CPI Top &Nbsp; Stock Market May Not Bottom.

Although in a short period of time, the macro

By examining the relationship between the economic growth rate, inflation rate, currency growth rate and other key economic indicators in China over the last 10 years, the author finds that the fluctuation trend of the A share index and the fluctuating trend of the inflation cycle and the period of money growth should be stronger than the economic cycle.

Therefore, if we look at A shares from the perspective of inflation cycle and money growth cycle, it is too early to say that the stock market bottoms out.

"Inflation is upward and stock market is down".

Three times since this century

The first inflation began at the end of 2003, which lasted for 17 months. CPI began to decline gradually after reaching the peak of 5.3% in 2004 July. The Shanghai Composite Index finally stabilized after the 998 point in 2005 6, and the interval between the two was about 10 months.

The second round of inflation started at the end of 2006 lasted for 24 months and increased even more. CPI reached a peak of 8.7% in February 2008, and was rapidly reduced by the impact of the US financial crisis.

In the same period, the Shanghai Composite Index fell from 6124 points to 1664 in October 2008 in less than a year, after the "cliff clipper" decline. The time interval between CPI peak and A stock bottom was 9 months.

From the external policy environment of the market, the first two A shares bottomed out, and there were dividends in the share reform, and the 4 trillion national investment and 10 trillion days of new loans to stimulate domestic demand.

The relationship between inflation and stock market in the past two times shows that the bottom area of A shares has a lag of 10 months or so with CPI.

That is to say, after CPI reaches its peak for 10 months, the real bottom area will be revealed in the A share market.

The logic of this is that the central bank, whose main task is to stabilize prices, needs a longer period of time to fully assess, observe and confirm the development trend of CPI. During this period, monetary policy is hard to relax. In general, macroeconomic regulation and control of inflation will continue.

The new round of inflation, which began in early 2010, has lasted for 20 months.

Combined with the economic situation and monetary environment at home and abroad, from the trend of development, the end of this round of inflation is still far from being expected.

However, based on the analysis of the tail factor and the year-on-year factors, CPI rose by 6.5% in July, which can basically be identified as the climax of the current round of inflation. Just because of the adverse effects of global liquidity, imported inflation, overrun domestic costs, cost push and demographic dividend gradually disappearing, the current inflation may last longer.

Based on the understanding of the severity, long-term nature and complexity of the current inflation situation, the central bank recently issued the "second quarter 2011 monetary policy implementation report" that it is still the primary task of macroeconomic regulation and control in the future to insist on stabilizing the overall price level.

The central bank also resolutely continued to shrink monetary credit shortly after the report was released. From September 5th, the deposit of three kinds of margin deposits, such as the deposit of letter of credit, margin deposit and margin deposit of bank acceptance, was included in the deposit reserve scope of the deposit reserve.

The expectation of loosening monetary policy in the market has failed again.

Since the first two inflation peaks have a relatively stable cyclical relationship with the stock market, it is obvious that it is too early to talk about A shares bottoming out. Although we have every reason to think that the valuation of the A share market is very low at present.

From the historical valuation comparison, the current Shanghai Composite Index's P / E level has entered a historical low area, and the overall market valuation level has been close to the end of 2008, but this valuation did not exclude the profitability of bank shares.

According to the data disclosed in the semi annual report this year, 16 listed banks achieved a net profit of about 465 billion 450 million yuan, accounting for more than 50% of the 2184 listed companies (2184 companies achieved a total profit of 924 billion 278 million yuan).

Excluding bank shares, the current A share price earnings ratio is still not lower than the bottom of the first two times, and compared with the previous two bottoms, there will be no external conditions to promote A shares in the next period.

Moreover, the impact of 10 trillion and 700 billion local debt on bank bad debts and the deterioration of external economic environment have become a lingering cloud over A shares.

The study also found that since 2001, the correlation between the increase of China's money supply and the Shanghai composite index is generally a process of gradual enhancement. The correlation coefficient between the two is about 0.9, that is to say, money supply is highly correlated with the A share market.

The central bank's first priority task set at the beginning of this year is to speed up the contraction of money and credit, and quickly achieve the requirements of the central authorities for better liquidity gates.

Therefore, inflation does not mean monetary policy easing.

In the coming period, even if the regulation policy is no longer overweight, the money supply will still be a gradual process of falling down.

By the end of this year, the broad money supply (M2) growth is expected to fall to around 12%, while the narrow money supply (M1) growth will drop to single digits.

Therefore, the author has every reason to believe that the collapse of the A shares caused by the early EMU accident and the downgrading of the US sovereign rating is just a representation. The monetary policy tightening brought about by long-term inflation and the resulting shortage of funds are the underlying reasons for the continued decline in the market.

"Do not know the true colors of Mount Lu, only in the mountains."

Only when we jump out of the stock market, can we think more about the macro economy and the fundamentals of listed companies than the market, so that we can understand the real bottom of the stock market.

In my opinion, the bottom of the stock market must be patient and wait.