Weekly views from GF Securities’ macro research team【20210503】

AuthorGF Securities' Macro Research Team

Post-COVID recovery: progress and outlook 
Recent asset performance directly related to how quickly the “COVID gap” narrowed; future investment opportunities lie in industries that are yet to fully recover We have constructed a “COVID gap” indicator based on industry added value and revenue growth to quantify how different sectors were impacted by the pandemic and how much they have recovered. As of the end of last year, tertiary industries such as accommodation & catering, IT, leasing & commercial services and other services were still seeing “COVID gaps", while upstream mining and raw material processing sectors, downstream consumer goods manufacturing and public utilities are yet to fully recover. We estimate that the recovery will continue to be concentrated in midstream sectors in 1H21 and spread to upstream and downstream sectors from 3Q21. For asset pricing, the market is less sensitive to the absolute value of the “COVID gap”, and more sensitive to how quickly the gap narrows. Future closing of the gap is likely to focus on the service sector and a number of industrial sectors, but this indicator should be looked at together with other data.
Guo Lei, Wang Dan, April 27, 2021

What is driving this round of price hikes?
Demand recovery, disrupted supply and high leverage ratio in the non-financial sector all driving this round of price hikes; we suggest paying attention to how policymakers will rein in price hikes The recent surge in commodity and industrial raw material prices is related to demand, supply and monetary conditions. On the demand side, the global post-pandemic economic recovery, restocking in the manufacturing sector and the property booms in both China and the US have bolstered demand; on the supply side, natural elimination of capacity, uncertainties surrounding the pandemic in resource-rich countries, as well as China’s carbon neutrality drive and the US’ clean energy plan have constrained supply expansion globally. In addition, loose monetary supply and rising leverage ratios in the non-financial sector worldwide are also pushing up prices. We believe price hikes are likely to continue, and suggest paying attention to how policymakers address the situation.
Guo Lei, He Xiaoshu, May 3, 2021

US ten-year Treasury yield may see M-shaped movement in 2021 
The Fed may consider cutting QE in 3Q21 and guide interest rate hike expectations in 2H22; ten-year Treasury yield may see an M-shaped curve this year At the April FOMC meeting, the Fed decided to keep its benchmark interest rate and bond purchases unchanged. Although it was more optimistic on the US economic outlook, it has no plan to cut QE or guide an interest rate hike, as unemployment is still high and inflation only reflects transitory factors. We expect the US to achieve herd immunity in 3Q21, after which a substantial improvement in employment should make a QE cut more likely. If the US achieves full employment and its inflation target next year, the Fed may guide interest rate hikes in 2H22. US Treasury yields may move in an M-shaped curve this year due to the combined effects of QE tapering, expansion in bond issuance, achieving herd immunity and US stock corrections.
Zhang Jingjing, April 29, 2021

More

Legal Disclaimer

This report has been prepared by GF Securities Co. Ltd or its affiliates. GF Securities Co. Ltd and its affiliates are referred to as “GF Securities” hereinafter. According to the laws, regulations and regulatory requirements in different countries and regions, this report is distributed by the subsidiaries/operating bodies of GF Securities with relevant lawful and compliant operation qualifications in these countries and regions.

GF Securities (Hong Kong) Brokerage Limited (“GF Securities (Hong Kong)”) is licensed by the Securities and Futures Commission of Hong Kong to conduct Type 4 Regulated Activity “Advising on Securities”. It is regulated by the Securities and Futures Commission of Hong Kong, and is responsible for the distribution of this report in Hong Kong.

GF Securities Co. Ltd is qualified to conduct securities advisory business as approved by the Chinese Securities Regulatory Commission. It is regulated by the Chinese Securities Regulatory Commission, and is responsible for the distribution of this report in China (except Hong Kong, Macau and Taiwan).

Important Notices

GF Securities Co. Ltd and its affiliates may be seeking or building business relationships with companies mentioned in this report. Therefore, investors should consider the impact on the independence of this report by GF Securities Co. Ltd and its affiliates due to potential conflicts of interests. Investors should not make any investment decisions based solely on the contents of this report.The research analyst(s) primarily responsible for the content of this research report, in whole or in part, certifies that with respect to the company or relevant securities that the analyst(s) covered in this report: (1) all of the views expressed accurately reflect his or her personal views on the company or relevant securities mentioned herein; and (2) no part of his or her remuneration was, is, or will be, directly or indirectly, in connection with his or her specific recommendations or views expressed in this research report.The remuneration for the production of this report by research staff is determined based on various factors including the quality of research, client review and workload, and it is also affected by factors including GF Securities’ overall revenue, part of which is generated from GF Securities’ investment banking business.This report is distributed solely to clients or designated institutions authorized by GF Securities, and is not distributed publicly. It can only be used by the targeted recipients who have the obligation to maintain confidentiality. GF Securities does not view any persons who have received or read this report through other means as its clients.This report is distributed to a certain client based on the conclusion that this client is deemed to be able to assess investment risks independently, execute investment decisions independently and assume corresponding risks independently.The contents of this report is for reference only. Information contained or opinions expressed in this report does not constitute an offer or inquiry. Customers should not substitute their independent judgment with this report or make decisions based on this report.This report is published solely for information purpose and does not constitute an offer to buy or sell any securities or a solicitation of an offer to buy, or recommendation for investment in, any securities. The research report is intended solely for use of the clients of GF Securities. The securities mentioned in the research report may not be allowed to be sold in certain jurisdictions. No action has been taken to permit the distribution of the research reports to any person in any jurisdiction that the circulation or distribution of such research report is unlawful. No representation or warranty, either express or implied, is made by GF Securities as to their accuracy and completeness of the information contained in the research report. GF Securities accepts no liability for all loss arising from the use of the materials presented in the research report, unless is excluded by applicable laws or regulations. Please be aware of the fact that investments involve risks and the price of securities may be fluctuated and therefore return may be varied, past results do not guarantee future performance. Any recommendation contained in the research report does not have regard to the specific investment objectives, financial situation and the particular needs of any individuals. The report is not to be taken in substitution for the exercise of judgment by respective recipients of the report, where necessary, recipients should obtain professional advice before making investment decisions.GF Securities may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in the research report. The points of view, opinions and analytical methods adopted in the research report are solely expressed by the analysts but not that of GF Securities or its affiliates. The information, opinions and forecasts presented in the research report are the current opinions of the analysts as of the date appearing on this material only which may subject to change at any time without notice. The salesperson, dealer or other professionals of GF Securities may deliver opposite points of view to their clients and the proprietary trading division with respect to market commentary or dealing strategy either in writing or verbally. The proprietary trading division of GF Securities may have different investment decision which may be contrary to the opinions expressed in the research report. GF Securities or its affiliates or respective directors, officers, analysts and employees related to research report business may have rights and interests in securities mentioned in the research report. Recipients should be aware of relevant disclosure of interest (if any) when reading the report.This Research report may contain and/or describe/present factual historical information on prices of Futures contracts (the “information”). Please note that this information is solely for the purpose of forming part of the argument/grounds/evidence in our research methodology/analysis to support our conclusion on our view of the relevant industry/company mentioned. It does not, by any means (express or implied) to be associated with or constituted as SFC Type 5 Regulated Activity (Advising on futures contracts).

Disclosure of rights

GF Securities (Hong Kong) does not have any investment banking relationship with the companies mentioned in this research report in the past 12 months.

Copyright notice

Without the prior written consent obtained from GF Securities, any part of the materials contained herein should not (i) in any forms be copied or reproduced or (ii) be re-disseminated.