2010 forecast: inflation exceeds expectations, stock market enjoys dividends
(Information source: Guotai An Market Global Financial Information Analysis System)
Although the market expects 2010 to be a year of moderate inflation, there are still institutions that believe that the price increase in 2010 may exceed market expectations due to the impact of three major factors. From the point of view of the operation of the stock market's bull and bear cycle in the past, the stock market can often enjoy the "inflation dividend" in the early stage of inflation.
The price increase is more than expected
The rise in prices has been widely recognized by the market, but is there any possibility of exceeding expectations? CICC said that due to the impact of three major factors, prices in 2010 may exceed expectations. First, historical experience shows that the acceleration of currency growth will inevitably be caused by rising prices in the medium and long term. The unprecedented loose monetary policy implemented since the second half of 2008 will surely lead to an upward trend in inflation. Second, the rising cost of labor in China The trend will be more evident in the rising price trend; third, the over-capacity problem in the manufacturing industry that is generally worried may not be as serious as expected.
CICC also pointed out that the factors that will boost inflation in the short term also include: First, the price of international resource products is rising, and demand from emerging markets may continue to push up the price of international resource products; second, domestic agricultural products and food The increase in prices pushes up the overall price level. Thirdly, the increase in the prices of domestic resources such as water, electricity and natural gas and the increase in wages in some economic sectors will also raise inflation in the short term and raise inflation expectations.
Early stock market inflation will benefit
Inflation is a double-edged sword for the stock market, and research shows that the stock market in early inflation can often benefit from it. CICC believes that the most intuitive effect of rising inflation is to make nominal income and profits tend to be "pretty." First, as economic activity becomes more active, inflation gradually changes from negative to positive, and corporate asset turnover will tend to accelerate, showing that income growth will change; second, as price levels rise, corporate profitability will be affected The impact is manifested in that gross profit margin and net profit margin will change with the fluctuation of product prices. Changes in revenue growth rate and profitability will ultimately affect corporate earnings growth.
But the impact of rising inflation on corporate profits is not necessarily positive. CICC's research on the historical inflation cycle shows that the two forces of rising product prices and rising input costs in the context of inflation have different importance to overall profit in different periods of inflation. At a stage where prices have gradually stopped declining and started to stabilize to a gradual recovery, the profitability of non-financial enterprises has generally improved. However, once the price has entered a stage of overall increase, the cost pressure brought by the price increase will erode the level of corporate profitability. In other words, the relationship between inflation level and corporate profit improvement is not linear, and the relationship between the two has a critical point. According to the analysis of the rising cycle of inflation in 2002-2004 and 2005-2007, CICC believes that the boundary of inflation level is about 4-5%, that is, the overall inflation (CPI) gradually rises from a negative region to reach Before 4-5%, the gross profit of non-financial enterprises increased overall; after that, the increase in prices brought more erosion of corporate gross profit, and the level of gross profit of non-financial enterprises also fell rapidly.
CICC further pointed out that two types of enterprises may benefit or overcome the effects of inflation. First, financial enterprises benefit from the activity of funds brought by the steepening of the yield curve under the inflation trend or the decline of real interest rates; second, resource-based enterprises, where resource-based enterprises refer to upstream industries with physical resources, Including basic metals, coal, some agricultural products and related industries, and some chemical industries such as fertilizer ("hard" resources), also refers to industries with resources such as distribution networks or brand advantages, including department stores, supermarkets, brand retail, and tourism with distribution networks With hotels, and food and beverages with brand resources such as high-end liquor and wine ("soft" resources). What these resource attributes bring to enterprises is the pricing power under the rising price trend or the ability to transfer upward pressure on costs.
Therefore, it is recommended to stick to the "financial + two-end" investment approach in 2010, over-provisioning the financial industry, upstream resources, and downstream large consumer categories.
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