Tianfeng Pring's profit cycle tracking: M1, social financing pulse at a new low Maintaining the judgment that the annual profit point 2.0 is approaching.

Tianfeng released a research report stating that the leading indicators of the Pring cycle fell to a low level, while the coincident and lagging indicators both fell slightly. Export performance in August was mixed, PMI continued to decline, the impact of financial data "squeezing liquidity" continued, M1 reached a new low, the pulse of social financing fell back, and the role of government bonds in the credit structure was enhanced, with a significant divergence in household loans. Waiting for countercyclical policies to strengthen, maintaining the judgment that the market is approaching the inflection point 2.0 within the year. Tianfeng's main points are as follows: 1) The key contradiction for the market to find the bottom lies in whether it can anticipate the turning point of performance. The market bottom usually precedes the turning point of performance by 1-2 quarters. When the economic cycle is in Phases 2-4 of the Pring cycle (i.e. the phase when coincident indicators are trending upward), stocks tend to perform well. 2) The Pring coincident indicator is crucial, but it needs to be combined with leading indicators for a comprehensive judgment. Since the turning point of coincident indicators lags behind the index bottom, relying solely on coincident indicators requires more time for verification (at least 1-2 months of recovery is needed to confirm the low point), which may lead to biased market judgments. Therefore, we believe that incorporating leading indicators in the judgment process will enhance foresight in determining the economic bottom. The key to breaking through the bottom-finding period lies in the sustainability of M1 recovery, with household medium and long-term loans being the core indicator. Household medium and long-term loans often lead corporate medium and long-term loans at the top and are usually closer to the bottom. Also, during the market bottom-finding period, both these indicators show an increase in year-on-year terms. 3) Higher frequency leading indicators need to be reflected in monetary prices. The bottoming out of narrow liquidity and monetary prices is a sufficient but not necessary condition for the market to reach a bottom. There is a lag between the decline in monetary prices and the rebound in demand. Support for monetary prices to stabilize often occurs in Phases 1 and 2 of the Pring cycle, with the bottoming out of monetary prices often synchronizing with or preceding the period of economic recovery. The macroeconomic outlook still faces certain pressures, with the manufacturing PMI continuing to decline in August, while unofficial Chinese PMI rose into expansion territory. The pulse of social financing fell back, new government bond issuance increased, and new RMB loans increased mildly. The decline in M1 widened in August, while M2 remained stable. The stock of social financing fell back year-on-year, with excess liquidity increasing. In August, the incremental scale of social financing was 3.03 trillion yuan, 98.1 billion yuan less than the same period last year. Structurally, new government bond issuance increased, new RMB loans grew less, and off-balance sheet financing declined but remained positive. In terms of loan structure, new short-term loans for households increased significantly, while new medium and long-term loans turned negative year-on-year. For corporate loans, new medium and long-term loans for enterprises increased slightly, new short-term loans for enterprises narrowed their decline, bill financing saw a slight decrease year-on-year, and the credit structure still needs improvement. The leading indicators of the Pring cycle fell to a low level, while coincident and lagging indicators both fell slightly. Export performance in August was mixed, PMI continued to decline, the impact of financial data "squeezing liquidity" continued, M1 reached a new low, the pulse of social financing fell back, the role of government bonds in the credit structure increased, and there was a significant divergence in household loans. Waiting for countercyclical policies to strengthen, maintaining the judgment that the market is approaching the inflection point 2.0 within the year.