Financial News
Written by: Wei Yingzhi
2021-01-23 10:00
Last update date: 2021-01-23 10:00
Is inflation coming back?
As the world is experiencing low inflation, and even Hong Kong has been experiencing deflation for 6 consecutive months, it seems untimely to say that inflation is coming back.
However, the investment market is looking for concept stocks for the recurrence of inflation in China and the United States.
Why is there such a big difference between market participants' thinking and reality?
It's not that the data reflects the past, but the analyst is predicting future differences.
The global economy is in a recovery phase, and demand for multiple production resources is increasing.
Whether it is copper, coal, steel, or oil, the entire commodity market maintains an upward trend. In the case of rising raw material prices, market participants expect inflation to return to be quite reasonable.
Another driving force considered to promote inflation is that major central banks around the world are still printing money, which has caused global flooding.
Since economics points out that inflation is a phenomenon driven by monetary policy, in the context of the global flooding, predicting the return of inflation appears to be in line with developments.
The weaker U.S. dollar pushed up the prices of many commodities.
(Profile picture)
Yuan Weiji: Strong consumption power in the Mainland stimulates inflation
In China, which fell into deflation last year, the latest consumer price data for December last year also showed that local prices have resumed their upward trend.
Yuan Weiji, deputy director of the Department of Economics and Finance of Shue Yan University, pointed out that China's economy is recovering because the mainland government has controlled the epidemic and is actively promoting the domestic demand cycle in the dual cycle.
Prompted by strong consumption, it will trigger slight inflation, which is good for the economy. When the public knows that the product will be more expensive next month or next year, they will tend to buy it now.
However, he emphasized that the most important thing is that inflation is not out of control.
Which types of stocks are mainly involved in inflation concept stocks?
These are commodities, food and gold stocks.
The first two directly reflect rising prices, while the latter is to fight inflation.
When inflation occurs, it reflects the decline in the purchasing power of cash in the hands of citizens.
In order to compensate for the decline in the purchasing power of cash, investors tend to park their funds in precious metal assets such as gold.
In fact, big banks also expect gold prices to challenge US$2,100 per ounce this year. If inflation occurs as expected, it is expected that gold may once again become a target for investors.
Chen Weicong expressed optimism about the development of copper mining.
(Profile picture)
Chen Weicong: Industrial metal prices still have room to rise
Since the fourth quarter of last year, driven by the concept of economic recovery, resource stocks have become the target of investors.
uSmart Securities Limited Yingli Securities Chen Weicong said that he is still optimistic about the development of the copper industry and believes that this sector has not yet reached the top.
He pointed out that this year the market is indeed paying attention to the issue of re-inflation, especially upstream raw material prices and metal prices, especially industrial metals, and there will still be potential upside in the foreseeable future.
He also pointed out that as new energy or electric vehicles are being built around the world, there are many equipment in them, such as charging piles, power batteries or investment in power grids, etc., resulting in a significant increase in copper consumption, and therefore a high growth in demand.
However, copper supply is temporarily tight.
He pointed out that many copper mines were affected by the epidemic, and afterwards suppliers were afraid to fully resume normal production; or logistics, which caused a blockage in transportation. Therefore, in the first half of this year, the overall copper price has a chance to "surpass." "Transfer", companies that own copper mines or have a copper industry chain will benefit relatively, such as Luoyang Luanchuan Molybdenum (3993) and Zijin Mining (2899).
As for Jiangxi Copper (0358), it also touches downstream businesses, such as processing businesses, which will also be driven by rising copper prices.
Food stocks can pay attention to Mengniu
As for food stocks, he pointed out that it depends on different companies. Some are, for example, leading companies, or they are at a lower level and have room for price increases, which can be passed on to the increase in raw material costs. These are certainly beneficial, such as Mengniu Dairy (2319).
When the price of raw milk rises with inflation, it is possible to maintain profits by slightly increasing the price of downstream dairy products or by deducting other costs.
But on the other hand, if some companies do not have room to increase prices and raw material prices rise too high, the increase in disguise will follow the threshold and the performance will be relatively lagging. Therefore, investors should pay attention to the different brands of food stocks.
Cen Zhiyong is bullish on paper stocks.
The picture shows Zhang Yin, Chairman of Nine Dragons Paper.
(Profile picture)
Cen Zhiyong: Optimistic about paper and new energy stocks
Another commenter, Cen Zhiyong, a strategist at Bailihao Securities, also talked about resource stocks.
Among resource stocks, the most eye-catching is definitely Ganfeng Lithium (1772) with the concept of electric vehicles.
As of last Friday (22nd), the closing price was 130 yuan, a 40% increase this month.
The cumulative increase this month.
Cen Zhiyong pointed out that even though the company is good, it is "extremely expensive" and "increased too exaggerated." Instead, he suggested that investors should pay attention to some sectors that have not risen. Among them, food stocks continue to be optimistic because everyone will worry about becoming an economy. Whether the food supply after the recovery is stable or not.
The other two sectors to pay attention to are paper and energy, or new energy.
Cen Zhiyong also pointed out that now that the global economy has returned to inflation and speculation has returned to the concept of recovery, one can indeed pay attention to the resource stocks. Paper stocks are another industry that can be watched, including Lee & Man Paper (2314) and Nine Dragons Paper (2689). ).
He pointed out that since January this year, the mainland has banned the import of waste paper, which has reduced the supply of waste paper. In addition, the recent increase in paper prices may also be related to the imbalance of supply and demand, which will benefit the entire paper industry.
Chen Weicong: A neutral attitude towards local real estate stocks
When talking about inflation-related stocks, how can one forget real estate stocks.
Chen Weicong said that if viewed from a normal inflation concept, funds will indeed flow into real estate and other physical assets, and the sector should show an upward trend. However, the current situation in Hong Kong is that the overall economy is weak and the epidemic has not yet been effectively controlled. Developers dare not raise their prices at the opening of the market, but the secondary market has seen some improvement recently, so the real estate sector should not be completely underestimated. They will look at it from a neutral perspective. After all, their current net asset value (NAV) per share is relatively large.
The real estate stocks have changed a lot, and we need to look at the development of the epidemic, economic recovery and immigration. These three aspects are more dominant. At present, Hong Kong does not have much inflation. For the time being, we only see the inflation of upstream resources. Less impact on the local area.
Regarding the overall situation of Hong Kong's future inflation, he said frankly that Hong Kong is always special.
Inflation in the Mainland is more dominated by changes in food prices, such as pork and vegetable prices.
He also pointed out that Hong Kong is dominated by the service industry and downstream consumer goods, coupled with the current overall employment situation and economic growth momentum are weak.
Investment and financial management Mengniu Jiangxi Copper Zijin Mining Liwen Paper Nine Dragons Paper
