AMBER HILL RESEARCH

Weekly Report - Market Outlook 20210222

2021/02/22    |     151    |     Author:

Central Document No. 1 was issued: rural revitalization and infrastructure first

 

Central Document No. 1 was released by the Central Government over the weekend. Although the No. 1 document of the past decade or so has been on the theme of "agriculture" or "rural areas", the emphasis varies markedly from year to year.

 

Most years, No.1 document focuses on a niche area. At the end of 2020, mainland China announced that the poverty alleviation task that has lasted for many years was basically completed, and 2021 was officially identified as the first year of the implementation of the "rural revitalization strategy". As 2021 is also the first year of the 14th Five-Year Plan, the No. 1 document released this year also clearly lays out the goals to be achieved in the rural revitalization strategy by 2025.


In addition to traditional topics such as "making a good comeback in the seed industry", which echoes the content of the Central Economic Work Conference at the end of 2020, the document clearly points out that "the focus of public infrastructure construction will be on the rural areas", and focuses on specific areas such as transportation, energy, the Internet, agricultural products warehousing and the fresh cold chain logistics system and other specific areas. "Implementation of rural road accessibility project", "promote rural gigabit optical network, 5G, mobile Internet of Things and urban synchronization planning and construction" and other expressions give people more room for imagination. Under the strategic goal of "dual circulation", it is foreseen that this will obviously drive the demand for related fields and be reflected in the secondary market.

 


The second half of a weak dollar - commodities are strong

 

In our February 8 weekly paper, we mentioned that "the dollar index rebound fears to come to an end." Looking back, the dollar index has remained weak since February 8.

 

The decline in the dollar index that began at the end of the second quarter of 2020 has entered the second half, with the "seesaw effect" benefiting commodities significantly.


Over the past week, crude oil and non-ferrous metals as a representative of the overall bulk commodities show a general pattern of rising, and there is a sign of acceleration. Long sentiment is gradually transmitted to silver, white sugar and other previously stagnating varieties. The commodities boom is expected to continue for some time before the dollar index signals a weekly level bottom.


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Chart 1 Daily line of bulk commodity index  Source:CHOICE


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Chart 2 weekly line of bulk commodity index  Source:CHOICE


A - share style switch officially opened

 

In our weekly report on February 8, we mentioned that "the A-share 'group' boom has loosened", and clearly pointed out that "when the market sentiment is too extreme, the opportunity of quality in small and medium cap stocks is showing".

 

This prediction has been verified by the market since the A-share market opened after the Spring Festival. The strong stocks represented by high-end liquor, food and medicine have weakened collectively, while the CSI 500 and CSI 1000 indices, representing small and mid-cap stocks, have continued to strengthen.


Since the beginning of the third quarter of 2020, the CSI 500 Index and the CSI 1000 Index have adjusted very fully. This start is likely to continue the large-scale upward trend since the end of 2018, attracting more new funds.


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Chart 3 China Securities 500 Index weekly line  Source:CHOICE


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Chart 4 China Securities 1000 Index weekly line  Source:CHOICE


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