Today's focus on the Chinese economy: The picture shows that China's weekly macro report shows that domestic demand is climbing and infrastructure is accelerating, and social finance surpassed expectations in March: the global epidemic continued to evolve from April 6 to 10, 2020. Domestic infrastructure investment is accelerating, but the recovery in consumption is lagging behind investment. Food prices rose slightly year-on-year, and commodity prices had mixed ups and downs. Interbank liquidity has remained relatively loose; the treasury bond yield curve has moved downward and steeper; bonds have maintained a relatively fast net issuance pace; and the RMB has appreciated. Social finance greatly exceeded expectations in March; food prices led to a decline in CPI, and PPI declined markedly; capital outflow pressure temporarily increased under the “dollar shortage.” Yi Wei, SAC Practice Certificate Number S0080515050001, SFC CE Ref: AMH263; Yuan Yue, SAC Practice Certificate Number S0080118090059, SFC CE Ref: BOK326; Zhou Peng, SAC Practice Certificate Number S0080119080009 China's Economy: Macro Hot Topics Speed Review, Social Finance Greatly Exceeded Expectations, Steady Growth Intensified: March Monetary and Credit Data Review added 5.16 trillion yuan in social finance, significantly exceeding the market Expected 3.14 trillion yuan. Looking at each item, the addition of social finance can be called “in full bloom.” Among them, the expansion of medium- to long-term corporate loans, bill financing, and corporate bond issuance is particularly obvious. The amount of social finance released in March shows that the policy is strengthening post-pandemic relief and steady growth. In addition to relief for small and medium-sized enterprises and low-income households, the clearest short-term policy focus is probably infrastructure investment focusing on new urbanization. Yi Yi, SAC Practice Certificate Number S0080515050001, SFC CE Ref: AMH263; Chang Huili, SAC Practice Certificate Number S0080517110001, SFC CE Ref: BJC906; Liang Hong, SAC Practice Certificate Number S0080513050005, SFC CE Ref: AJD293 Finance: Industry News Weekly #13：新增社融大超预期；上市券商3 Results have declined somewhat in the past week, finance, Bank, insurance, and brokerage A shares changed 0.6%, 0.1%, 1.0% (Shanghai and Shenzhen 300:1.5%), and H shares changed 2.4%, 2.0%, 2.5%, and 3.2% (Hang Seng State-owned Enterprises: 3.4%). Since the beginning of 2020, the absolute returns of A/H financial stocks have been -14.7% and -15.1%, respectively, outperforming the Shanghai and Shenzhen 300 Index 5.5 ppt and the Hang Seng State-owned Enterprises Index 1.8 ppt. Wang Yaoping, SAC Practice Certificate Number S0080517120002, SFC CE Ref: ALE841; Zhang Shuaishuai, SAC Practice Certificate Number S0080516060001, SFC CE Ref: BHQ055; Tian Tan, SAC Practice Certificate Number S0080517100002, SFC CE Ref: BKY217; Yao Zeyu, SAC Practice Certificate Number S0080518090001, SFC CE Ref: BIJ003 Overseas Economies: Macro Weekly Report: Increased credit support from the Federal Reserve: April 6 to April 12, 2020 Last week: 1) The European epidemic eased, but the emerging market outbreak became a new focus; 2) The Federal Reserve increased its injection of 2.3 trillion dollars into the economy; the Eurozone launched a 540 billion euro bailout plan, but no progress was made in issuing Eurozone mutual bonds; 3) The US labor market continues to face significant pressure. This week's focus: 1) US unemployment claims, and retail sales data for March. Zhang Mengyun, SAC Practice Certificate Number S0080518040004, SFC CE Ref: BIB964; Yi Yi, SAC Practice Certificate Number S0080515050001, SFC CE Ref: AMH263 A Share Market: A-share Strategy Weekly Report Policy Intensification Week Review: The index rebounded slightly, and the “pure domestic demand” sector performed well. At the beginning of last week, the market performed well under the influence of factors such as the overseas epidemic and slowing expectations, continued rebound in peripheral markets, and increased domestic policy support. The Shanghai Composite Index and the GEM Index broke through 2,800 and 2000 points respectively in the middle of the week, and there was a correction on the last trading day. In the end, the Shanghai Composite Index/GEM Index increased 1.2%/2.3% weekly, and the trading volume of the two markets remained around 60 to 700 billion yuan. In terms of industry and themes, “pure domestic demand” related sectors such as catering and tourism, building materials, food and beverage, media, and steel are leading the market; the pharmaceutical sector is still performing well; and technology sectors such as electronics and communications have recovered. Wang Hanfeng, CFA, SAC Practice Certificate Number S0080513080002, SFC CE Ref: AND454; Li Qiusuo, SAC Practice Certificate Number S0080513070004, SFC CE Ref: BDO991 Stock Market: Thematic Strategy “Factor Market Reform” to promote “new urbanization” is a strategic move. The international situation is changing, and the global interpretation of the pandemic is impacting China's external demand, and identifying effective domestic demand to implement demand boosting and relief, not only further to China in the short term, medium to long term Development and response to the international situation are of strategic importance. The Development and Reform Commission issued “Key Tasks for New Urbanization Construction and Integrated Urban-Rural Development in 2020" on April 9, and the State Council issued “Opinions on Establishing a Better System Mechanism for Market-based Allocation of Factors” on the same day. These two documents indicate the direction of urbanization construction, and the other is to break down related institutional barriers to continuing urbanization, helping to further raise the level of urbanization, release domestic demand, and improve the quality of development. Wang Hanfeng, CFA, SAC Practice Certificate Number S0080513080002, SFC CE Ref: AND454; Li Qiusuo, SAC Practice Certificate Number S0080513070004, SFC CE Ref: BDO991; Liu Gang, CFA, SAC Practice Certificate Number S0080512030003, SFC CE Ref: AVH867; Wang Hui, CFA, SAC Practice Certificate Number S0080514120001, SFC CE Ref: BJI914 Overseas Markets: Overseas markets observe that valuations are too high; there may be more profit cuts during the performance period: April 6-12, 2020, when the number of new confirmed cases in the US fell for a while, causing the market to anticipate the emergence of an inflection point of the epidemic. This optimistic expectation further drove a general rebound in US stocks and global stock markets. However, since then, the US epidemic has risen again, and the number of confirmed cases and deaths has now risen to number one in the world. This indicates that it will take time to confirm the inflection point of the epidemic; and it is still worth paying attention to whether the continuous spread of the epidemic in Southeast Asia and other places will bring a new wave of impact. Liu Gang, CFA, SAC Practice Certificate Number S0080512030003, SFC CE Ref: AVH867; He Lu, SAC Practice Certificate Number S0080120010032 Overseas Markets: Overseas Strategy America's “Shadow Banking” Preliminary Exploration The origin of the “huge shock” in the financial market caused by the COVID-19 pandemic was a huge impact on the cash flow of various departments of the entity, especially the corporate sector, and was amplified by financial and asset management institutions. Therefore, credit bonds are the weakest link in the current financial system, and credit shocks are also the source of tight liquidity. Thanks to strict regulations after the 2008 financial crisis, the US banking system's leverage, capital adequacy ratio, and share of liquid assets are far better than at the time, although they will still be affected by narrowing interest spreads and declining asset quality. In contrast, the potential pressure of “shadow banking”, which is outside the bank supervision system but has risks such as liquidity and credit mismatches, cannot be ignored in the context of volatile asset prices, withdrawal of funds, tight cash flow for enterprises and residents, and damage to asset quality. Liu Gang, CFA, SAC Practice Certificate Number S0080512030003, SFC CE Ref: AVH867; Yi Wei, SAC Practice Certificate Number S0080515050001, SFC CE Ref: AMH263; He Lu, SAC Practice Certificate Number S0080120010032 Energy: Commodity Petroleum: EIA may underestimate shale oil production The oil production announced by the US Energy Administration (EIA) drastically cut oil production in a single week, but inventories have also risen sharply. Explanation of demand, import and export, and processing volume. We estimate that the decline in downstream demand and changes in imports and exports can only explain 60% of US crude oil reserves. For excess crude oil reserves, the amount of crude oil processed can be verified by refinery maintenance volumes, while import, export and inventory data are relatively transparent. We estimate that the deviation may be due to estimates of weekly production. We expect actual production in the US may be 12.9 million b/d, which is higher than the paper figure, and the EIA may increase production in later monthly data. Guo Zhaohui, SAC Practice Certificate No. S0080513070006, SFC CE Ref: BBU524; Lin Hao, SAC Practice Certificate No. S0080519120001 Power and Electrical Equipment: Performance Preview Expected PV's profit performance diverged in the first quarter. The second quarter may provide an opportunity for long-term layout to forecast profit performance differentiation in the first quarter, and the impact of overseas demand began to be released in April. Sectors with strong prices are making good profits. Structural cost improvements enhance profitability. Downstream and downstream price misalignment squeezes gross margins in the short term, causing profit pressure. The domestic epidemic affected installation progress and component shipments. Considering demand pressure in the second quarter, a market consensus has been reached. We expect that PV stock prices will not continue until the number of people affected overseas reaches an inflection point. Prior to that, the launch of the domestic market and policy conferences led to a recovery in short-term sentiment, but worsening overseas demand will cause shocks. Considering that if the epidemic hits an inflection point at the end of May, PV demand, mainly in the ToB business, is expected to rebound in the 3rd quarter. We believe that long-term capital can fall during the April shock to lay out the silicon and photovoltaic glass sectors with a good supply and demand pattern. We are optimistic about Big New Energy, Tongwei Co., Ltd., Xinyi Solar, and Follett. Liu Jun, SAC Practice Certificate Number S0080518010001, SFC CE Ref: AVM464; Liu Jiani, SAC Practice Certificate Number S0080117010012, SFC CE Ref: BNJ556; Wang Song, SAC Practice Certificate Number S0080117120052, SFC CE Ref: BLE051; Zhu Yixuan, SAC Practice Certificate Number, HUICHUAN Technology (300124.SZ): S0080118080042 Maintaining outperforming the industry's 1Q20 forecast and exceeding market expectations, focusing on the 1q20 performance forecast issued by leading industrial automation company Alpha. Net profit increased 30-50% year-on-year, exceeding market expectations.Revenue side: We expect the company to have strong 1Q20 orders, and the revenue of general servo systems, PLC and other products will grow rapidly. Profit side: The company's results in reducing costs and increasing efficiency are obvious, gross margin has increased, and profitability continues to strengthen. We believe that the company's profitability will continue to strengthen, market share will continue to rise, and competitiveness will continue to increase. Therefore, we raised our 2020/21 net profit 6%/11% to 1,437/1,809 billion yuan. The company's current stock price corresponds to 34/27x P/E in 2020/21, respectively. Since industry demand is still uncertain, we maintain a target price of 34 yuan, corresponding to 36/29x P/E in 2020/21, respectively. Compared with the current stock price, there is room for a 20% increase compared to the current stock price, and maintain an outperforming industry rating. Zeng Tao, SAC Practice Certificate No. S0080518040001; Zhang Yue, SAC Practice Certificate No. S0080519090002; Liu Jun, SAC Practice Certificate No. S0080518010001, SFC CE Ref: AVM464 Hengli Petrochemical (600346.SH): Maintaining a 1Q20 performance that exceeds expectations; steadfastly extracting crude oil, refining and chemical business profits may recover significantly; predicts that Hengli Petrochemical's 1Q20 net profit will be about 2.1 billion yuan, year over year The increase was around 315%, which was better than our expectations and that of the market. We expect 1Q20's PTA business to achieve net profit of 100 million yuan, down from 4Q19, and the polyester business to achieve net profit of about 300 million yuan, which is basically flat from month to month. After reducing the predicted profit of the above two segments of the business, the 1Q20 company's refining and chemical business may have achieved net profit of about 1.7 billion yuan, which once again exceeded our expectations of about 1 billion yuan. A crude oil procurement strategy that firmly undercuts oil prices. The 2Q20 ethylene project is expected to contribute incremental results. The profit forecast for 2019-21 remains unchanged, with a target price of 22.6 yuan (corresponding to 12 times the 2020 price-earnings ratio) and the “outperforming the industry” rating. The company's current stock price corresponds to 6.7 times the 2020 price-earnings ratio. Lu Chen, SAC Practice Certificate Number S0080519060003, SFC CE Ref: BKH244; Wang Zhongyang, SAC Practice Certificate Number S0080519050001, SFC CE Ref: AXN241; Hu Yuhao, SAC Practice Certificate Number S0080119070037, SFC CE Ref: BNJ944 Gree Electric (000651.SZ): Maintaining a strong performance in the industry with large repurchases, and the effects of improving the governance structure are beginning to reflect the company The announcement will use the repurchase of the company's shares for employee stock ownership plans or equity incentives. The repurchase scale is 3 billion to 6 billion yuan, and the maximum repurchase price is no more than 70 yuan/share. Repurchases are beneficial to stock price stability and reflect improvements in the corporate governance structure after the mixed reform of state-owned enterprises. In the long run, Gree has sufficient strength to use repurchases and high dividends to increase valuation. Improvements in the air conditioning industry are expected to be delayed until 3Q2020. We expect China's air conditioning market to recover slowly in the second quarter, and overseas markets will be negatively affected by the epidemic. We lowered the company's 2020/21 EPS forecast by 8%/7% to 4.37/5.57 yuan to maintain the 2019 profit forecast. We are optimistic about the company's long-term competitiveness and the international integration of valuations, so we will continue to outperform the industry rating and target price of 78.00 yuan, with room for an increase of 45%. The company's current stock price corresponds to 12x/12x/10x 2019/20/21e P/E. He Wei, SAC Practice Certificate Number S0080512010001, SFC CE Ref: BBH812; Wei Yifei, SAC Practice Certificate Number S0080119080093