Pandemic losses are already a fact, keep an eye out for second shocks and window opportunities

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Hello everyone! Before the lecture, I would like to send special greetings to the students in Wuhan, Hubei Province, I believe that everyone will be able to come out, please persist for a while.

I think the epidemic problem will last for a total of 3-5 months. And what I want to focus on today is a sentence:Let's not "waste" this crisis.

What we want to admit is that the crisis brought about by the epidemic will basically make the loss in the first quarter very large, which is already a fact.

Now the concern is the second question: if some SMEs with particularly tight cash flow before possible closures, and some employees before possible unemployment leads to a further decline in household income,If you don't get proper help and support, then the second round of shock will come.This has a great impact on the entire social economy and all aspects.

My basic view is that the central and local governments need to quickly introduce a series of fiscal policies to provide emergency assistance to low- and middle-income families and small and medium-sized enterprises. Of course, I have seen some policies now, but I think it is not enough, even if the fiscal deficit is slightly higher in the short term, it is necessary, and it should be made as a priority to avoid a second round of demand and supply shocks as soon as possible.

In addition to fiscal policy, it is monetary policy. In terms of monetary policy, the government's difficulty isHow to deal with stagflation。

What is very embarrassing is that the economy is down, even in January and February, but inflation has risen. CPI has reached above 5.4 for the sixth time in the past 20 years (five times before, once in mid-2004, once each in 2007 and 2008, and twice in 2011).

In the case of this number, the government has concerns and concerns if it wants to make a difference in monetary policy.

At this stage, China's debt-to-GDP ratio is relatively high in the world, ranking 17th and 18th.

● In 2018, the proportion of the household sector has reached 53.2%, compared with 70-80% in developed countries and 30-40% in developing countries.

● This proportion is particularly high in the corporate sector, which is about 143%, which is about twice that of Europe and the United States. Therefore, the risk accumulation of enterprises is very large.

● The government sector has been very healthy in the past, basically at 37%, but in 2018 it also reached 72.3%. If we continue to take out money this time, it means that the leverage will be further increased.

The situation of foreign reserves is also not optimistic. We are the whole worldForeign exchange reservesThe country with the highest level has 3.1 trillion dollar reserves, and also has 2 trillion yuan of external debt, and short-term foreign debt (maturing in one year) accounts for about 43% of the total foreign reserves in the same period, which is also very high.

Of course, everyone says that China's overall economy is relatively healthy, and the proportion of interest is very low compared to the interest that can be paid, which is very safe.

However, if in such a debt burden andLeverage ratioIf we further relax monetary policy and further increase M2 investment, it is natural that overseas investors may worry about China's next inflation and the sustainability of overseas debt.

Therefore, if there is a high probability of doing this, if leverage is increased, it is likely to affect the country's credit rating. The credit rating of enterprises overseas will also be affected, which will increase the cost of overseas bonds and financing. At the same time, it further threatens the stability of the RMB exchange rate.

The year-on-year growth rate of China's M2 has been declining from nearly 20% to 13% in recent years, especially since July 2017, and has been controlled between 8% and 9%.

In other words, the macro management department is consistent in its determination and action on the issue of lever control, and has been stabilizing and controlling leverage, and gradually reducing leverage.This time, the entire monetary policy has not turned, which actually has a very large weather vane effect.

Another tool of the central bank is the deposit reserve, which has dropped from 24% in the past to about 10% now. This is close to the big banks in the United States; In Taiwan, it is about 7%. Such a tool is already very limited, and there is about 3% at most.

China's renminbi is not fully circulating. The largest asset in China is real estate, with a total market capitalization that exceeds the sum of Europe, the United States and Japan. Judging from my frequent travels around the world, this is an illusion, which is unreal, unscientific, and unrealistic. Therefore, if the water is further released, the first asset to float up is the house, and the probability of the housing market rising is very high.

I especially want to remind the comrades who speculate that first, there is a complete oversupply now, and there may be a special case in some cities; second, increasing the money supply and cutting interest rates will promote the growth of housing prices; Third, I don't believe that people have the will and ability to increase and allocate real estate. If housing prices increase in this round, shipment is a reasonable decision, and chasing up is likely to be a takeover.

Likewise, it has a big impact on the stock market. In the past few years, when currency is issued, the stock market has a high probability of growth. I also remind you that due to the impact on the performance of the first and second quarters, the usual method of Chinese listed companies is to use the epidemic to clear out past bad debts and bad debts. Although monetary policy is favorable, stock prices may pull back and decline in the short term.

China's supply chain also accounts for a very high proportion of the world, and the performance of many supply chains around the world may be impacted, and their efficiency in the first and second quarters will also be affected. So everyone has seen the change in stock price.

Market sentiment has a time frame. I remind everyone that there is not just a wave.

This is the first wave of returning to normal after resuming work from January to April. The official caliber believes that everything will basically return to normal in April, and I think from the perspective of enterprises and investors, there will be a little margin until May.

There is likely to be a second wave of shock, I think it will be in June and July.

Therefore, it is very feasible to define the epidemic as 3-5 months.

Some students asked if there would be retaliatory consumption after the epidemic, and I told you that it was impossible. After all, the losses are great.

However, you have to remember: many industries are currently affected, such as transportation, catering, tourism, and cultural industries, but this industry will not disappear, and it will still exist when the epidemic passes.

When some small and medium-sized enterprises have tight cash flow, high debt ratios, and insufficient asset chains, they are affected to give up this industry.It will lead to the rise of the top few companies.

Therefore, in this process, everyone must not follow the trend, and if they feel bad, they will throw stocks in droves. At this time, you should look at the leading companies, which are easy to expand in size in the market. Because small enterprises have left, space has been freed up.

The epidemic will also ripen and expand two strategic industries: online education and online office.

In a situation like the epidemic, we don't know when normal work and school will fully resume, when shopping and dining will resume, and I think online education and online office will continue for quite a long time.

This process facilitates the following:

First, for many people who do content, such as professors, speakers, and teachers, they may have rejected the online model, but now they have to get used to it, and then get used to it, and they will find that some content, some methods, some courses, and some education can be on-line, and the effect is very good.

Second, all parties will support content providers, consumers, and service providers who provide support for the system, so that everyone is more familiar and better at making this industry to the extreme.

What should enterprises affected by the epidemic do?

We must actively wait for the fiscal policies of the state and governments at all levels. Now we should actively prepare information for declaration at any time, such as applying for preferential epidemic loans and bonds.

In addition, I would like to say that the impact of this epidemic on the global and Chinese economy is far greater than that of SARS.

● Different economic stages:When China first joined the WTO in 2003, its economy rose rapidly, basically growing by 11-12% of GDP. And now it is just the economic downturn, and it is an acceleration period of downturn.

● China's export volume and supply scale are different:In the past, something happened in China, and the impact on the world was very small; And now we have a high proportion of global influence. If you look at GDP, we accounted for less than 8% of global GDP then, and now we account for 17-18%.

● Different leverage ratios:In 2003 and 2004, the Chinese government's debt accounted for only 47.3% of GDP, and the total debt of the entire country accounted for only 158% of GDP. In 2019, the government's debt accounted for nearly 81% of GDP, and the total debt was 278%. In this situation, the pressure to fight this crisis is much greater than in 2003.

● The proportion of the service industry is different:The first hit this time is the service industry. Of course, the manufacturing industry also has a certain impact, mainly affected by the start of construction and resumption of work, not the impact of consumption. The proportion of the service industry has now reached about 55%, so the impact of the epidemic on China is greater.

● Different affected population ranges:Recently, Professor Zhu Min made a very good calculation, the population affected by the epidemic was only 18% during SARS, and this time it was 36%. Corresponding to GDP, SARS only affects 26% of GDP areas, and this time it will affect 74%.
The retail sector accounted for only 25% of GDP in 2003 and now reaches 71%. In terms of fiscal revenue, SARS affected only 24% of the areas, and this time it affected about 61%.
There were very few closed management during SARS, and this "closure" basically covered 2/3 of China. In addition, the global travel restrictions on Chinese people in 2003 were far less than they were this year.

● The trade situation between China and the United States is different:One thing that did not happen in 2003 was that the United States forced China to increase imports from the United States.
On the surface, this time it affects China's imports and China's local production, but it indirectly affects the exports of third-party countries to China, and may also increase the import and export friction of third-party countries to China, further affecting the exports of Chinese exporters to these third parties.

I hope everyone must prepare early.