On December 11 and 12, the CMS held the meeting for investment strategy of 2014 and exchange of listed companies, titled “To Resume the Reform Process”, and made the report on investment strategies for macro economy, A-share market, H-share market, and company industry.

The macro research team of the CMS gave basic opinions about macro-economic situations of the next year: 2014 is the first year of China’s comprehensively deepened reform and opening up after the Third Plenary Session of the 18th Central Committee of the Chinese Communist Party, however international and domestic economic conditions are still complicated. According to previous reform logic, gradual advance is the main keynote, but it is not impossible to see a staggered reform blowout in 2014. It is necessary to keep a moderate economic growth for achieving employment objectives and social stability, the inflation increase and tight liquidity will restrict the economic growth. In the short term, the structural policy of steady growth may partly hedge the downward pressure of negative factors on economic trends. It is anticipated that China’s economy will still remain the trend of stable downturn and witness small fluctuation of economic growth between quarters. It is also estimated that the average GDP growth in 2014 will be 7.5%, being 7.6% in the first quarter, 7.7% in the second quarter, 7.5% in the third quarter, and 7.4% in the fourth quarter.

On the underground of moderate economic downturn, shadow banking risks and quit of QE have restrained the space of monetary policies. On the basis of comprehensively analyzing economic fundamentals, liquidity, and carryover effect, the CMS holds that the whole-year inflation level in 2014 will be slightly higher than 2013, have an over trend of being high and then being low, temporarily raise during the Spring Festival, and reach its annual peak in the second quarter probably. It is anticipated that CPI will increase averagely by 3.1% on year-on-year basis, being 3.2% in the first quarter, 3.4% in the second quarter, 2.9% in the third quarter, and 2.7 in the fourth quarter.

With respect to the stock market, the strategy research team of the CMS points out that there are three factors determining the market: 1. Economic trend, which determines the earnings growth. It is anticipated that the economic growth in the next year will be stable and will not witness marked ups and downs probably; 2. Liquidity and interest rate, which largely determine the valuation trend. Under the overall background of interest rate liberalization and increasing CIP, it is anticipated that the interest rate level of the next year will still keep high; 3. Risk preference. After the Third Plenary Session of the 18th Central Committee of the Chinese Communist Party, various reform measures have been promulgated one by one and these measures (including a series of strong reform measures for the capital market) will improve the risk preference. When the economic forecast is stable and there is no systematic risk in liquidity, the improvement of risk reference will probably increase the market fluctuations, but the market space will be restrained because there is no room for obviously improving the economy and interest rate level will continue to increase probably.

With respect to industry allocation, the strategy research team of the CMS suggests: 1. Persisting in holding consumer service industries of which the fundamentals stably grow, such as pharmacy, food and drinks, tourism, household appliances, automobiles, and electronics and information consumption; 2. Actively grasping the investment opportunity brought about by reform, including in brokerage, war industry, and environmental protection; and 3. Paying attention to certain traditional industries of which the supply side is tightened.