns are very important. from the liquidity perspective, I personally tend to Judgement is in the Chinese real economy, the most lenient when liquidity is over. when liquidity should be the most liberal in the first half of this year, and probably the second quarter of this year, from the third quarter, China has entered a state of liquidity loose an irreversible and sustained decline and weaken the process. mobility corresponding to what is loose? mobility corresponding to the loose capital markets and real estate market is rising faster, more profound level of liquidity easing, stock market, real estate market rise faster. If the shortage of liquidity into the state, the basic process will end up, and turned down. easing liquidity to support economic recovery has a very significant impact, especially in the current economic context.
From the trend, the first half of 2009 the Chinese economy appears loose liquidity, it should be a degree unprecedented, unprecedented liquidity loose in this context, we see the market rise in the Chinese capital market ten-speed is not seen in history. But into the second half of this year, this process has been transferred and the weakening trend irreversible. liquidity into the decline and weakening trend in itself is not very scary, very scary is that this decline and weakening trend in the future will be swept over a critical point of the day, re-tension into the shortage and, if a future day, that day may be next year, maybe two years later, however, will be to. liquid critical point when inundated , re-transferred to shortages and tension, we almost have to conclude that so far the stock market rise, the real estate market rise will replay it again backwards. on the future of mobility is critical, very important challenge is to predict, When liquidity will be the turning point, if the inflection point, what can we confirm the inflection point appears. If in the future liquidity of the critical point has been submerged or are near the critical point, how do we know that liquidity is at a turning point near? we can observe three aspects of indicators, these three indicators can be cross-validation, we can almost confirm that flow has reached a turning point, if only one hand, these three indicators index is confirmed, we will have a very high alert, confirm if the two indicators I personally think that is almost certain. If all three indicators confirm that no need to doubt this. The first indicator is the interest rate. from the official credit market, the weighted interest rate of credit to the private capital lending rates, bills discount rate, these areas if we seen in a very broad range, a sustained rise in interest rates, from South to North, from East to South China, Northwest, from the official credit market has been to the private lending market, if the relatively large range we observed a general increase in interest rates, which will is a very dangerous signal, very dangerous that liquidity is likely to have a turn at a turning point probably at least nearby. The second area targets what is it? If we look at China's capital on the balance of payments account, in part under the capital account, capital flows easily explained, such as foreign direct investment, excluding foreign direct investment in the future, in the capital account, there are some unexplained capital flows. If it is difficult to explain capital flows abnormal period of time, a large number of net inflow of the situation, pay attention to a net inflow, not the net outflow, if there is a large net inflow of the situation, we also need to be vigilant about liquidity is not a problem. The third evidence is that we observed in the spectrum of a broad spectrum of assets market, while observing the stock, real estate, Poole tea, mahogany furniture, stamps, coins, and so the market, if the spectrum in such assets, the majority of asset classes on the market, the market also showed downward pressure on prices, That is the stock market to adjust itself, but the coins are still rising, coins in the adjustment, but the real estate market on the rise, if a very large range of prices in these markets also showed downward pressure, which will also be a very dangerous signal. three aspects of the signal being, if you see a light is yellow, I'm afraid we must be very vigilant, and if two lights are yellow, we will deploy to retreat. If the three lights are yellow, would not have considered the basic, you need fled. the market has basically concluded that reversed. so the first indicators of economic theory from some of the basic derived indicators, with indicators such verification market CBBC conversion, in our to examine the most of the time can be applied to .2007 by the end of the beginning of 2008, the market down 6,000 points from before and after diving, we saw a substantial increase in private lending interest rates, we see the bill was pulled to 10% discount rate the level of , under the capital account, we see a lot of net capital inflow of hard to explain. in the stock market turn down, we see the real estate market into a freeze, we see the market in Beijing, commemorative coins, commemorative coins prices also diving, evidence of three simultaneous, so that while economic mobility appears clear that the major problems. The major problems of economic mobility to some extent, with the tightening of monetary policy are closely related. Since then, we see the market collapse downwards, the market rate of decline and magnitude beyond our expectations, the market fell into a trend is not surprising in itself.
we see the end of 2008 to early 2009, the end of November to December this time we have seen bills discounted market, the official credit market, the private lending market, a wide range of interest rates began to decline. in the level of capital flows, we begin to see large net capital outflow of hard to explain. in the stock market showed a slight upward trend, we see a very strange coin prices are also rising rapidly, coins, stamps markets are also becoming active again. evidence of at least three 2-2.5 is a clear recognition of liquidity is likely to have turning point, it is in this context, although the trend of the economy many people still look very bad, but we have the need to raise this issue, that is a bear market is over, the bull market is fast approaching, it is such judgments are based on 16 November last year, I wrote the article said that the Chinese market participants need to consider whether the bear market has ended the problem. comprehensive mobility shift trends, we believe that the bear market may have ended, in several months later, standing on the level of 3300 points, all on such a decision may have been not much doubt, but the problem is until last month 11,12 1,2 months of this year, in fact, for such a decision we will have a lot of controversy. controversial stand on the stock market is the core of the stock point of view, many problems should be obscure. Last night I was discussing the issue with a friend, that if from now on has been more liquidity into the established decline and weakening trend, judging from the future is concerned, we are only facing a critical judge, is to escape the top of the key judgments, which is not a bull market, is not a rising trend, which has been without controversy, what controversy is turning point time to come. We know that this turning point will come, but the problem is the turning point comes when, what methods we use to judge the top. discussion, he was questioned, he said that if I have several aspects of the evidence cited in the history of CBBC convert most for China to determine the future are still applicable? This is only afterwards that, in advance do not know. My personal view is that tendency, if I have been advocating from the assets of the logic in theory see, I have just cited evidence of several aspects of flight in the future to determine a turning point in judging the top and CBBC, the evidence principle still applies. such a decision is correct, we will see clearly after a few years.
Then we discuss a problem, we Why determine the liquid has been transferred to weakening trend .2008 why such a big market decline, the market fell through in 2008, almost everyone desperate, a significant majority of people believe that this life would never see 6000. even many people think that the market fell 75% after the bubble, not a generation, the market can not be transferred to the bull market. because the need for a generation to forget the pain, forget the memories, you need to market participants, after 70 from now, after 60 After the main age 80,90 in turn, we forget the pain later, the market can blow a new bubble, these views are from experience, from intuition, from the point of racking our brains come to the conclusion, but a few months to see, this view too pessimistic. because now the market has blown bubble. Why such a big market in 2008 fell through, a few months time, there is such a strong recovery. This is also the issue we discuss next, we discuss the the issue is not to say every point of this transition process are used to grasp well. But we need at least a relatively consistent and logical theory to explain all of these processes, the consistency of these explanations can avoid or minimize the mistakes of our future opportunities. from the perspective of liquidity supply, top-down view, from the perspective of liquidity supply, the source of supply of liquidity is actually very simple and very clear about the supply of liquidity are only three sources a source of credit creation from the banks or credit or credit growth. The second source is from the trade surplus, trade surplus continue to accumulate, and the third from a net inflow of capital flows or capital, from the perspective of liquidity supply problem, the other in principle, there may be some very small supply of liquidity, but the supply of the entire economy at the macroeconomic level, there is no significant impact, we can almost ignore the existence of these factors. From the perspective of liquidity needs problem, simply, why do you need money? liquidity demand from the point of view, my personal view is that bias caused by changes in demand for liquidity are two very key factor, a key factor is the name of the economy and the nominal amount total growth rate. The reason is that money is very important functions is the media transaction process, whether you buy a house or buy a cola, a restaurant, all of these transactions must be through the medium of currency, the greater the trading volume, the greater the amount of the transaction, the need more money. of liquidity is the key to the name of the total economy. The second key factor is it? the private sector for the expected future investment returns. If the primary is expected to build a private sector steel company, built coal mines, construction vehicles manufacturers can make a lot of money, this time around he will be financing, access to credit from banks, to obtain loans from abroad, taking the funds from the stock market out of the savings mobilized, all for the construction of steel mills, coal, automobile manufacturers . but this is expected to dominate the balance sheet adjustments under the act also created a demand for and consumption of liquidity. With the supply of liquidity and liquidity needs to judge to judge, it is easy to know so many years stood in terms of funding to promote , the market could happen so many very violent oscillations and fluctuations .2008 what happened in China? occur most important change is the significant decline in the trade surplus. Second, credit control and credit growth down. Whether the trade surplus decline in the amount of credit control or credit growth led to decline in mean decline in the supply of liquidity. From the perspective of liquidity needs in 2008, the most striking changes occurred in what is it? The most striking change was due to international commodity prices, and other factors, on behalf of the entire Chinese economy growth rate in a very short period of time there is a sharp rise in .2004,2005,2006,2007, China's nominal economic growth rate of about 15% level. from 95 years later, there is no break in nominal economic growth rate over this range, but the 2-3 quarter of 2008, nominal economic growth rate climbed to nearly 22% level. nominal growth of the economy climbed to nearly 22% level, even if transaction demand for money perspective, the transaction demand for money growth rate will probably take 22-25%, and this background, we see that money supply growth rate decreased by 15% or even lower levels. this enormous flow of of the gap, resulting in severe liquidity shortage. The severe shortage of liquidity in the stock market collapse of the market performance, the performance in the real estate market, the market freeze, in the coin market, prices on the performance of diving, in the civil the performance of the market interest rate loans surged dramatically. In the month of last year's 8,9, rumors from the very grass-roots civil society level data show the private sector at the time when the highest lending rates to monthly interest rate of 8 points, annual rate of nearly 100% In this context we can understand the market very quickly in 2008 in the first half fell .2009 What happened? liquidity supply and demand very different direction to go. liquidity demand perspective, we see that nominal economic growth rate collapse in 2009, 1,2-quarter economic growth rate of only 4% of the nominal, within six months dropped by 18 percentage points. At the same time we see this time, the private sector is very low expected return on investment, private sector investment is almost in a frozen state, which further reduce the liquidity of the real economy and aspirations of absorptive capacity, while the supply from the liquidity perspective, we see the explosive growth of credit, a period of time we also see the trade surplus increased significantly, the one hand, a sharp rise in liquidity provision, on the one hand the demand for liquidity quickly dried up, so we see a lot of turning point in the private lending market, we see that the lowest interest rates in January of this year, when 4,5 from last year monthly interest rate of 8% down to 4,5 months of this year when the lowest less than 10%. Again this context that we see the real estate market in the general confusion, the general pessimism of the sudden start, and is a great volume rise, with prices quickly pulled up, and the market's rise key to enter into the 4,5 month in the upscale residential, and into a house that needs some rigid contact is not very close part of the market. And the stock market in general doubts, pessimism and even despair in the atmosphere, almost no decent market adjustment, continuous sharp rise. If we look at the price of commemorative coins, the situation is the same as last November, coins began to perk up the market, almost synchronization with the rising stock market. Why do we know that liquidity has been transferred to the decline and weakening trend? because from the perspective of supply and demand, we are about to see a very negative changes. now such a high amount of credit, credit growth is bound to be difficult to maintain. credit growth down the process into a matter of time, and is expected to begin soon.'s trade surplus dropped substantially, in the second quarter is already a very established fact, the problem is the long-term trade surplus will decline the so-called long-term, to continue at least until the end of next year or even longer, from the perspective of capital flows, although the second quarter we saw a net inflow of capital to some extent, but I personally think that this trend can not be a net capital inflow maintained. net capital inflows to the relatively low level, even out to some extent, will be the norm in the future we see. At the same time, demand from the liquidity perspective, we can say on behalf of China's economic growth for the third quarter of this year will turn up. can be asserted that private investment is expected with a very low level and gradually improved, so bring a level of liquidity needs, but also into the rising channel. the liquidity supply and demand are moving in the direction of relative disadvantage, So almost certain liquidity equilibrium state has been gradually easing from the extreme decline. the future is inevitable there will be such a process, liquid from the extremely liberal to moderately easy, moderately easy to basic loose from then to moderate stress, extreme stress, we into this trend is inevitable, but we do not know when this trend to the critical point, but we know some day will surely come this critical point, the critical point comes, we can judge it with a lot of evidence, the evidence confirmed that the critical point when , we can do only two words, is the point of view, can be used to judge just said. extends to the decline in 2004,2005, or extends to the second half of 2002 to the rise in the first quarter of 2004, this analysis does not need adjustment in the strict. We only need to the various data on the economic framework, we can get to market trends more consistent and reasonable explanation. Such an interpretation is logically appropriate to look back, but that does not mean that every inflection point near the location at an early stage that we are able to reasonable grasp of inflection point. from the history of the past so many years, we have 6,000 points at the top of the grasp of the inflection point is very successful, and why? because a lot of data very difficult to get at the time. until we get all the data from official credit rate, bills discounted rate, all data collection complete, the time has grown to 20 February 2008, until all data have been put together, we recognize that when the market into a downward trend, when the market has dropped 4300 points Many people think that turning point in the space of late 4300, looking back, even then cobble together all the data and then make judgments on the trend, is not too late. Therefore, we first turn last year and more, we turn more than in October, in theory, mobility of loose assertion soon. from grasp the trend point of view, last October the temptation to turn a very large number. According to this reason, in January last year, 10,11, we turn more decisively, from that time has been emphasizing on the market liquidity influence continues to the present. but also based on this framework, the market rose during 2006, we are in March 2006 when the market rose by 1250 when the firm began to turn more. and this continued until 2008, turning more in February. on the decline in early 2008, we turned around at this turning point in more than enough time, mainly because the data appeared to track a certain lag. but that does not mean that we are to analyze and grasp the logic of the market is problems. If all the data in early 2008 to put together in early 2008, the market can make judgments about the downward trend. the future, we are not sure, we will turn left empty, because we are not sure that all data collected, but we are sure the position earlier in the right turn empty, because the right side of the data acquisition much easier.
such a framework look back a few questions, 2006,2007 reasons explain the market rally Many, many asset revaluation theory is a theory. In addition to this theory, there are a large number of other theories, such as split share structure reform, golden years, the demographic dividend, saving move. all of these theories face the market fell in 2008 did not explain it. Whether or move the demographic dividend or a savings golden years, including the split share structure reform, are very difficult to explain the decline in 2008. But the asset revaluation process theory can explain the decline in the course of .2008, it is proposed new theory, the Olympic Games when people made up a song, then the black African people, but also black, but the size of Africa. means that the decline is because the size of the non-concentrated market decline caused by lifting of the ban to sell. This view is extremely popular in the market, regulatory departments are also under great pressure, as it almost negates the principle of the split share structure reform. Such an interpretation is very attractive on the surface, so a popular saying at that time called the size of the non-is the industrial capital, who play the stock market is the financial Capital, two valuation methods are not the same capital, industrial capital with the return of the valuation, valuation of financial capital with deposits. industry size of non-GM by 60%, 70% of the chips, the market according to ...
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