CICC released a research report pointing out thatThe short-term A-share market may still be expected to repair in volatility, but throughout the second half of the year, under the influence of internal and external uncertainties, the market path may not be unilateral upward.The room for absolute returns in the market depends on whether China can achieve sustained stabilization and improvement in fundamentals as soon as possible.Structurally, CICC recommends "stability" in the second half of the year.. In terms of overseas Chinese stocks, CICC believes that although the market turmoil caused by worries such as policy tightening in the peripheral markets may still be the main source of fluctuations in the overseas Chinese stock market.However, the Hong Kong stock market is still expected to show considerable resilience.It is mainly supported by more positive policies, more attractive valuations and the continued inflow of southbound funds.In other words, while fluctuations may occur, they also provide better opportunities for intervention.

The recent performance of US stocks is reflected in the dual impact of inflation and growth expectations, and the announcement of higher-than-expected inflation has intensified investors' concerns about further tightening of US monetary policy.The domestic price level is relatively moderate, and the main contradiction is still weak demand.. Since the meeting of the Politburo at the end of April, policies have continued to strengthen and stabilize growth and expectations. The newly released social finance and M2 data show that liquidity has loosened and increased, and market interest rates have fallen instead of rising after the data. At the same time, from the beginning of the year to the end of April, China's market adjustment has been relatively large, the valuation is relatively low, the recent domestic epidemic situation has significantly improved, the resumption of work and production has been deepened, and market sentiment has gradually improved.More robust than overseas。

Look ahead, CICCThink that the Chinese and foreign policy cycle continues to reverse.The Chinese market is likely to maintain relative resilience relative to overseas in the second half of the year. With low inflation, sufficient policy space and continued repair of fundamentals, the Chinese market already has medium-term investment value. Considering that liquidity relaxation is still increasing, the overall market repair space is not significant, and there may be some inertia for the improvement of market sentiment, CICCIt is considered that the short-term A-share market may still be expected to repair in volatility, but throughout the second half of the year, under the influence of internal and external uncertainties, the market path may not be unilateral upward.The room for absolute returns in the market depends on whether China can achieve sustained stabilization and improvement in fundamentals as soon as possible.Structurally, CICC recommends "stability" in the second half of the year.. Recently, the growth style has been widely concerned by the market. CICC believes that in the context of loose liquidity, some of the growth that has experienced a large decline in the previous period, a gradual match between valuation and earnings, and a high degree of prosperity can be structurally arranged and repaired in stages, while the opportunity for strategic style to switch to growth needs to pay attention to the progress of overseas inflation and steady growth in China.

The current focus is on three directions:

1) areas where "steady growth" may have policy support: infrastructure (traditional infrastructure and some new infrastructure), building materials, automobile and housing-related industries have policy expectations or actual policy support

2) areas with low valuations and relatively low correlation with macro fluctuations, especially in some areas with high dividends, such as infrastructure, electricity and utilities, hydropower, etc.

3) some areas where fundamentals are bottoming out, supply is limited or the economy continues to improve: agriculture, some non-ferrous and some chemical sub-industries, coal, and photovoltaic and military industries.

CICC tips: pay attention to the following aspects in the near future:

1) Financial and inflation data are released in May.The recently announced new loans in May totaled 1.89 trillion yuan, an increase of about 390 billion yuan over the same period last year. Short-term loans and bill financing for enterprises are still the main sources of loan increment, with social financing increasing by 2.79 trillion yuan, an increase of about 840 billion yuan over the same period last year, which is higher than expected against the background of loose policies. The year-on-year growth rate of M2 rose from 10.5 per cent in April to 11.1 per cent ‍ in May, continuing to exceed the growth rate of the social welfare balance, reaching a 2020 high, further reflecting the strength of macro policy. Judging from the inflation data, pig prices have risen somewhat, but the supply-side logistics disturbance has eased, the suppression on the demand side of the epidemic has not been significantly alleviated, and the price growth of services and optional goods has slowed, with CPI unchanged at 2.1 per cent year-on-year in May. PPI slowed further from 8.0% to 6.4% year-on-year. Domestic prices are relatively moderate.

2) the policy will continue to make efforts to "stabilize growth".The Ministry of Finance and the State Administration of Taxation issued a notice saying that starting from July 1, 2022, the industry scope of the policy of full refund of value-added tax credit will be expanded to support enterprises to reduce their burden and extricate themselves from difficulties. The executive meeting of the State Council stressed that the downward pressure on the economy is still outstanding. All localities should earnestly assume the responsibility of protecting the livelihood and well-being of the people, ensure reasonable economic growth in the second quarter, and stabilize the overall economic market. Local property market relief policies have landed one after another, Guangzhou purchase restrictions have been relaxed, Beijing can apply for hold-over housing provident fund, Qingyuan, Linfen, Fuzhou, Wuhan and other property markets are preferential and subsidy policies.

3) the progress of the domestic epidemic situation:Recently, there has been the spread of a clustered epidemic in Beijing, breaking the trend of clearing zero on the social surface for several days in a row, and the area around Beijing has also been affected. Shanghai has also seen new social cases caused by the aggregated epidemic, and the officially disclosed confirmed cases in Inner Mongolia have also shown a rising trend, and the epidemic situation is still disturbed. We will continue to pay attention to the process of resuming work and childbirth.

4) overseas progress:Recently, the United States announced that CPI in May grew by 8.6% year-on-year, another record high; core CPI increased by 6% year-on-year, also higher than expected. High inflation poses a major challenge to the Fed, which may require the Fed to implement more aggressive monetary tightening policies to deal with inflation, but according to economic laws and experience, this may increase the downward pressure on the economy and increase the probability of recession. The three major US stock indexes fell nearly 3 per cent after the CPI data, the biggest daily decline in nearly three weeks, while Treasury yields rose to 3.16 per cent on the 10-year benchmark note.

As for overseas Chinese stocks, CICC pointed out that although risk aversion hung over global stock markets last week and US stocks continued to be volatile, overseas Chinese stock markets still showed rare resilience. Positive policies continued to stack economic data to improve the overseas Chinese stock market continued to strengthen last week, especially the Hang Seng Technology Index rose 9.75% on the marginal improvement of the regulatory environment.

The overseas Chinese stock market has continued to rebound since mid-May, with the MSCI China index rising more than 17 per cent, with technology growth stocks leading the way in anticipation of a marginal improvement in the regulatory environment. Looking ahead, CICCIt is believed that the marginal relaxation of regulatory positions and still attractive valuations will continue to support the market.In addition to policy factors, economic data also played a positive role in the recovery of epidemic prevention and control measures last month.

However, in the process of repair, CICCInvestors still need to be reminded of potential fluctuations due to profit-taking, external market volatility and poor market expectations (actual repair of growth and corporate earnings).. Looking ahead, CICC believes that the core contradiction that investors are concerned about may turn to whether policy measures can have a real effect. In the early stages of a market rally, valuations and sentiment tend to be the first to repair, while a bottoming rebound in the macro environment and earnings is a key factor in the market's continued rise.

On the whole, although the market turmoil caused by policy tightening in the peripheral markets and economic recession may still be the main source of fluctuations in the overseas Chinese capital stock market.But CICC expects that the Hong Kong stock market is still expected to show considerable resilience.It is mainly supported by more positive policies, more attractive valuations and the continued inflow of southbound funds.In other words, while fluctuations may occur, they also provide better opportunities for intervention.