The outbreak in the Mainland has not yet been completely controlled, and the social crisis in Hong Kong is getting worse
The stock market can ignore it. The hype around the global government ’s market rescue and anti-epidemic drugs has been ignited. Hit a new high this year. The short-term rising tide has overdrawn the longing for the economy and overestimated the effectiveness of water release. When the valuation needs to be revised, it will be even more painful!
As the number of people diagnosed with the epidemic in China and Hong Kong continues to rise, the people in the Mainland will resume work indefinitely, which will greatly affect the industrial supply chain.
Residents will not leave home for epidemic prevention and will also severely hit the consumer industry
In Hong Kong, the business volume of merchants in the Chinese New Year has plummeted by 70% to 80%. In addition, employees in the financial, hotel, catering and transportation industries have to be forced to take unpaid leave, and retail stores are even more likely to set off. This situation is in sharp contrast to the positive atmosphere of Hong Kong stocks, which puzzles investors!
In fact, the so-called “good news” just comes to the rescue. The worse the economy is, the more the government will expand monetary policy easing. Although low interest rates and abundant market liquidity, it is difficult for companies to do something because of the downturn in the real economy. Money only flocked to the stock market in search of returns. Nearly 70% of the market value of Hong Kong stocks comes from Chinese-funded enterprises, and mainland funds have become major players. As the central government strengthens its efforts to loose money, the source of funds for speculation in Hong Kong is not in danger of breaking the cables. It will also actively maintain the stability of Chinese stock valuations. Value to appease the people. This explains why the economy is so bad, but the stock market is still very resilient, and it continues to rise as expected.
The problem is that the two industries are difficult. Even if some banks are willing to spend time with merchants and extend the repayment period to the hardest hit industries, the job market has deteriorated sharply and the demand side continues to deteriorate. Can it help merchants solve their difficulties? I’m afraid it won’t even pay as much. In addition, banks must first discard profits when dealing with related issues, and they must face the risk of rising non-performing loans. It can be seen that the profit outlook of traditional industries is pessimistic. In the next quarter, companies in both places will issue profit warnings and even the tide of bankruptcy. The rise in the market, which is purely funded by funds, is like a “fool fighting” game. After all, we have to face reality. As for new economic enterprises, such as 5G communications and e-commerce, in theory, they can benefit from changes in consumption and business models, and they have some resilience. However, the immediate rise in the market has overdrawn corporate profit growth and cannot afford overvaluation.
Don’t forget that China and the United States only signed the first-phase trade agreement
Now that the Mainland economy has been hit hard, there are many variables in terms of implementation, and the second-stage negotiations that touch on core interests are bound to be arduous. On the other hand, due to the sharp slowdown in domestic demand in China and Hong Kong, the sluggish economy in the first half of the year will drag down the full-year forecast. Asset prices, including the stock market and the property market, will continue to “leave the ground” without conditions. It will only make the rich and the poor more disparate, and intensify the society towards extreme contradictions. Whether it is a corporate or individual investor, what is indispensable is not the courage to follow the trend, but the prudent management of risk and the high efficiency of execution!