China Merchants Securities CO., LTD. : The Investment Strategy of A Shares in 2012: China and the World will Change in Answer to the Risk

China Merchants Securities held an exchanging meeting in Shenzhen for listed companies, which discussed the investment strategy in 2012 and the theme of which was "China and the World will Change in Answer to the Risk". The meeting invited Jia Kang, the director of Research Institution for Fiscal Science, Ministry of Finance, to make a speech about "Current Economic Situation and Policy Outlook". Ding Anhua, the vice-president and chief economist of China Merchants Securities, also gave a speech on the macro-economic situation in China. In the meeting, China Merchants Securities released a series of investment strategy reports in year 2012 on different aspects, including macro economy, A shares market, H shares market, corporate industries and so on.

In the speech of "the Outlook of Macro Economy in 2012" given by Ding Anhua, he elaborated some basic opinions on next year's macroeconomic situation from the macro economy studying team of China Merchants Securities. Those opinions were: the GDP is expected to grow around 8.1% next year; in view of each quarter, the figure is expected to appear as a V-structure, which is contributed by the slow decline in first half year and steady upswing in the second half year. Throughout the year, the inflation rate is expected to be around 2.7%. In 2012, the inflation may continue to decline season by season, and as the economy growth rate reaches its minimum in the second quarter, the inflation rate would also reach its bottom in the third quarter; while in the fourth quarter, the inflation rate would rebound slightly.

In view of the stock market, the strategy research team of China Merchants Securities pointed out in the 2012 investment strategy report of A Shares market, that the stock market reflects the integrated environment of economic cycle; normally, the profit rate of stock market is worst in the period of stagflation. Despite of the stagflation in 2011, the economic growth and liquidity got worse and the stock market had a unilateral decrease. In 2012, the macro economy has those features: low growth and low inflation; a certain improvement in liquidity; a better performance in stock market than this year and a stop for the unilateral decline. According to the estimate that the liquidity will strengthen in the first half year and withdraw in the second half year, there is a substantial probability that the index figure will show as high in the middle and low in the two ends.

In terms of industry allocation, it suggested to hold those industrial companies whose gross margin bottom out while maintain stability in demand, such as popular consumer goods industries. Those goods industries and related manufacturing industries are recommended to hold all over the year. In view of the pace of allocation, it suggested to continue allocating some industries such as popular consumer goods and medicines in the first quarter of next year, while allocate a portion on the early cyclical industries; also, to increase the allocation on manufacturing industries which have a steady increase in return.