Macro Commerce: There is a high probability that domestic PPI year-on-year has bottomed out in June or July this year.

The report from China Merchants Securities stated that without countering "internal competition," the global inventory cycle and oil prices will also drive the increase in PPI. As the largest producer, the global inventory cycle has a strong driving force on China's PPI on a year-on-year basis. With the stimulus of fiscal expansion in the United States and Europe, it is expected that in the second quarter of next year, the global economy will passively reduce inventory, and in the third quarter, the global economy will actively replenish inventory. Taking into account the base effect, starting from the second quarter of next year, oil prices will have at least zero contribution to domestic PPI, and may even have a positive contribution. In addition, it is highly probable that domestic PPI on a year-on-year basis has already bottomed out in June-July this year. Although year-on-year PPI has hit bottom, it will not turn positive until at least the middle to late next year. This change is not enough to affect the current market style. However, countering "internal competition" has caused the market to focus on the prospect of PPI turning positive ahead of time and trigger asset style switches: barbell strategies shift towards inflation and domestic demand strategies; pro-cyclical assets gain a certainty premium, and bond-like assets change from being a "reservoir" in the past three years to a "ATM."