Europe And The United States Economy Is Good Why Peripheral A Shares Fell Alone

Recently, the peripheral A shares have fallen alone, the European and American economies have been improving, the stock market has gone up and up, and the hedging assets such as gold dollar bonds have fallen.

On the contrary, the main contradiction in the current market is not the fundamentals but the policy and capital side. In April, the upgrading of financial leverage led to liquidity tension, risk appetite decline and demand contraction.

It is expected that the financial deregulation will soon disappear. The three big signals of future regulatory policies and monetary policy easing are: the two signs of the bottom of the economy are clear, the financial leverage will be more complete, and the demand for economic and political stability will rise.

International Economy: the US is beyond the expectation of Africa. PMI continues to expand in the US, Europe and Japan. In France, the centre of France has led a pick-up in risk appetite.

The manufacturing industry in the US, Europe and Japan continued to expand, with the US manufacturing PMI declining to 54.8 in April, and the final value of PMI in the euro area manufacturing industry rose to 56.7, a six year high. The final value of Japanese manufacturing PMI was 52.7, hitting a three year high of PMI.

In April, the number of new non farm workers in the United States increased by 211 thousand, significantly higher than expected (190 thousand) and the previous value (7.9), and the unemployment rate dropped to 4.4%, the lowest in ten years, and the June Federal Reserve.

The probability is more than 90%.

In May, the United States Federal Reserve decided to maintain the benchmark interest rate target interval 0.75-1% unchanged. It did not change hawkish stance and maintained the guidelines for raising interest rates.

The US Congress passed the Appropriation Bill to ensure that the government runs until September, that is, the end of fiscal year 2017, and the Trump administration avoids closing risk.

The new US health care reform bill passed by the house of representatives in a narrow margin, and the follow-up is subject to Senate approval.

French intermediate candidate Ma Long is expected to be elected president to avoid European risk.

After the first round of French elections in April 23rd, the candidate for support for European integration led by Ma long, which relieved market worries.

European and US stock markets continued to strengthen this week, and hedge assets such as gold, US dollar and US debt continued to fall, and the euro and pound continued to strengthen.

The domestic economy: the end of replenishment, the financial leverage, spillover of real estate sales in April, and falling prices of crude oil, copper and steel.

Due to the end of inventory compensation and the financial leveraged spillover effect, there is a relatively obvious drop in the 2 quarter Credit Union financing. Taking into account the 1 quarter lag, the 3 quarter investment and the economy may be callback, the economic short-term W medium term L type.

30 real estate sales in large and medium-sized cities increased by 10.8 points in April compared with -41.9% in March.

Passenger car sales rose sharply in April, up slightly from a year ago.

The number and cost of the May 1 tourist hit a new high and the consumption of tourism market was upgraded.

Electricity consumption in the first week of May was 13.4%, slightly lower than 14% in April.

The operating rate of the blast furnace was flat. Last week, the price of rebar fell and the price of cement continued to rise.

US crude oil inventories are high and OPEC cut oil prices. Oil prices once fell below 45 US dollars.

Colored inventory is high and price volatility is weak.

In May, vegetable prices continued to pick up year-on-year, and pork and fuel prices continued to decline.

Currency: financial deleveraging upgrading, liquidity is tight.

The central bank, commercial banks and non banking financial institutions are reduced by three.

The central bank reduced its assets by 2-3 yuan in the month of 1 trillion and 100 billion yuan, mainly due to a sharp decline in claims for other depository companies.

Banks, brokerages, capital management business and financing of local financing platforms have been regulated and financial leveraged upgrading.

The new AA class city investment bond yields generally exceed 7%, while bonds are postponed or cancelled.

This week, the R007 interest rate was 3.2847%, down 89.71 BP from last week; the DR007 interest rate was 2.9828%, a decrease of 19.90 BP compared with last week; the 10 year treasury bond yield was 3.5592%, up 9.24 BP compared with last week.

The RMB exchange rate appreciates slightly.

Policy: one line and three meetings

Financial deleveraging is short term high pressure.

The Securities Regulatory Commission recently supervised some securities companies to carry out self inspection of information management business according to regulatory requirements.

Local banking supervision departments started on-site inspections to implement the three arbitrage four improper governance.

The CIRC issued a document requesting to make up for the short board of supervision, including strengthening the institutional equity, the authenticity of stock investment funds and the supervision of related pactions, strictly prohibit the behavior of acting on behalf of the stock and illegal associated shareholding, and strictly prohibits the multi-layer embedded products such as unclear investment fund assets, unclear whereabouts of funds, unclear risk situations, etc., and will conduct special investigation on illegal fund raising risks in the insurance industry in 5-7.

The Ministry of Finance and other six ministries and commissions jointly issued the notice on further regulating the behavior of local governments in raising debt financing. Local governments should not inject public property assets or reserve land into financing platform companies. They should not undertake to make the expected revenue from reserve land as the source of debt financing funds for financing platform companies, and demand that the non-standard government financing guarantee act be comprehensively corrected before July 31st.

Market: 2014 in the second half of the year, the liquidity easing period in the first half of -2016 was successively

Assets bubble, leverage arbitrage and financial risk have been born in the field of bond market and housing market.

In 2015, the stock market took the lead in deleveraging. Since August 2016, the bond market began to leverage. Since October 2016, the housing market has begun to leverage.

From the perspective of deleveraging, compared with the bond market, the stock market is relatively complete after clearing off the field, matching funds, standardizing the two financing, checking universal insurance and raising the cards.

At present, financial leverage is more hidden in banks, brokerage firms, fund companies, local financing platforms and other fields. The main assets are bonds, real estate, local infrastructure and other basic assets. This is also the current high pressure field of financial deleveraging.

Deleveraging has short-term pains, which will help to squeeze bubbles, reduce costs, control risks and serve the real economy for a long time. It will trigger a two dip in the demand side and boost productivity and industry concentration on the supply side.

To maintain the stock market turbulence, the callback provides the opportunity to buy high-quality leaders.

No matter from the fundamentals or valuations, the bond market has begun to have the value of allocation, but the over storage rate has dropped and the yield curve has been flattened. This shows that the overrun of the bond market is mainly due to the liquidity tension and the reduction of institutional demand caused by regulatory upgrading. The main contradiction in the current bond market is not the fundamentals but the policy aspect.

The real estate cycle will take a long look at population, medium term land, short-term finance and the short term adjustment of the housing market to the first half of 2018.

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