In the first half of 2022, global stock markets experienced extraordinary times: the Hang Seng Index fell below 20000 in March, the Prev fell below 3000 in April, and the Dow fell below 30000 in June. In such a special context, should stock investors stay on the sidelines or enter the market at a bargain? With the changes in the global macro situation and the impact of downward pressure on the economy, which industries and sectors should be bullish for a long time?

After taking stock of global stock markets in the first half of 2022, the Chinese edition of Barron Weekly found that A shares and Hong Kong stocks outperformed US stocks. As of June 30, the Hang Seng Index and the Hang Seng Technology Index fell 6.57% and 14.12% respectively. In terms of A shares, the Shanghai Composite Index fell 6.63%, while the Shenzhen Composite Index and the gem Index fell 13.20% and 15.41%. The Dow Jones Industrial average, the S & P 500 and the NASDAQ Composite Index all fell in double digits.

Compared with the rise in the world's major stock indexes in the same period last year, the performance of global stock markets in the first six months of 2022 was gloomy. What are the investment opportunities and risks in global stock markets in volatility?

A-share: go out of the independent market and pay attention to the synchronization of the domestic economy and the market

The Chinese version of Barron Weekly believes that steady growth is a clear market main line in the first half of 2022; in addition, with the mitigation of the risk of the domestic epidemic, post-epidemic recovery may become an important investment theme in the second half of the year.

On June 30th, the National Bureau of Statistics announced that the purchasing managers' index (PMI) of the manufacturing industry in June was 50.2%, up 0.6% from the previous month, returning to above the critical point, and the manufacturing sector resumed expansion. Just two days ago, the National Health Commission issued the COVID-19 Prevention and Control Plan (9th Edition), which adjusted the isolation control time for close contacts and immigrants to "7 days of centralized isolation medical observation + 3 days of home health monitoring."

After experiencing the disruption of the epidemic in April, the domestic economy initially recovered in May. The National Bureau of Statistics said at a press conference on June 15 that there were indeed positive changes in economic operation in May. With the overall improvement of the domestic epidemic prevention and control situation, the effects of policies and measures to stabilize growth have gradually emerged, the positive changes in economic operation have increased, most of the main indicators have improved, and the economies of some areas affected by the epidemic have rebounded.

At the same time, the people's Bank of China cut its benchmark by 0.25 percentage points on April 25 to support the development of the real economy and promote a steady decline in comprehensive financing costs.

Although the Shanghai Composite Index fell below 3000 points on April 25, China Merchants's research report pointed out that from April 27 to June 24, the Prev Index rebounded 16.1% and the gem Index rebounded 31.3%, while US stocks fell twice since the end of April. A-share performance in the global stock market, "desensitization" to overseas shocks.

Citong Securities pointed out that since May, under the background of the Fed tightening more than expected and recession expectations fermenting, overseas stock markets have generally undergone large adjustments; based on the resumption of China's economy in leading developed markets and domestic liquidity pricing, this round of A-shares have a logic independent of overseas.

For the trend of A shares in the second half of 2022, many institutions have given a more optimistic view. Guoyuan Securities believes that compared with the valuation quantiles of overseas multinational stock indexes, based on the valuation data since 2010, the A-share broad-based index is currently in the lower quantile.

Guotai Junan Securities believes that from the valuation level, the valuation of the main index has fallen to the bottom area, and in early May, it proposed to "firmly believe in the long-term upward trend of A shares"; from the perspective of industry configuration, the institution believes that it can configure relatively undervalued sectors such as brokerage, SSE 50, China General Interconnection, and media.

Bohai Securities recommends paying attention to the high prosperity sectors of the industry in the post-epidemic phase, such as automobiles and new energy, as well as the agriculture, forestry, animal husbandry and fishing sector in terms of thematic opportunities.

Shen Wanhongyuan is optimistic about the new and old energy cycle. Cheap electricity is exported through manufactured goods and is essentially tradable, and such tracks that have a significant impact on the building of China's international competitiveness have the opportunity to become the foundation of a bull market, the agency said.

However, the agency is also careful to point out that the "market bottom" may be synchronized with the "economic bottom", and the decline in external demand and the pattern of household income distribution still leave room for improvement in China's economy.

Earlier, when the Prev fell below 3000 points, Chen Jingrong, director of the Golden Policy Research Institute, also told the Chinese edition of Barron Weekly that the bottom of the market was not only a stock market problem, but also a real economy problem.

On June 27, Zhu Hong, a senior statistician of the Industry Department of the National Bureau of Statistics, when interpreting the profit data of Chinese industrial enterprises in May, also pointed out that the profits of industrial enterprises continued to decline in May compared with the same period last year, and the upward pressure on enterprise costs was still great. Production and operation still face many difficulties, and the foundation for the efficiency recovery of industrial enterprises is not yet solid. At present, the international situation is becoming more complex and grim, and there are still many uncertainties in the benefit recovery of industrial enterprises.

Bohai Securities believes that under the background of accelerating the implementation of a package of stable growth policies in May and June, China's economy is expected to achieve the short-term goal of "reasonable positive growth" in the second quarter. At present, from the overall sound tone of the policy, after the phased and comprehensive implementation of the stable growth policy, the market will enter the observation stage of the policy effect.

Us stocks: bear market brings buying opportunities, "recession trading" throughout the second half

As of June 29, the Dow Jones Industrial average, the S & P 500 and the NASDAQ were down 14.61%, 19.88% and 28.55%, respectively. For the next trend of US stocks, there are different voices in the market. The June 20 cover article of Barron Weekly points out that the collapse in U. S. stocks has created a buying opportunity that has not been seen in decades. Stifel strategist Barry Bannister told Barron Weekly that U. S. stocks are still in a bear market.

One consensus is that market expectations for the US economy are no longer so optimistic. On June 15, the Fed forecast that US GDP would grow by 1.7 per cent in 2022, 1.1 percentage points lower than its March forecast of 2.8 per cent, and cut its forecast growth of US GDP in 2023 and 2024 from 2.2 per cent and 2.0 per cent to 1.7 per cent and 1.9 per cent, respectively. On the same day, the Fed announced its biggest rate hike in nearly 30 years, raising its target range of the federal funds rate by 75 basis points to between 1.5% and 1.75% in response to soaring consumer prices.

According to the World Bank, a major risk to the current economic outlook is high global inflation and sluggish growth, reminiscent of the stagflation of the 1970s. This could eventually force developed economies to tighten monetary policy substantially, leading to financial woes in some emerging markets and developing economies. The World Bank says strong and broad policy responses are needed to promote growth, strengthen macroeconomic frameworks, reduce financial vulnerability and support vulnerable groups.

Barron Weekly believes that another big worry in the US stock market is that the earnings outlook of listed companies may deteriorate. Analysts are optimistic that earnings per share will grow 11% to $228 in 2022 and 9.6% to close to $250 in 2023.

In May, analysts' forecasts for third-quarter earnings growth for S & P 500 companies fell to 10.6% from 11.4%, and their forecasts for fourth-quarter earnings growth fell from 10.9% to 10.1%, according to FactSet.

To some extent, the expectation of profitability of listed companies in US stocks is of great significance to the stock market. In terms of absolute returns, fewer and fewer industries have been able to take the lead in stabilizing the S & P 500 since 1990, according to Cinda Securities.

Dr. Huang Haizhou, member of the China International Capital Corporation Management Committee, managing director, and global head of the Equity Business Department, said when participating in the live broadcast of the "he Gang Global Investment report" that the bottom of US stocks may be seen in the third quarter of this year, but two conditions must be met: first, the downward trend of US inflation is clear, and second, the US economy will enter recession next year or the year after next.

CITIC said in the investment strategy report on the US stock market in the second half of 2022 entitled "the end of the long bull in US stocks, start recession trading" in the second half of 2022, the fear of high inflation, monetary tightening and superimposed recession has put an end to the 13-year long bull of US stocks, and with the deterioration of fundamentals, US stocks are not expected to have a sustained rebound before the Fed's monetary policy shift is expected to be formed, and "recession trading" will be the theme throughout the second half of the US stock market.

The agency advises investors to pay attention to three main lines:

• 1. Varieties that benefit from "consumption downgrade", including$McDonald's Corp (MCD.US) $、$Jinbao Soup (CPB.US) $、$Kraft Heinz (KHC.US) $And discount retailers.$Dollar Tree Company (DLTR.US) $；

• 2. Energy stocks with low valuations and high profits, such as those whose valuations are historically low and whose profits maintain rapid growth$Chevron Corp (CVX.US) $和$Exxon Mobil Corp (XOM.US) $；

• 3. Technology blue chip with strong certainty, such as software / cloud computing leader$Microsoft Corp (MSFT.US) $、$CRM.US (Saifu) $Fully lay out the network security$Palo Alto Networks (PANW.US) $, and the chip subdivides the leader in the track$NVIDIA Corp (NVDA.US) $和$Advanced Micro Devices Inc (AMD.US) $。

Hong Kong stocks: with good performance-to-price ratio, Internet companies may promote valuation repair

Discussions about the bottom of Hong Kong stocks began last year. In the first half of 2022 alone, Hong Kong stocks fell less than A-shares and US stocks. The Hang Seng Index continued to decline from January to March in 2022, but after the release of the "policy bottom" on March 16, Hong Kong stocks stopped falling and stabilized and entered the box shock.

However, the PEG linked exchange rate system determines that interest rate changes in the United States and Hong Kong remain synchronized, and the liquidity of Hong Kong stocks is greatly affected by overseas. On June 16, the Hong Kong Monetary Authority raised the base rate for the third time this year, in line with the Fed's tightening actions. At the same time, Hong Kong stocks are highly open, and many of the participants are overseas institutions and funds, which are in line with the international market, and their trend is more sensitive to the international market trend.

However, a positive factor that can not be ignored comes from the support of policies and regional economy. On the occasion of the 25th anniversary of Hong Kong's return to the motherland, Soochow Securities believes that Hong Kong, China will continue to serve as an important "bridgehead" for the country's two-way opening up. The China Securities Regulatory Commission and the Hong Kong Securities and Futures Commission issued a joint announcement on June 28, saying that the inclusion of ETF into the interconnection mechanism was officially approved and ETF trading under interconnection will begin on July 4, 2022.

In addition, Internet companies, which play an important role in Hong Kong stocks, are ushering in opportunities for valuation repair. On May 17, Liu he, member of the political Bureau of the CPC Central Committee and vice premier of the State Council, pointed out that it is necessary to support the sustained and healthy development of the platform economy and the private economy, study specific measures to support the standardized and healthy development of the platform economy, and encourage platform enterprises to participate in major national scientific and technological innovation projects. Soochow Securities pointed out that the boots of Internet regulation policy fell to the ground, and the platform economy officially changed from "strong supervision" to "seeking development".$Tencent (00700.HK) $、$Meituan-W (03690.HK) $As the representative of high-quality Internet companies occupy an important weight in Hong Kong stocks, it is expected to drive the overall valuation of Hong Kong stocks to continue to repair.

Societe Generale Securities believes that as China's economy stabilizes in the second half of the year, the profit expectations of China's high-quality companies will improve, and the risk premium of A-shares and Hong Kong stocks will fall significantly downward, especially the Hang Seng Index is expected to have a more obvious Davis double-click. The improved momentum of earnings forecasts for Hang Seng Index heavyweights in the second half of the year is expected to be stronger than that of A-share index heavyweights. The biggest difference between the two lies in industries such as information technology and the Internet.

Shen Wanhongyuan is also bullish on Internet companies, arguing that this sector is expected to become one of the preferred sectors for overseas investors to return to Chinese assets, but it is also a reminder of the risk of marginal regulatory tightening facing the industry.

Other global stock indexes: have entered a bear market, the impact of inflation will continue

Between the beginning of 2022 and June 29, the MSCI all countries World Index (ACWI, in dollar terms), which targets 47 major countries, fell by 20 per cent. According to QUICK FactSet, the total global market capitalization lost about $25 trillion in 2022.

In the Asia-Pacific market, the Bank of Japan left interest rates unchanged on June 17, but the depreciation of the yen is stimulating consumer prices. Barron Weekly said the return of inflation had become a sensitive topic in Japan, where central bank governor Toshihiko Kuroda had been forced to apologize after implying that Japanese families seemed used to rising prices.

At the same time, the selling of the yen gained momentum, devaluing the yen to Y136 to the dollar on June 22 for the first time in 24 years. From June 9 to 30, the Nikkei 225 index fell 6.56%, compared with an 8.33% drop in the first half of this year.

On the other hand, the stock market performance of Vietnam, which has made positive macroeconomic progress, is not so bright. In the first quarter of 2022, driven by "made in Vietnam", the industrial and construction industries grew by 6.38% year-on-year, the fastest of the three major industries in Vietnam, with agriculture and services growing at 2.45% and 4.58% respectively. In the first half of this year, the Ho Chi Minh Index fell 18.7%.

In the European market, Morgan Stanley believes that the geopolitical conflict makes the European macroeconomic downside risks are rising, and the sharp rise in energy and food prices will put a heavy burden on European consumers. The ECB also started an interest rate hike cycle and decided to end net asset purchases under its asset purchase programme from July 1, while planning to raise key interest rates by 25 basis points at its monetary policy meeting in July and raise rates again in September.

The Russian stock market suffered heavy losses, falling as much as 37.20% as of June 29, making it one of the worst performing stock markets in the world. Societe Generale Securities believes that the common risk of inflation in the United States and Europe in the second half of the year still comes from the impact of geopolitical conflicts on energy and food prices, and the delayed transmission will continue.