(1) since the beginning of this year, the price difference between domestic and foreign thermal coal has remained high, and the quantity and growth rate of imported thermal coal in China have declined significantly in the first quarter. Accordingly, the price control of coal has also been adjusted: according to the e-interactive information of Baofeng Energy Shanghai Stock Exchange, on January 28, the guiding price of the National Development and Reform Commission requires that the price of thermal coal pit should not exceed 700 yuan / ton, and the port price should not exceed 900 yuan / ton. In the notice on further improving the price formation mechanism in the coal market issued by the National Development and Reform Commission on February 25, the reasonable range of medium-and long-term trading prices in key areas was made clear, and further, in the announcement on defining the price-raising behavior of operators in the coal field issued on April 30 The NDRC further clarified the upper limit of spot prices (no more than 50 per cent of the reasonable range of medium-and long-term trading prices), raising the upper limit of port spot prices to 1155 yuan / ton, while pit prices have also been raised from 700yuan / ton. Especially in Shaanxi and Shanxi (the upper limit is more than 700 yuan / ton), and there is also room for policy (to maintain a certain degree of flexibility, allowed for legitimate reasons). The price control policy was implemented many times in the United States in the 1970s, which is effective in the short term and will accelerate the shortage and lead to higher inflation in the medium-term dimension. In the future, the regulation of energy prices will exist for a long time, but the need to dynamically coincide with the law of supply and demand can only delay the upward trend of inflation.

(2) on May 4, the central bank increased the special re-loan line of 100 billion yuan to support the clean and efficient utilization of coal, which is specially used to support the development and use of coal and enhance the coal reserve capacity. The above measures echo President Yi Gang's speech on "maintaining price stability" at the Boao Forum for Asia on April 22. However, in the face of upward global inflationary pressures, it may be difficult to be immune at home. It may seem like input pressure, but more efforts may be required on demand, and the practical effect of using these structured tools may be relatively limited: under the established "carbon neutralization" goal, taking into account the new production capacity and profit cycle, the possibility of entrepreneurs blindly carrying out capital expenditure because of short-term high profits may not be high, and major enterprises pay large dividends at this stage, not a financial problem.

3. The future is clear, and observation is more important.

In the past two weeks, due to the short-term "falling too much", there have been a lot of voices about the "bottom" of the market, but we are more cautious than before, it is not pessimistic, but in fact, we have calculated before, the whole market is not in the historical extreme valuation (2014) scenario, then there needs to be more "victory rate" signals. So it is nothing more than a slowdown in overseas tightening and a resurgence of epidemic control and demand. We provide several observations from three perspectives:

3.1 Real interest rate rose to 0.62%

We observe that the 13-year real interest rate on US debt has gone through a process from negative to positive, gradually falling from a low of-0.74% to a high of 0.92%, with an upward range of 166bp; the highest real interest rate of 18-year US debt is 1.17%. The slope and magnitude of the rise are relatively slow. The current real interest rate is 0.26%, which is 130bp higher than the lowest point of this year-1.04%. From the range, the sharp rise in real interest rates may be nearing the end of the stage, while from an absolute height, there may still be some room to rise, and the real interest rate of about 0.62% is a tipping point. In the future, as real interest rates continue to rise, the crackdown on the financial attributes of industrial metals is likely to weaken gradually. However, it may also be difficult to relieve the pressure on NASDAQ and the domestic growth stocks associated with it.

3.2 the epidemic finally entered the normalization of epidemic prevention.

On May 5, the standing Committee of the political Bureau of the CPC Central Committee set the tone: unswervingly adhere to the general policy of dynamic zero clearance. At present, the increase in the whole country has declined, but we need to enter the steady state of some new normal. According to our calculations, if we use the average ranking of per capita GDP and per capita general public budget income as a measure of affordability after entering the new epidemic prevention state, we find that the provinces and cities at the top in the above rankings account for a relatively high proportion of GDP in the country, which means that as long as the above-mentioned areas achieve phased dynamic zero clearance, or all enter the end of a sharp decline in new growth, then the impact of the epidemic on economic expectations will reach an inflection point.

3.3 steady growth of "real ammunition"

As we have mentioned in previous reports, under the set growth targets, the fundamental scenario for the future should be a 2020 "American mirror", and part of the impact of the epidemic on the economy may be difficult to reverse. But it can be improved: the economic growth path may be more focused on investment and physical consumption to compensate for the loss of services.

The CPC Central Committee and the State Council issued the opinions on promoting urbanization with County towns as an important Carrier to promote urban and rural construction, which further defines the path for the future, which is in line with our previous hypothesis. it is also in line with the rural revitalization that we have emphasized since the beginning of the year. So now all that's left is to see "live ammunition".

All the short-term demand upside comes from credit and balance sheet expansion, so we need to see that the growth rate of social finance continues to rise and the gap between the growth rate of social finance stock and nominal GDP growth continues to widen. Historically, during the recovery, the growth rate of social integration stock tends to be more than 2.8 per cent higher than that of nominal GDP, compared with 2.23 per cent at the end of March and needs to be maintained at more than 11.2 per cent in the future.

3.4 potential problems with inflation

As we mentioned in a series of reports, the current state of the industrial chain is: after experiencing the downward trend of China's economic cycle and the supply chain blockage caused by the epidemic, the absolute inventory level and inventory growth rate of major mid-and downstream industries are at historical highs, while the inventory of finished goods related to upstream industries is at a historically low level, while capacity utilisation in major upstream industries is still running high. Therefore, when the impact of the epidemic recedes from its peak in the future, the performance of the middle and lower reaches driven by resumption of work, consumption encouragement and infrastructure construction can be expected in the short term, and the inflationary pressure is not obvious, but after the downstream inventory is digested, the contradiction between supply and demand will soon shift to the upstream where there is not too much safety redundancy. Therefore, the decline in inventories in the middle and lower reaches will be an important observation of rising domestic inflation.

The peak season of energy consumption is coming. In summer, residential electricity demand will gradually rise in the future, and the certainty of energy consumption will pick up. At the same time, with the gradual acceleration of work resumption after the control of the epidemic, the two types of demand may resonate.

4. Meet the tide of inflation

In a market where risk compensation is not high, there seems to be no need for excessive fear or greed because of the ups and downs of the market itself. For A-share investors, compared with singing "Battle Song", it is better to see the "dashboard".

Rather than judging when the market is at the bottom, it is more important to grasp the strongest main line in the future. Time may not be an "enemy" for emerging industries at the moment, but it is a friend of traditional industries.

Our previous view was that short-term growth rebound investors can take the opportunity to participate, but we also suggest that investors seize the switching window and adjust the layout to meet the trend of inflation. Sectors in growth stocks where demand and costs are away from the effects of inflation (such as military industry and computers) will prevail.

In terms of allocation, energy is deterministic, metals have demand elasticity, and real estate and banks also have obvious opportunities for industry improvement.The order of recommendation for the next stage as a whole is: oil and gas, copper and aluminum, gold, oil transportation, coal, chemical fertilizer, zinc, real estate and banks.