Put aside inflation for now, signals in Alibaba and Baidu are more important
Hello everyone, I am Dolphin Analyst, and here is the weekly market strategy report. Key information as follows:
1) Following CPI, PPI is also cooling down. Concerns about stagnation have caused 10-year Treasury bond yields to rise to nearly 3.9%, leading to a sharp decline in US and growth markets. However, considering that risk-free returns have fallen to the high point of this round of adjustments, the Dolphin Analyst believes that the short-term adjustment of non-US growth stocks is nearing its end.
2) Maintaining the judgment on US stocks: opportunities still exist after short-term setbacks. Looking further ahead, the weakening US economy and difficult to maintain high interest rates will lead to turning points. In this situation, after being scared by high-frequency macro data, US stocks can still focus on the price opportunities of individual stocks with stable industry status.
3) Chinese stock financial reports are beginning to be released, with Baidu and Alibaba in the lead. For the fourth quarter performance, most investors are expected to automatically ignore it, and all the focus is on the marginal recovery of business after the peak of the New Year's epidemic and the outlook for the first quarter and the whole year, as well as how new business plans will be implemented.
Here are the details:
I. CPI is over and PPI is cooling down again
1.1) Last week's key macro data once again showed stagnation in trading performance. The reasons behind this were high-frequency macro data that emerged-PPI soared significantly and rose 0.66% on a month-on-month basis.
Moreover, except for the energy category, core commodity prices rose 0.56%, and even core services excluding trade warehousing and transportation also increased. The overall production materials segment seems to have a trend of rising inflation.
Due to concerns about stagnation and the need for higher interest rates, and as risk-free rates rose last week, global markets, except for Europe, mainly fell, with growth-style markets experiencing greater declines.
**However, if we look at it in reverse, the 10-year Treasury bond yield has once again risen to nearly 3.9%, which is close to the upper limit of the recent few rounds of adjustments. The risk of further upward movement is decreasing, and the risk of short-term market declines is also decreasing. **
**As the season for asset financial reports in China approaches, attention should be focused on whether the improvement in EPS can exceed expectations for further recovery of Hong Kong stocks. The upcoming financial reports and executive conference calls of Chinese concept stocks might be observed.
Due to the strength of the US dollar, the renminbi has had a marginal weakening on the Shanghai-Hong Kong stock connect. Though both Northbound and Southbound areas are in a state of purchase, the absolute value and overall transaction volume of purchases are relatively weak.
Looking at the current valuation percentile, the domestic growth board market is more sensitive to the yields of US bonds. The rise in yield has led to a significant drop in the new energy power sector, which has been leading the decline.
Second, the income of Alpha Dolphin Combinations
During the week of February 19th, the Alpha Dolphin portfolio decreased by 1%. Since the portfolio consists mostly of Chinese assets, it slightly under performed the S&P500 (-0.3%), but outperformed both the Shanghai and Shenzhen 300 Index (-1.7%) and the HengSeng Tech Index (-2.4%).
Since the beginning of testing till the previous weekend, the absolute income of the portfolio is 15.8%, and the excess income compared to the benchmark S&P500 index is 22.6%.
Third, individual stock performance: consumer goods relatively stable, new energy semiconductors on a downswing
Last week, the holding stocks were relatively strong in consumer goods, while new energy and semiconductor boards showed different degrees of callback both in the portfolio's holding pool and the observation pool.
Apart from the fundamental reasons for some individual stocks, common factors such as the ebbing of emotion where the ChatGPT concept was speculated, and the rising riskless interest rate, added to the callback pressure on these growth stocks.
The degree of individual stock declines is mainly related to their fundamental outlook and industry competition expectations. Examples of big declines like Yihai International, iQiyi, Alibaba, and Feihe, had poorer fundamentals. After undergoing valuation corrections, they might face even greater relative declines if there is no good fundamental support.
Meanwhile, the downswing in new energy, whether it is Yangguang Power, Ningde Era, Longi, or Enjie, reflects their bias towards growth styles that are more sensitive to rising riskless interest rates. Expectations of capacity release and competition intensification could also be a factor.
** For companies with large ups and downs, Dolphin Analyst has compiled the driving factors for reference:
4. Composition of Asset Distribution
Alpha Dolphin's portfolio consists of 34 stocks, including 7 with standard ratings, 27 with low ratings, and the rest in gold, US bonds, and US dollars. As of last weekend, Alpha Dolphin's asset allocation and equity asset holding weights are as follows:
5. Key Events for Next Week:
This week, Chinese concept stocks' earnings season will intensify, with Baidu and Alibaba leading the way. For this earnings season, the market is estimated to largely ignore fourth-quarter performance, and instead focus on the recovery of consumption and advertising since the lightning-fast peak of the pandemic at the beginning of the year. This corresponds more to the management's outlook for the first quarter and full year. Additionally, there is a key company in the US stock market, NVIDIA, which requires attention to inventory changes and judgments on inflection points in the industry.
This week's main macroeconomic data is the US January PCE data on Friday night Beijing time. After the double kill of CPI and PPI prior to this, if PCE also significantly exceeds market expectations, then the market's endpoint for rate hikes may rise again.
Please refer to the following articles from the recent weekly reports of Longbridge Research and Investment Group:
"Hong Kong and the United States are both weak, and the wolves are coming again?"
"High-frequency macro threading marionettes, the U.S. stock market is a puppet market"
"One positive day changes faith, will Tesla lead the US stock market to come back?"
"How Far Is the US Stock Market From 'Peril' and 'Crisis'?" 《Is the hammer of performance just around the corner when US stocks don't have a "red New Year"?》
《What's behind the stagnant US stocks?》
《Has CPI fallen back enough for the Fed to be at ease?》
《Is it easy to eradicate service inflation? Beware of market overcorrection.》
《Hong Kong stocks finally have a backbone? Independent market still has further upside potential.》
《Darkness before dawn: the mentality is focused on darkness or dawn.》
《Can emerging markets bounce around for much longer as US stocks are hit hard by reality?》
《Global estimate repair is good news? There are still performance checks to be made.》
《China's asset violence pulls up, while China and the US are two different worlds.》
《Did the giants Amazon, Google, and Microsoft fall? Meteor showers still fall on US stocks.》
《Policy shift expectations: unreliable "strong US dollar funding" GDP growth?》 《Southward takeover vs Northward escape, is the moment to test "determination"》
《Slow down rate hikes? The American Dream is shattered again》
《 A fresh look at a "iron-blooded" Fed》
《Has the hope of reversal been lost when falling into doubt about life?》
《 Fed's violent hammering of inflation brings domestic consumption opportunities instead?》
《 The world has fallen sharply again, and the root cause of the US labor shortage》
《The Fed becomes the number one short seller, and the global market falls》
《Laying off people too slowly to complete the takeover, the United States has to continue to decline》 《US stock market's “funeral is cause for celebration”: recession is good news, and the most fierce rate hike is already fully priced in》
《Rate hike enters the second half, the curtain rises on "performance thunder"》
《Epidemic will rebound, US will decline, and funds will change their minds》
《The current Chinese assets: "No news is good news" for US stocks》
《Has growth turned into a carnival, but does it mean that the US must be in recession?》
《Is the US in recession or stagnation in 2023?》
《US oil inflation, can China's new energy vehicles grow bigger and stronger?》
《The opportunity for Chinese assets comes when the Fed is accelerating rate hikes》
《US stock market inflation has exploded once again, how far can the promised rebound go?》
《This is the most down-to-earth, Dolphin Investment Portfolio is launched》
Risk disclosure and statement in this article: Dolphin Research Institute disclaimer and general disclosures
