htmlIn July, the manufacturing PMI fell by 1.2ppt month-on-month to 49%, lower than expected, returning to the contraction range, and weak demand is the main contradiction. In terms of price, lard has gone from resonance to differentiation, driving the year-on-year increase in CPI in July and the year-on-year decrease in PPI. We believe that looking forward, CPI is easy to rise but difficult to fall. In terms of trade, exports exceed expectations reflect China's export competitiveness. The new social financing was lower than expected, with a significant increase of less than year-on-year, and the credit structure also deteriorated significantly. In contrast to the growth rate of social financing, the growth rate of M2 has increased significantly. With liquidity accumulation, monetary policy may still be difficult to turn. html Economic data in July was generally lower than expected, the main factor was that real estate downward exceeded expectations and spillover dragged down other data. Affected by the insurance and payment storm, real estate data have slowed down one after another. Due to the drag of real estate investment, fixed asset investment in from January to July increased by 5.7% year-on-year (6.1% from January to June). The downward trend in real estate has also dragged down industry and consumption. Among real estate-related consumption, consumption of furniture, construction and decoration materials fell by 7% year-on-year, a decrease of 1.3 percentage points further expanded from June. Although the epidemic has caused some disturbances to the economy, the amplitude is less than in the second quarter, and the impact on employment has gradually weakened. The overall economic impact of high temperature weather is relatively neutral, but it suppresses outdoor operations, thus suppressing infrastructure growth. The weak economic data also prompted the central bank to cut interest rates, national and local AMCs also accelerated their entry to provide help, and local relief fund was implemented. We expect fiscal policy may continue to be strengthened, focusing on resolving risks on the one hand, and focusing on making up for the shortcomings of social needs on the other hand. CICC's total volume and industry jointly interpret this.
Risk: Policy changes or fundamentals repair is less than expected; the impact of the epidemic exceeds expectations.
Macro
Overall view: Real estate multi-dimensional drags down
7 economic data is generally lower than expected, the main factor is that real estate downward exceeds expectations, and spillover drags down other data. Affected by the insurance and payment storm, real estate data have slowed down one after another. Strictly affected by real estate investment, fixed asset investment from January to July increased by 5.7% year-on-year (6.1% from January to June). The downward trend in real estate has also dragged down industry and consumption. Among real estate-related consumption, consumption of furniture, construction and decoration materials fell by 7% year-on-year, a decrease of 1.3 percentage points further expanded from June. Although the epidemic has caused some disturbances to the economy, the amplitude is less than in the second quarter, and the impact on employment has gradually weakened. The overall economic impact of high temperature weather is relatively neutral, but it suppresses outdoor operations, thus suppressing infrastructure growth. The weak economic data also prompted the central bank to cut interest rates, and national and local AMCs also accelerated their entry to provide help, and local relief funds were implemented. We expect fiscal policy may continue to be strengthened, focusing on resolving risks on the one hand, and focusing on making up for the shortcomings of social needs on the other hand.
Affected by the insurance and subsidy storm, real estate data have slowed down one after another. htmlFixed asset investment from 71 to July increased by 5.7% year-on-year (6.1% from January to June), mainly dragged down by real estate investment. The year-on-year growth rate of real estate development investment slowed down for the second consecutive month in July to -12.3% (June-9.4%), even below the low of -10.1% in April. In July, the real estate production index fell by 10.8% year-on-year, an increase of 3.8 percentage points from the previous month. In terms of demand, the home purchase sentiment is still disturbed, and the sales area and amount of commercial housing both slowed down year-on-year. From the supply side, the new construction was nearly halfway through the same period last year, and the year-on-year decline in completion narrowed slightly (-37%). From the funding side, the source of development funds further shrank to -25.8% year-on-year, and loans, foreign capital, deposit advance payments, mortgages, and self-financing fell across the board. The first floor and one policy for the maintenance and delivery plan of various places is actively promoted, and national and local AMCs have also accelerated their entry and provided assistance, and local relief funds have been implemented. From May to July, various regions issued 304 policies to stabilize real estate according to the city[1]. However, we believe that under the prevention of moral risks, it is difficult to achieve overnight maintenance of housing and stable demand, and policies to stabilize real estate on both supply and demand sides still need to be strengthened. The downward trend in
also dragged down industry and consumption. Although faces the low base for the same period last year, the year-on-year growth rate of industrial added value in July (3.8%) still slowed down compared with June (3.9%). In the manufacturing industry, only automobiles, beverages and other transportation equipment have improved their growth rate.The growth rate of other manufacturing industries has declined compared with June, while the decline in raw material manufacturing industries such as steel and nonferrous metals fell, and the decline in other equipment manufacturing industries decreased by the decline in consumer goods manufacturing. We believe that this may indicate that the drag of real estate is greater than the epidemic. Among real estate-related consumption, consumption of furniture, construction and decoration materials fell by 7% year-on-year, a decrease of 1.3 percentage points further expanded from June.
The overall impact of high temperature weather on July economic data is relatively neutral. The data from the China Meteorological Administration showed that the national average temperature in July was 23.2℃, which was 1℃ higher than the same period in the previous year, the second highest in the same period since 1961. The impact of high temperature weather on economic data has both promoted and suppressed, and there are still little impact. We believe that the overall impact is relatively neutral. The advantageous aspects are reflected in the fact that the added value of mining and utilities has increased by 8.1% and 9.5% year-on-year (8.7% and 3.3% respectively in June); the retail growth rate of household appliances such as air conditioners has also improved by 3.9 percentage points to 7.1%. The unfavorable aspect of
is reflected in the suppression of outdoor operations and thus suppressing infrastructure growth. 7 in the year-on-year growth rate of broad infrastructure fell slightly to 11.5% from 12.0% in June, among which the growth rate of utility investment declined, and the narrow-sense infrastructure continued to improve slightly, and the rebound of water conservancy was particularly obvious. Judging from recent data, special bonds and infrastructure construction funds have been accelerated, and the operating rates of asphalt and cement mills have rebounded, which shows that the infrastructure prosperity has rebounded; the infrastructure growth rate in July may be more disturbed by abnormal high temperature weather, and infrastructure construction in August may still be suppressed, but considering the low base of the same period last year, this does not change our previous judgment that the year-on-year growth rate of general infrastructure in the third quarter was the highest this year. Although the epidemic has caused some disturbance to the economy, the amplitude is smaller than in the second quarter. Although the epidemic in recurred again in July, the overall impact was less than in the second quarter, and the service industry production index in July increased by 0.6% year-on-year (1.3% in June). Although consumption is lower than expected, it mainly comes from the drag of automobile and real estate consumption. In July, the total retail sales of consumer goods increased by 2.7% year-on-year, lower than Wind's consensus expectations (5.3%) and down 0.4 percentage points from June. It is worth noting that the July consumption data also contains some positive factors: (1) Although the epidemic rebounded in July, the impact on offline service consumption was weakened. For example, the year-on-year decline in catering revenue and accommodation and catering industry production index narrowed by 2.5 and 2.6 percentage points respectively; (2) Disposable consumption, which is more sensitive to income and the epidemic, continues to improve, and the total growth rate of 9 discretionary consumption is 7.9%, further improving by 1.2 percentage points from June. (3) The effect of promoting consumption policies continues to emerge. Although automobile consumption declined in July, it is still at a high growth rate, and the growth rate of home appliance consumption has also improved by 3.9 percentage points to 7.1%.
The impact of the epidemic is weak, which is also reflected in employment data. 7 employment situation improved significantly, with the unemployment rate in July 5.4%, down 0.1 percentage point from June, showing a seasonal downward trend. The unemployment rate for young people aged 16-24, with the greatest employment pressure, rose by 0.6 percentage points to 19.9% in July, with a month-on-month upside below the seasonal average (1.95 percentage points).
Strategy
Overall view: Waiting for policy efforts to transmit to fundamentals
Recently, the index of the A-share market fluctuated, lacking a clear main line, hot spots rotated faster, blue-chip companies performed relatively sluggish, and small and medium-sized stocks have a high activity. We believe this may be different from the current stage facing the macro level. There are many certainty and challenges. Areas with high fundamental prosperity in the market are relatively scarce, and macro liquidity remains relatively loose. On August 15, Central Bank announced that it would carry out MLF operations of 400 billion yuan and reverse repurchase operations of 2 billion yuan. The winning bid rates of MLF and open market reverse repurchase both dropped by 10 ppts. The loose liquidity environment may still have certain support for the market.
7 financial data may reflect that there is a periodic failure in the transmission of funds to entities.The growth rate of M2 and social financing in July recently announced by showed differentiation. Since August, short-term capital interest rates have dropped to historical lows, which all reflect that there may be a certain phased deviation between current capital supply and physical demand. Policies are actively promoting the transmission of fundamentals to a clear effect. In history, markets in similar stages often enter a state of relatively lack of main lines after valuation has been restored to a certain extent. Market turning points may require further clarification of profit improvement turning points. We started to remind that "the market may transition from a unilateral rebound to a two-way fluctuation" from the end of June, which is also based on the judgment that the market drivers may gradually transition to fundamentals.
's interim results are being gradually disclosed, and mid-to-late August is the peak disclosure period. As of August 14, the overall disclosure rate of A shares 's interim report performance and performance forecast was 44%, and the profit of the full A/non-financial sample company in the first half of the year was 14.5%/17.1%. At the structural level, the upstream coal, petroleum and petrochemical and non-ferrous metals profits in the first half of the year were 103%/84%/64% year-on-year, and the new energy vehicle, photovoltaic and semiconductor industry chains were 82%/80%/36%, respectively, and the overall profit expectations have been revised up since July; while the profit expectations of the middle and lower-stream industries have generally been lowered since July.
market valuation once again has medium-term value. It is not advisable to be pessimistic about the medium-term market, and then "stable" it before "progress". looks forward, factors such as the recurrence of domestic local epidemics, sluggish real estate risk disposal and sales volume, the downward trend of overseas economic cycles and regional situations will still restrict the effectiveness of the "stable growth" policy. The uncertainty of fundamentals may affect the risk preference of . The market will remain fluctuating in the short term and lack the main line. It may continue to maintain a period of time. We must pay attention to grasping the rhythm and flexibility. In light of the current monetary and fiscal policies, especially the increase in real estate support policies in some regions, we expect that although the transmission of policies to fundamentals will be delayed, it is expected to gradually take effect in the future. In addition, the current market valuation has once again achieved medium-term value, so it is not advisable to be pessimistic about the medium-term market, and then "stable" and then "progress". In the configuration of
, the policy support field may still have relative performance. We recommend that in terms of configuration, the areas with low valuation, low correlation with macroeconomics, or stable economic conditions and policy support are still available. The current macro fundamentals are not repaired strongly and liquidity is loose, which may still have some support for the performance of small and medium-sized market capitalization. The market style turning around still needs to wait for the resolution of the main contradictions at the macro level. Growth styles require comprehensive attention to prosperity and valuation to make structural configurations. As the upstream prices have fallen sharply, we have gradually begun to pay attention to the possible recovery of mid- and downstream industries. The opportunity to switch to growth of strategic styles needs to pay attention to the progress in overseas inflation and China's stable growth. During the interim report intensive disclosure period, focus on industries whose interim report performance may exceed expectations.
fixed income
7 economic data in July was lower than expected, especially the real estate market accelerated downward, and the short-term economy is still under pressure. In July, the epidemic situation in some areas of the country recurred, and some economic activities were once again dragged down. At the same time, the financial pressure of real estate companies has not been alleviated, residents' willingness and ability to buy houses continue to be insufficient, and the downward trend of the real estate market continues to drag down the domestic economy. From the perspective of demand, in terms of consumption, the epidemic has repeatedly dragged down some service industry consumption, real estate-related consumption continues to be sluggish, and durable goods consumption has slowed down; in terms of investment, infrastructure investment is still relatively high, but real estate investment has accelerated downward, manufacturing investment has slowed down, and overall fixed investment is relatively insufficient; in terms of foreign demand, exports continue to maintain rapid growth, and will still play a supporting role in the short term.
As the epidemic situation in various places continues to recur, consumption and production activities continue to be disturbed, the epidemic is still an important factor restricting the economy. However, for the domestic economic recovery, the more critical problem is still in real estate. On the one hand, the financing problem of real estate companies cannot be effectively solved, and on the other hand, the continued lack of ability and willingness to buy houses for residents. Although foreign demand has provided great support for the domestic economy in the past two years, the key to maintaining medium-to-high growth in the domestic economy is still in the real estate market. If the real estate market continues to decline rapidly, the center of domestic economic growth may further decline in the future.In addition, funds are tight at present in all aspects of real estate development. If the financing problem cannot be effectively solved, whether through sales improvement or policy support, the real estate market may face greater pressure.
We believe that under the background of great downward pressure on the economy, the subsequent macro policy may still need to continue to make efforts. On the one hand, monetary policy still needs to increase support for entities. The central bank's interest rate cut of 10BP shows that monetary policy continues to focus on stabilizing growth. More interest rate cuts may still be needed in the future to reduce physical financing, and support economic recovery through a loose monetary environment; on the other hand, fiscal policy may also need to be strengthened in the future, especially through additional issuance of treasury bonds to make up for the shortcomings of financing needs of residents and enterprises. Of course, in the environment of monetary easing, this kind of fiscal policy will not lead to an increase in interest rates.
We expect monetary policy focus to remain stable in growth and employment. Structural inflation and bond market leverage are not the main policy concerns. Monetary policy is expected to continue to remain loose, which continues to be beneficial to the short-term and credit allocation. Long-term interest rates have declined since July, but have not made a significant breakthrough downward breakthrough. The market concerns are nothing more than two points: one is the policy of stabilizing growth, and the other is the cautiousness of monetary relaxation. The first one-year MLF interest rate was 2.85. However, with the downward trend of the real estate market and the central bank's interest rate cuts again, these concerns are gradually being dispelled. Basically, the economy is still under pressure, and interest rates still need to go downward in the direction. We expect long-term interest rates to achieve a downward breakthrough, and 10-year Treasury bonds may drop to 2.5% or even lower. We continue to recommend that the combination maintain a certain leverage and pay attention to long-term interest-rate bond trading opportunities.
Commodity
Energy: Weak domestic demand drags down consumption, high temperature affects both sides
Oil and gas imports narrowed, and coal supply is still at a high level. In July, net crude oil imports increased to 8.83 million barrels per day month-on-month, a year-on-year decline narrowed to -9.5%; natural gas net imports 12.1 billion cubic meters, a year-on-year decline narrowed to -6.9%. At the same time, we have seen that the pressure on overseas oil and gas imports, which has increased rapidly since May, has eased. Following the marginal decline in June, the year-on-year increase in my country's crude oil imports in July continued to drop to 39%, while the year-on-year increase in natural gas imports has basically stabilized at 26.5%. At present, geopolitical conflicts and supply-side constraints still support overseas oil and gas prices, import cost pressure may continue, and domestic oil and gas supply guarantee may still require its own production to be strengthened. In July, domestic oil and gas production fell slightly month-on-month and was still in the expansion range year-on-year. Among them, crude oil production was 4.05 million barrels per day, an increase of 1.5% year-on-year, and natural gas production was 17.1 billion cubic meters, an increase of 8.2% year-on-year. In addition, coal supply is still at a high level. In July, the output of raw coal was 372.66 million tons, an increase of 16.1% year-on-year, 0.8 percentage points faster than the previous month. The average daily coal output was 12.02 million tons, a decrease from the 12.64 million tons last month. Looking forward, we expect domestic coal supply to shift from phased to normalization, and coal supply will remain at a high level of more than 12 million tons. According to the State Mining Safety Supervision Administration, since September last year, a total of 490 million tons/year increased coal production capacity has been increased by 180 million tons/year since September last year. In terms of imports, the high price spread of coal prices at home and abroad continues to remain (see "Global Coal: Risks Still Alive, This Winter may Tighten Again"). Customs data showed that coal and lignite were imported in July, an increase of 23.9% from the previous month, and a year-on-year decline of 22.1%. The import volume of coal has increased by a certain level compared with the previous period. By country, Russia's coal imports have grown rapidly, while Indonesia's coal imports have also increased month-on-month. Driven by strong demand, there is still a certain demand for replenishing inventory through imports. The inventory days in the eight coastal provinces have fallen back to about 12 days, only about 2 days higher than the same period last year.
Domestic demand for oil products weakens, and high temperature disturbances reappear. In July, domestic refined oil consumption was lower than expected, down 7% month-on-month to 12.12 million barrels per day, and the year-on-year decline expanded to 9.7%. On the one hand, weakening domestic manufacturing demand has dragged down the decline in production activities and has also dragged down the consumption of refined oil in the industrial field. In July, PMI fell from 50.2 to 49, falling below the boom and bust line , among which the production index fell sharply from 52.8 to 49.8, and production in high-energy-consuming industries such as petrochemical and black weakened significantly.The hot weather since mid-July has also put certain restrictions on outdoor construction activities. Shanghai, Fujian and other provinces and cities have issued high-temperature "stop orders" [2]. On the other hand, residents' travel has partially recovered, but it is still restricted by the recurrence of the epidemic and high temperatures. Benefiting from the demand for summer travel, the implementation of domestic flights in my country improved significantly in July, with a month-on-month recovery of 42% to 11,600 flights, narrowing to -18% from the same period last year. However, the travel situation in the residents' cities was lower than expected. In July, the congestion index of 100 cities fell slightly month-on-month, among which Beijing, Shanghai, Shenzhen and other places were all disturbed to a certain extent, which dragged down the demand for domestic gasoline and other residents' oil products. However, as domestic demand weakens, domestic refined oil exports have recorded a significant improvement. In July, the net export of refined oil html was 3.46 million barrels per day, an increase of 11% month-on-month, and the year-on-year decline also narrowed from -64% last month to -16%. Looking forward, the repeated epidemic situation in Hainan and other places since August may further drag down the demand for refined oil in the summer travel and transportation sectors of residents. At present, the city's traffic congestion index continues to decline, and high temperatures may continue to interfere with the development of outdoor construction activities.
But at the same time, high temperature also provides certain support for domestic coal demand. We have seen that some regions have also experienced high electricity pressures at peak times in recent times. The hydropower that had made more efforts in the early stage failed to continue, which increased the burden on thermal power. The average inlet flow of Sanxia Hydropower Station in July decreased by 35.3% year-on-year, and the ring-to-circuit also decreased by 16.8% compared with June. Power generation in July increased by 4.5% year-on-year, of which hydropower increased by 2.4%, a significant slowdown from the previous period, but thermal power generation increased by 5.3% year-on-year, an increase of 11.3 percentage points from the previous month. The daily consumption of power plants in the eight coastal provinces, the thermal coal was also set a new high since 2017 in early August. However, electricity and industrial coal are still relatively weak, cement production in July fell 7% year-on-year, and the production of methanol and has also fallen rapidly to a year-on-year contraction range since July. We expect coal demand to be sustained by high temperatures may be weak, and may decline after the high temperature weather eases.
ferrous metal : Demand continues off-season, and output actively shrinks
In July 2022, crude steel production in July 2022 was 81.43 million tons, a year-on-year decrease of 6.4%, an increase of 3.1 percentage points from June. The average daily crude steel production was 2.63 million tons, a significant decline from 3.02 million tons in June. From January to July this year, crude steel production was 609 million tons, a year-on-year decrease of 6.4%, and annualized output was 1.049 billion tons. Pig iron production in July was 70.49 million tons, a year-on-year decrease of about 3.6%, and the growth rate fell by 4.1 percentage points from June. In July, steel exports were 6.671 million tons, an increase of 17.7% year-on-year, basically the same as last month's growth rate, but the absolute volume fell by 11.7% month-on-month compared with last month. In July, steel imports were 789,000 tons, down 24.9% year-on-year and 0.3% month-on-month. Our estimate of the apparent steel consumption in July fell by about 8.1% year-on-year, an increase of 2.7 percentage points from June. However, steel inventory sales were more obvious in July, and the actual consumption decline should be less than the apparent consumption. In terms of raw materials, iron ore imports were 91.244 million tons in July, up 3.1%/2.6% year-on-month. Coke production in July was 38.8 million tons, down about 1%/6.4% year-on-month.
5 Steel production continued to decline in July, and the growth rate of pig iron production also turned negative year-on-year. Although supply and demand remain weak in the off-season, supply is obviously better in the supply and demand game. Under the pressure of profit, steel mills actively shrink production, and steel inventory also accelerated its sales in July. Long-process steel mills have significantly reduced production, and the national blast furnace capacity utilization rate fell below 80% in July and rebounded slightly to around 81% in August. The capacity utilization rate of 49 arc furnace steel mills nationwide also remained at a low level of around 30%. In terms of domestic demand, although it is difficult to perform in the off-season, it has not deteriorated further than the previous period. From the indicators related to asphalt and other construction, it can be seen that the construction of infrastructure projects has recovered in the near future. Infrastructure increased by 7.4% year-on-year from January to July. We expect the physical workload to be gradually released. However, risk events on the real estate side are still suppressing the recovery of demand for real estate steel. In July, the year-on-year decline in real estate development investment and newly started area continued to expand compared with the previous month, recording -12.3% and -45.4% respectively. In terms of manufacturing, July data showed that both excavator and automobile sales rebounded. According to CCMA, excavator sales in July increased by 3.42% year-on-year, the first positive growth this year. It is worth noting that domestic sales still declined by about 24.9% year-on-year, but exports increased by 72.9% year-on-year, and the proportion has risen to 48%.Automobile production in July increased by 31.5% year-on-year. In terms of steel import and export, steel exports continued to weaken in July compared with June, but also showed a certain degree of resilience. However, the current price difference between domestic FOB and Southeast Asia CFR hot coils has narrowed to around US$15/ton, and the factory price difference between European hot coils and remains at around US$150/ton. The export arbitrage space for steel has been greatly compressed compared with the previous period, and we expect that exports may be strong or difficult to sustain. In terms of raw materials, iron ore imports continued to rebound month-on-month in July. Judging from the current shipping volume or output guidance of the four major mines, there may still be room for sea iron ore supply in the second half of the year. Coke production in July declined with iron production.
Nonferrous metals: Aluminum exports are still tough, and there are initial clues of differentiation between copper internal and external demand
Copper: The marginal demand improves, and import inflow continues. htmlIn July, affected by the maintenance of individual smelters, domestic refined copper production fell by 5% month-on-month to 840,000 tons. The premium of Yangshan copper continued to rise, import inflows were smooth, and bonded inventory continued to decline. In terms of downstream demand, according to SMM survey, due to the recovery of the price difference of fine waste, the operating rate of fine copper rods has increased month-on-month. The overall operating rate of copper materials continued to rebound in July, but it was still slightly lower than the level of the same period last year. In terms of imports and exports, China's imports of unforged copper and copper materials decreased by 16.5% month-on-month (annualized) to 460,000 tons, and cumulative imports from the beginning of the year to July increased by 5.8% year-on-year. In August, we expect domestic downstream demand may continue to increase, but power restrictions and production cuts in some areas of East China and Central China may to a certain extent restrict the increase in the operating rate of copper materials companies. Overall, the reverse trend of domestic and external demand is beginning to emerge. At the same time, with the completion of the maintenance of the smelter, the production of refined copper in August is expected to increase month-on-month, and domestic copper supply and demand may both increase.
aluminum: Exports are still tough, domestic demand is weak, and the supply side has increased and decreased. Aluminum prices rebounded slightly in the past month, and domestic electrolytic aluminum plants have recovered their spot cash profits. On the demand side, domestic demand has entered a seasonal off-season, and social inventory has begun seasonal accumulation. Off-season demand and accumulation trends may suppress the rebound of domestic aluminum prices. The export end is still resilient. In July, my country's export volume of unforged aluminum and aluminum materials rebounded by 3.9% month-on-month, and the cumulative exports from the beginning of the year to July reached 4.16 million tons, an increase of about 35% year-on-year. However, we expect that demand for durable goods consumption, manufacturing, and construction in Europe and the United States may face continuous downward pressure in the second half of the year. At the same time, the domestic aluminum export price advantage will be reduced, and the driving effect on domestic demand may be weakened. On the production side, the domestic production of electrolytic aluminum in July was about 3.5 million tons, an increase of 6.7% year-on-year. The cumulative output has reached 23.06 million tons, an increase of 1.4% year-on-year. In August, under the influence of high temperatures and droughts in some areas in the south, the power supply of aluminum plants was tighter again, and the production cuts increased risks to support aluminum prices. Looking forward, we believe that we need to pay attention to the impact of the risk of power shortage at home and abroad on aluminum operating capacity, as well as the improvement of domestic aluminum demand for real estate.
Agricultural Products: The US-funded yield adjustment has led to significant changes in global end-of-term inventory, and the momentum of rising pig prices in the off-season is insufficient
Corn: The output has dropped significantly month-on-month, and the end-of-term inventory continues to be sold. According to USDA's August supply and demand balance table data, affected by the reduction of US corn yields and the reduction of European output, the global corn production in 2022/23 is expected to be 1.18 billion tons, a decrease of 0.53% from the previous month's forecast, and consumption is expected to be 1.185 billion tons, basically the same as the forecast last month. Due to the significant reduction in production, end-of-term inventory changed from a slight recovery last month to continued sales, down 2% from the previous month to 307 million tons. Domestic, according to the Ministry of Agriculture and Rural Affairs' 38-month supply and demand balance table, the national corn production in 2022/23 is expected to be 273 million tons, imports are 18 million tons, and consumption is 291 million tons, both of which are the same as the forecast last month.
Soybeans: The yield of new US soybeans has increased beyond expectations, but there is still a risk of downward adjustment under the influence of adverse weather. According to USDA's August supply and demand balance table data, driven by the increase of US soybean yield from 51.5 cloves/acre to 51.9 cloves/acre, the global soybean output in 2022/23 is expected to be 393 million tons, an increase of 0.36% from the previous month's forecast. Both consumption and import and export trade volume have been slightly higher than last month, and the inventory forecast for the end of the period has increased by 1.81% month-on-month. According to General Administration of Customs data, my country's soybean imports in July this year were 7.883 million tons, a month-on-month decrease of 4.45%.According to August data from the Ministry of Agriculture and Rural Affairs, in 2022/23, my country's soybean production may increase significantly year-on-year to 19.48 million tons, imports are expected to increase to 95.2 million tons, and consumption is expected to increase by 3.23% year-on-year to 113 million tons.
live pig: After the new cycle is opened, pig prices enter an upward channel, but weak demand in the off-season of consumption has led to insufficient price action. As of July 29, the average price of three-yuan live pigs abroad was 21.2 yuan/kg, an increase of 15.85% from the same period last month. Specifically, the ex-factory prices of foreign three-yuan pigs in various places have risen to varying degrees. On July 31, the ex-factory prices of foreign three-yuan pigs in Liaoning, Henan, Sichuan, Hunan and Guangdong were 20.75 yuan/kg, 21.3 yuan/kg, 21.85 yuan/kg, 20.8 yuan/kg, and 22.7 yuan/kg, respectively, up 0.73%, 4.67%, 11.48%, 3.48%, and 8.35% respectively on the previous month. Overall, supported by the start of the new cycle, pig prices are still in the upward range this month, but the increase in slowed down compared with last month. We believe that the recent lack of momentum for price increases is mainly affected by weak demand during the off-season of consumption.
Palm Oil : Malay production is slower, and the poor export of Indonesian has accelerated the export speed of Malay. According to MPOB's August supply and demand data, horse brown production in July was 1.5736 million tons, an increase of 1.84% from the previous month, slightly lower than the average growth rate during the increase period. Exports rose 10.72% from the previous month to 1.3219 million tons, and exports to China fell 42.7% month-on-month to 55,000 tons, a record low in the same period.
Risks: Extreme weather, lower demand than expected, national industrial policies, geopolitical risks.
Chart: Monthly supply and demand and apparent consumption of major domestic commodities
Source: China Customs, National Bureau of Statistics, SMM, SHMET, CICC Research Department
Bank
new social financing in July was 756.1 billion yuan, a year-on-year increase of 319.1 billion yuan, lower than the consensus estimate of Wind, 1.4 trillion yuan, mainly due to the decrease in loans, corporate bonds and undiscounted bank acceptance bills. The growth rate of social financing stock was 10.7%, down 0.1ppt from the previous month. In July, new loans were 679 billion yuan, a year-on-year increase of 401 billion yuan, lower than Wind's consensus estimate of 1.1 trillion yuan; loan balance increased by 11.0% year-on-year, down 0.2ppt from the previous month.
Weak demand for credit drags down social financing. 7 new social financing increased by 319.1 billion yuan year-on-year, mainly due to the weak drag on physical credit and corporate bond financing, the two increased by 430.3 billion yuan/235.7 billion yuan year-on-year. RMB loans increased by 401 billion yuan in July, mainly due to the drag of residents' medium- and long-term loans, enterprise medium- and long-term loans and enterprise short-term loans . The three increased by 248.8 billion yuan/147.8 billion yuan/96.9 billion yuan year-on-year, respectively, reflecting the decline in housing demand for residents and weak corporate financing demand under the risk environment of the real estate market; in addition, July is the off-season, and there is also a certain prepayment of demand after the credit volume in June. bill discount increased by 136.5 billion yuan year-on-year, reappearing the phenomenon of impulse, consistent with the downward trend of bill interest rates at the end of July.
Social Financing-M2 Scissors Difference reflects the contradiction between capital supply and demand. 7 resident deposits and company deposits increased by 1022 billion yuan/270 billion yuan year-on-year respectively, driving the year-on-year growth rate of M2 to 12.0%, setting a new high since May 2016. We believe that in addition to the accelerated fiscal expenditure factors, the poor performance of the stock market may also lead to the return of deposits from financial products . The social financing-M2 scissors gap further widened to 1.3ppt, the largest since April 2009, reflecting the relatively abundant supply of funds but weak demand for the real economy. The phenomenon of "idle funds" within the financial system has driven down bond interest rates. On the other hand, the year-on-year growth rate of M1 rose by 0.9ppt compared with the previous month, and the gap between M2-M1 scissors narrowed by 0.3ppt. It may be that due to the "stable growth" of infrastructure, some funds have been invested in the operation of the entity.
infrastructure loans will continue to support the bottom in the second half of the year. 7 in July, the year-on-year growth rate of medium- and long-term loans in enterprises was 11.9%, down 0.3ppt compared with June. Since June, the policy has adjusted the credit line of 800 billion yuan and increased 300 billion yuan to supplement infrastructure projects. We expect infrastructure will continue to promote the growth rate of medium- and long-term loans to the public in the second half of the year. Looking at the whole year, we expect the policy bank's loan increase to reach 2.5 trillion yuan in 2022, accounting for about 11.5% of the new loans in the banking industry throughout the year, a significant increase from 6.8% in 2021, playing a countercyclical adjustment role.Since April, infrastructure investment has bottomed out and rebounded, and the electricity, heat and water conservancy and environmental industries are relatively obvious.
Restoration of real estate loans needs to be "secured and paid" and policy relaxation. html In July, the medium- and long-term loans for residents increased by 248.8 billion yuan year-on-year, a decrease of 8 consecutive months, mainly due to housing delivery risks, as well as the weak demand for residents to buy houses and more early repayments. In 2Q22, the increase in mortgage loans and development loans (TTM) accounted for only 11% of all loans, which has dropped significantly compared with 43% in 2017, the lowest level since 2009. The real estate transaction area in August is still at a low level, and the recovery of residents' demand for housing purchases may require further relaxation of policies and the coordination of the "security and delivery" policy is strengthened. In terms of public real estate loans, although banks' risk preferences are still low, we expect that with the guidance of "stabilizing stock" of development loans and the acceleration of the issuance of mergers and acquisition loans, the loan growth rate is expected to stabilize at around 0%.
The growth rate of social financing and credit in the second half of the year has been stable and slightly reduced. Considering that July/August is generally the off-season for credit supply and September is the peak season for commissioning, we expect that the financial data in August may still be weak, but since policy support may still be relatively stable, credit demand in September is an important observation point. Looking at the whole year, we expect the scale of new loans in 2022 to be about 21.3 trillion yuan, an increase of 1.3 trillion yuan year-on-year, and the annual balance growth rate is about 10.6%; we expect the additional social financing of 33.4 trillion yuan in 2022 to be more than 4.1 trillion yuan year-on-year, and the stock growth rate is about 11.0%. Overall, we expect the growth rate of social financing and credit will decline slightly in the second half of the year.
credit investment under the "new normal". This year, the differentiation of credit growth rate has shown three major "new normals": "the corporate has surpassed personal loans", "the new economy has increased rapidly, real estate deleveraging, infrastructure has stabilized the market", and "the Yangtze River Delta is higher than the country". Credit demand also shows the characteristics of leading regional banks > state-owned banks > joint-stock banks. We believe that banks with large exposure in areas with good credit demand, strong professional pricing capabilities and comprehensive customer service capabilities can better cope with the "new normal". The current valuation and positions of bank stocks are at the historical bottom, showing long-term allocation value. Bank stocks have fallen recently, mainly due to concerns about the quality of real estate-related loan assets. We expect that as the policy of stabilizing growth continues to be strengthened and the coordination of real estate policies is strengthened, the valuation of bank stocks is expected to be restored.
risk: real estate market risk, repeated epidemics.
Non-bank finance and financial technology
Capital market and diversified financial industries: In 77, operating indicators related to A-share and Hong Kong stock capital markets fell across the board, causing most non-bank finance sub-sectors to experience a certain correction due to market sentiment. The corresponding sector views are as follows:
► Securities sector, valuation has entered the left range, waiting for the market and policy catalysis. In the short term, the main factors affecting the recovery of the sector are: 1) Under the background of the increase in uncertainty of the internal and external environment in the short term, the overall market risk preference is weak, and the securities sector may find it difficult to have relative returns; 2) August is the window for mid-term performance disclosure. The overall profit decline of securities companies itself in the first half of the year is expected to be around 30% (of which the top securities companies perform more steadily), and are also affected by the overall performance of the market performance on risk preference; 3) At the mid-year regulatory meeting of the China Securities Regulatory Commission at the end of July, the statement on the reform of the comprehensive registration system is to put in a lot of effort, make all preparations for the comprehensive implementation of the stock issuance registration system, and steadily promote the reform of the stock issuance registration system. In the medium and long term, with the continuous deepening of capital market reform, the business transformation of leading securities companies and professional companies has been smoother, and the share has continued to increase, and the expectations of the long-term ROE center have been strengthened.
Insurance and health management industry: life insurance liability side has gradually turned inflection point, and the short-term asset side is significantly disturbed by the capital market; the fundamentals of property insurance are relatively stable, and the market has certain defensive attributes in the sector during a cautious period. The corresponding sector views are as follows:
► Life insurance sector: It has a high allocation value from a medium- and long-term perspective, and is suppressed by the investment side in the short term. Due to the continued negative growth of new policy premiums in the past few years, the market sentiment has been relatively pessimistic. The overall valuation of the life insurance sector has been significantly overshooted. The current valuation and holdings of the life insurance sector have reached historical lows. We expect that the growth of new life insurance business in the second half of the year will show a trend of narrowing the decline, and the turning point on the liability side is gradually increasing.If the subsequent equity market can improve, the asset-liability resonance and valuation switching are expected to catalyze the recovery of the valuation of the life insurance sector.
► Property Insurance Sector: Still has room for valuation repair, and the market has certain defensive attributes in the sector during a period of prudence.
Risk: regulatory environment uncertainty; intensified competition among peers; declining market activity; market volatility risk.
Real estate
Sales weakened and investment declined in July, and further policies are still to be made
National Bureau of Statistics announced the real estate development investment and sales figures from January to July 2022.
7 commercial housing sales fell again in July, and industry policies may increase their investment under the framework of "housing for living, not for speculation". html In July, the year-on-year decline in the national commercial housing sales area and amount widened by 11ppt and 7ppt to -29% and -28%, respectively, ending the previous year-on-year recovery trend for two consecutive months. The demand support effect achieved by industry policy increase since the second quarter has weakened significantly; we believe that this is directly related to the upward trend of waiting and watching sentiment of potential home buyers in the context of the increased possibility of real estate companies postponing their home delivery. Looking forward, considering that the Politburo meeting in July continued the statement of "supporting rigid and improved housing demand", and emphasized that "to implement policies based on the city and make full use of the policy toolbox", we expect that subsequent industry policies will be strengthened under the framework of "housing for living, not for speculation", such as Langfang's recent relaxation of purchase restrictions, etc., but the actual effect of the policy must be determined by whether the implementation of the "maintenance and subsistence" measures can effectively repair the expectations of housing purchases; the year-on-year decline in sales area and amount may be between the neutral situation (-13% and -17%) and pessimistic situation (-18% and -24%) proposed in our previous semi-annual strategy (see the report "Real Estate 2H22 Strategy: Big Waves Washing Sand, Dawn Appears" on June 26, 2022).
7 real estate investment fell by a new year-on-year low in July, and further supply-side measures are still needed. html In July, the year-on-year decline in national real estate development investment in July widened to -12.3% (June-9.4%), the lowest in a single month this year. The year-on-year decline in net increase in newly started areas and construction areas remained at a low level of 40% (July -45% and -44% vs June -45% and -48%). We believe that in the context of the secondary bottoming out of sales, the narrowing of refinancing channels for private real estate companies, and the intensive maturity of credit bonds, the obvious decline in supply-side related indicators is in line with expectations; our observations in the land market are also consistent with this. From January to July, the transfer fee for residential land in 300 cities decreased by 46% year-on-year (due to the difference in the rhythm of concentrated land beats this year and last year, this indicator may be relatively high in the short term. If only cities that do not participate in concentrated land auctions, the transfer fee for residential land from January to July has fallen by -60% year-on-year). Looking forward, we believe that the continued decline in investment may indirectly affect residents' home purchase ability through industrial chains, fiscal expenditures and other paths. Combined with the above-mentioned potential expectations, it will further put pressure on the cash flow of real estate companies, and the year-on-year investment decline may reach high single digits; and the key to blocking the formation of this negative cycle is still top-down supply-side policy measures.
7 in July, the year-on-year decline in funds in real estate companies was slightly wider, and all major sub-items were weak. 7, the year-on-year decline of funds in real estate companies increased slightly by 2ppt to -26%. According to sub-items, domestic loans fell by 37% year-on-year (June-32%), self-raised funds fell by 21% year-on-year (June-18%), deposits and prepayments fell by 31% year-on-year (June-31%), and personal mortgage loans fell by 23% year-on-year (June-20%).
Short-term A/H real estate stocks may be mainly volatile, and high-quality leaders in the medium and long term are still attractive. Resident expectations and actual sales in the new housing market have weakened recently, and the continued decline in real estate investment has further increased the possibility of negative cycle formation. In addition, credit bonds are intensively due, the cash flow pressure of real estate companies may be strengthened in the short term, but considering that the recent demand support and the "protective housing" policy may still be introduced, we believe that the short-term A/H real estate stocks' stock price performance may be mainly volatile. In the medium and long term, we believe that high-quality leading real estate companies still have certainty in the logic of improving concentration, and it is recommended to buy at a low price.
Risk: policy changes or fundamental repairs may be lower than expected; real estate companies' credit side deteriorates at an accelerated pace; the impact of the epidemic exceeds expectations.
Light Industry Retail Beauty
National Bureau of Statistics announced: The total retail sales in July was 3.59 trillion yuan, up 2.7% year-on-year. Affected by multiple factors such as the outbreak of the epidemic in many places and the drag on consumption in travel and residential areas, the growth rate fell by 0.4ppt month-on-month, while the retail sales of consumer goods except automobiles increased by 1.9% year-on-year, and the growth rate increased by 0.1ppt month-on-month. Among them, upgraded categories such as gold, silver and jewelry performed better. In addition, the summer has driven a recovery in service consumption, and the online penetration rate continues to increase.
6's social retail growth rate in July increased by 2.7% year-on-year. The summer has driven the recovery of service and offline consumption, and the online penetration rate continues to increase. ① By business model: 7's retail sales of commodity in July increased by 3.2% year-on-year, and catering revenue was -1.5% year-on-year, respectively -0.7ppt/+2.5ppt respectively compared with June. The increase in dining out during the summer period, driving the improvement of catering service formats. ② Viewed by channel: In terms of , the online retail sales of physical goods in July increased by 6.3% year-on-year, with an online penetration rate of 24.1%, an increase of 0.8ppt year-on-year, and the trend of online sales continued; at the same time, offline physical operations improved, and the decline in retail sales of department stores and specialty stores above the limit from January to July narrowed by 1.0ppt/1.8ppt respectively compared with January to June.
weak travel and residential sales drag down social retail sales, and upgraded consumption has many highlights. ① Must-selected categories: 7 basic daily consumer categories such as grain, oil, food, tobacco, alcohol, Chinese and Western medicine have strong resilience, with year-on-year growth rates of +6.2%/+7.7%/+7.8% respectively; ② Optional categories: 7 gold, silver, jewelry, and cultural office supplies have performed well, with year-on-year growth rates of +22.1%/+11.5% respectively, with month-on-month growth rates of +14.0/ +2.6ppt; however, the textile, clothing and cosmetics category only achieved a slight increase of +0.8%/+0.7% year-on-year, among which the growth rate of cosmetics fell by 7.4ppt month-on-month. We believe that it is related to the siphon effect of the "618" big promotion; ③ Post-cycle category of real estate: Building materials and furniture category -7.8%/-6.3% year-on-year, indicating that the sales of residential products are sluggish, while the home appliance category +7.1% year-on-year performance is better, which may be driven by high temperature weather. In addition, the growth rate of retail sales of travel commodities such as automobiles, petroleum and products fell by 4.2ppt/0.5ppt respectively compared with June, bringing down the retail sales of social goods by 0.4 percentage points in total.
Positive benefits of consumption promotion policies in various places are gradually being released, and consumption is expected to continue to recover in the future. We believe that as the epidemic situation in various places gradually and effectively prevent and control, measures such as stabilizing growth, promoting consumption, and helping enterprises alleviate difficulties are further implemented, the supply and demand side are expected to continue to recover, and consumption is also expected to continue to recover.
We are firmly optimistic about the trend of increasing market share of consumer leaders with core competitive barriers, and recommend two main investment lines:
1) The leader in the high-prosperity track that benefits from new consumption changes and the rise of domestic products.
2) The subsequent fundamentals are expected to usher in the industry leader with marginal improvement.
Risk: The recurrence of the new crown epidemic; the downward risks of macroeconomics; the intensified risks of industry competition.
Internet
Online sales continue to recover, and the penetration rate of online shopping has increased steadily
National Bureau of Statistics released the online consumption data for July 2022 on August 15. We calculated based on the data released by the Bureau of Statistics:
7 online retail data continued to recover month-on-month, mainly benefiting from the natural recovery of consumption brought about by the slowdown in the epidemic, and overall in line with expectations. The total online retail sales (including physical and virtual items) in July 2022 were 1 trillion yuan, an increase of 3.8% year-on-year, the same as in June 2022, with a CAGR of 9% from 2020 to July 2022. Among them, online physical goods sales increased by 6.3% year-on-year to 866 billion yuan, recovering from the year-on-year increase of 5.6% in June 2022, but the increase ratio was not significant, with a CAGR of 8.7% in two years. Online virtual goods sales fell 8.2% year-on-year to 155.7 billion yuan. In July, the number of express delivery volume reached 9.6 billion pieces, an increase of 8% year-on-year. The average order price per parcel in July increased by 2% year-on-year to 90 yuan, compared with 88 yuan per parcel in the same period last year.
Online retail category , online food products performed better, with a year-on-year increase of 16%, online wear products increased by 10% year-on-year, and online use products increased by 4.4% year-on-year. penetration rate , the online shopping penetration rate in July (the percentage of online physical sales to total social retail sales) was 24.1%, an increase from 23.3% in the same period last year, and the month-on-month decrease was mainly because online sales were in the off-season after the 618 Shopping Festival.At the
platform level, e-commerce companies confirmed their performance bottom due to the impact of the epidemic in the second quarter. looks forward to the third quarter We expect the slowdown in the epidemic to bring about the continuous recovery of the e-commerce industry. However, due to the uncertainty of the macro environment and the epidemic, residents' consumption attitudes still need time to confirm. At the same time, coupled with the impact of the shopping festival absorbing consumer demand in advance, we are cautious about the growth rate of online retail sales from August to September. costs and efficiency improvement is still steadily advancing, and some companies have significant results in reducing losses in new businesses. Faced with an uncertain environment, we expect that the leading e-commerce companies will selectively invest in core businesses with higher long-term value and stronger advantages on the basis of reducing costs and improving efficiency, so as to seize the initiative in the next stage of development.
In addition, we recommend paying attention to new structural changes in the industry. In addition, based on the high base and loading rate limit in the second half of this year, we believe that the impact of live e-commerce on comprehensive e-commerce platforms may usher in a turning point.
Risks: The epidemic is repeated; the macro economy and consumption are weak; inflation brings certain uncertainty to the supply chain.
Building Materials
Cement: 7 cement production in July was 192 million tons, a year-on-year decrease of 7%, narrowing by 5ppt, a month-on-month decrease of 1.7%, indicating that the demand for cement did not improve significantly in July, mainly due to the low base effect in July last year, which is more consistent with the shipment data we observed. Judging from the recent exchanges with experts and enterprises, the recovery of demand across the country (except South China) is limited, basically fluctuating in the 60-70% shipment range. The current infrastructure projects and funds have improved significantly compared with the beginning of the year (the improvement in excavator data also confirmed this point. In July 2022, the sales of excavator were about 17,900 units, up 3.42% year-on-year, turning positive from negative growth in the previous period). However, the market believes that infrastructure projects are difficult to make up for the decline in real estate. Under the low base in the second half of the year, we believe that demand may remain flat overall, and may increase slightly in some areas. The national cement demand throughout the year may decline in high single-digit declines, but we believe that the decline is still within 10%. At present, we are still optimistic about the peak season valuation repair of the cement sector. At present, we can see that inventory sales are relatively rapid. The inventory ratio in some areas of East China has begun to approach 50%. The shipments in South China have also recovered relatively quickly recently. Leading companies said that the delivery level improved by 20-30% when the weather was sunny, and prices have also begun to rise and rebound. The impact of supply contraction caused by the efforts of enterprises to staggered production restrictions and small enterprises to reduce production losses due to losses. According to experts, more than half of the southern region, or even 2/3 of the small enterprises are in losses. For industries with strong control and pricing capabilities in leading markets, this large-scale loss state is difficult to last for a long time. Price rebound in peak seasons is expected, but weak demand will restrict the extent of price recovery.
glass: 7 production fell by 1% year-on-year and 0.4% month-on-month, which is more because the industry is in large-scale losses. From the end of June to the end of July, several production lines stopped production and cold repairs, driving the marginal contraction of about 3%. With the plum rain weather from July to August, the downstream completion demand has improved marginally. The orders of downstream deep-processing glass companies we tracked have improved moderately. Coupled with the shrinking supply, inventory has begun to significantly sell, and prices have begun to stabilize and rebound. According to Zhuochuang, the inventory of domestic glass companies was 61.59 million boxes, a month-on-month period of -14.77%, the highest rate of destocking this year; but the replenishment of warehouses by traders may be the main reason for the sharp decline in inventory of glass companies, and downstream demand has not recovered significantly. We believe that this year's peak season market will not be absent, but the path is still uncertain:
Path 1: If subsequent downstream demand continues to recover moderately, the processing plants' digestion speed is accelerated, and traders continue to replenish inventory driven by optimism, it can further alleviate pressure and drive a moderate recovery of 10-15% (200-300 yuan/ton).
Path 2: If replenishment of the warehouse is unsustainable, the industry's prices will continue to remain sluggish. When companies continue to lose money, some companies choose to increase cold repairs, and the supply has contracted beyond expectations, which will drive prices to rebound beyond expectations, with the increase greater than situation 1, and it is expected to provide leading companies with a window period to reserve low-priced soda fuel, which is also expected to promote valuation repair.
Consumer building materials: 7 social financing reflects the decline in housing demand for residents and the weak financing demand for enterprises under the risk environment of the real estate market. The market is still highly pessimistic about the real estate chain. The current valuation of consumer building materials has been affected by the unfinished building incident and the recent credit-related rumors of some real estate developers. It is recommended to pay attention to the phased market brought about by the marginal restoration of cement and glass fundamentals, as well as the leading new materials with reasonable valuations. However, for the leading consumer building materials leaders, we believe that the medium-term logic has not changed. Although the new start of real estate may continue to be weak and continue to grow negatively, real estate completion and infrastructure have entered the right side of demand recovery, and the decline in some raw materials will release the excess profit elasticity of consumer building materials. At the same time, experiencing the intensive test of cost increase, the epidemic, and the credit risks of downstream customers in the past year, the competitiveness of leading enterprises and small and medium-sized enterprises has been differentiated again. Companies with poor competitiveness are accelerating their elimination, leaving the leader room for land grabbing. In the second half of the year, we recommend paying attention to the two main lines of "demand benefit from stable growth" and "benefiting from real estate completion improvement".
risk: real estate continues to be weaker than expected, energy costs exceed
construction
6 July infrastructure investment growth rate weakened month-on-month, but still at a high level this year; pay attention to the opportunities of high-quality stocks
Statistics Bureau disclosed fixed investment data in July, urban fixed investment increased by 3.5% year-on-year, a decrease of 2.3ppt from the previous month's 5.8% month-on-month. Among them, the monthly growth rate of real estate and infrastructure decreased, and the monthly decline in real estate increased, and the three year-on-year indicators all weakened; combined with industrial chain data, the monthly decline in cement production, heavy truck sales, and domestic excavator sales continued to narrow slightly month-on-month. We believe that reflects the overall national investment implementation and construction workload gradually got rid of the impact of the epidemic and showed a moderate recovery trend. In terms of infrastructure, the growth rate of CICC's broad infrastructure was 11.2% in a single month and the growth rate of narrow infrastructure was 11.5%, both of which slowed slightly by 1-3 ppts compared with the previous month, but the lengthening cycle was still at the highest level this year and in the past three years; in terms of splitting the fields, the growth rate of transportation in old infrastructure was only 2%, while the municipal government reached 18%, but the growth rate of both was slightly higher than last month; new infrastructure overall maintained a relatively high growth rate, such as electricity, health, and culture increased by 15%, 25%, and 23% year-on-year, but the growth rate was lower than last month.
project end: Infrastructure bidding indicators improved in July. 7 infrastructure bidding data continues to rise. After the continuous decline from March to May and the positive month in June, the year-on-year growth rate in July continued to rise month-on-month, with a month-on-month increase of 18ppt to 32%, and the growth rate in August is expected to continue to rise. In the sub-items of the data field in July, transportation, electricity, environmental protection, and municipal government have continued to grow positively per month and show a trend of acceleration on a month-on-month increase; by region, all regions showed positive year-on-year growth trends, among which the East China region continued to show a trend of improvement, with year-on-month increase of 18ppt to 27%, achieving rapid growth in July. The growth rate in Central China and South China turned positive in July, with a year-on-year increase of 29% and 15% respectively, and the Southwest maintained a high year-on-year growth rate.
Funding side: Funds still have strong support in the third quarter. html Public fiscal expenditure increased by 6% year-on-year in June, maintaining steady growth and continuing to be stronger than the fiscal public income indicator, reflecting fiscal expenditure; government fund expenditure increased by 28% year-on-year in June, increasing month-on-month, reflecting fiscal continued efforts. The issuance of special bonds in July was less than the repayment amount, with a monthly issuance of 61.3 billion yuan, while the net repayment amount reached 90.2 billion yuan. With the almost complete annual special bond issuance of 2022 by the end of June, the issuance of special bonds in July reached a low level.
looks forward, we believe that considering that the growth rate of infrastructure bidding amounts has been on the rise since June, although the net issuance of special bonds on the capital side has decreased, the issuance of special bonds in the first half of the year will continue to be used in the third quarter. We believe that infrastructure is expected to maintain a high prosperity in the third quarter. As the base rose in the fourth quarter, we believe that the growth rate of infrastructure investment may weaken. In terms of market performance of
, the stock price of infrastructure targets has continued to decline since July, and we believe that it is mainly due to weak policy expectations.According to our review of history, the driving factors of infrastructure stock prices mainly include policy expectations, upward fundamentals, and trading style. Current policy expectations may still be weak, mainly considering that the expression of infrastructure at the Politburo meeting at the end of July has weakened compared with April; in terms of fundamentals, we see that fundamentals in the third quarter improved, but unlike in the past, in this round, due to the financial resources of local governments being dragged down by real estate and the epidemic, we expect that the sustainability of infrastructure fundamentals may be weak; these two points restrict the current stock price. Looking ahead, we recommend paying attention to the opportunities brought by trading style switching to infrastructure stocks. In addition, we believe that the short-term investment opportunities in the construction sector may be more at the individual stock level. It is recommended to pay attention to individual stock opportunities related to better growth, stronger competitiveness, and interim performance exceeds expectations.
risk: infrastructure investment is implemented less than expected.
Utilities
Monthly data introduction:
National Development and Reform Commission, China Electricity Union, and the National Bureau of Statistics released monthly electricity data:
➢ Demand side: In July, the whole society's electricity consumption increased by 6.3% year-on-year (June: +4.7%). points in terms of industry, affected by high temperature weather, the electricity consumption of primary, tertiary and residents increased by 14.3%, 11.5%, and 26.8% year-on-year. Due to extreme high temperatures, the electricity consumption of high-energy-consuming industries was guided in an orderly manner in many places, and the secondary industry was -0.1% year-on-year. From January to July, the total electricity consumption of the whole society increased by 3.4% year-on-year, while the primary, secondary, tertiary and residents increased by 11.1%, 1.1%, 4.6% and 12.5% year-on-year.
➢ Power generation: National power generation increased by 4.5% year-on-year in July (June: +1.5%). thermal power has changed from decline to increase, up 5.3% year-on-year, the growth rate of hydropower and wind power slowed down, up 2.4% and +5.7% year-on-year, the decline in nuclear power narrowed, -3.3% year-on-year, and the growth rate of photovoltaic accelerated, up 13% year-on-year. From January to July, the national power generation increased by 1.4% year-on-year, hydropower, nuclear power, wind power and photovoltaic increased by 16.3%, 1.1%, 7.7% and 13% year-on-year, and thermal power -2.5% year-on-year.
tracks the price trends of upstream scenery equipment:
Photovoltaic industry chain: In July, some silicon material companies have maintained a high operating rate, and the supply of silicon materials is in short supply, and the prices of the industrial chain are rising.
➢1) Silicon material: Some silicon material companies were inspected and suspended production in July. At the same time, the shipping schedule of overseas polysilicon was postponed, and the supply of silicon material was still in a tight state. At the same time, the downstream maintained a high operating rate. The price of silicon material rose from 269 yuan/kg at the end of June to 294 yuan/kg at the end of July. In the first two weeks of August, the shortage of silicon materials has not eased, and the price has risen to 304 yuan/kg. 2) Silicon wafer: With the continuous rise in upstream silicon material prices, Longi Zhonghuan raised the prices of single crystal silicon wafers of various sizes at the end of July. In terms of market quotations, the prices of single crystal M6/M10/G12 150μm silicon wafers rose by 0.26/0.24/0.33 yuan/piece to 6.33, 7.54 and 9.93 yuan/piece respectively. 3) Batteries and components: Upstream prices pushed up battery modules, and the single crystal 166/182/210 battery quotation rose by 0.11/0.09/0.10 yuan/watt in July to 1.28/1.30/1.28 yuan/watt respectively, and the price of single-sided/double-sided components rose by 0.09 yuan/watt to 1.98/2.00 yuan/watt from the end of July.
Wind Power Industry Chain: The winning bid price of 7 in the past month was stable, the price of 6MW fan was basically stable at around 1,700 yuan/kilowatt, and the bidding price of fan and tower and tower packaging was stable at around 2,100 yuan/kilowatt. The fan price has shown strong stability in the past 1-2 months. From January to July this year, the open market bidding volume of the wind power industry was about 60GW (including 49GW of onshore wind power and 11GW of offshore wind power), which has exceeded the total number of the industry's open market bidding volume last year.
Industry views and recommendations:
Electric Power Operation: 1) Thermal Power: With the gradual implementation of medium- and long-term contracts and the continued efforts of domestic production and supply-saving policies, the coal supply side has shown significant improvements, and the tension in coal supply and demand has been greatly alleviated. Recently, the coal prices in port production areas and Indonesia's medium and low-calorie market have dropped significantly, and the closing price of Qinhuangdao thermal coal has dropped from 1,245 yuan/ton on July 1 to 1,140 yuan/ton on August 12. However, due to the continuous high temperature weather, electricity demand is high. We believe that coal prices will fall into a deadlock in the short term, but as the high temperature weather ends, we expect coal prices to enter a downward channel. In addition, as of August 11, the number of available days on coastal and inland thermal coal nationwide reached 12 days/18.3 days, still higher than the 10 days/10.7 days in the same period last year.We believe that power plant inventory remains high, bargaining power is strengthened, and coal prices are expected to continue to decline. Affected by high temperatures and low incoming water, hydropower generation weakened in July, with hydropower generation in the middle and late months of the year -5.2% and -4.6% year-on-year. 2) New Energy: In July, the Fujian Provincial Development and Reform Commission announced that Huaneng and Fujian Investment and Development Group Consortium won the bid for the Lianjiang Offshore Wind Farm Project with RMB 0.193/kWh. Recently, Huaneng Consortium announced that it had given up its qualification to be elected. The replacement of the selected company may be the China General Nuclear Corporation and China Resources Consortium, with its bid price of RMB 0.26/kWh. It can be seen that project safety and return issues are being paid more and more attention, and enterprises have a bottom line of return on investment. Recently, the problem of low electricity prices in Shanxi's new energy has continued to attract attention. The low comprehensive electricity price is mainly due to the mismatch between new energy output and load, and the large proportion of guaranteed electricity purchases has been reduced. At present, low electricity prices are limited to subsidy projects, and we believe that this situation will not spread across the country. We recommend 1) Undervalued thermal power + new energy leaders; 2) The thermal power leaders with falling coal prices and high performance elasticity; 3) Haifeng Investment has brought about high performance growth but with a new energy leader at the bottom of the valuation.
Power Grid Equipment: According to statistics from the National Energy Administration, the investment in power grid engineering from January to June was 190.5 billion yuan, a year-on-year increase of 9.9%; of which, in June, the investment in power grid was 64.2 billion yuan, a year-on-year increase of 26.1%, and the investment in power grid in 2Q22 increased by 7.5% year-on-year. On August 3, State Grid held a meeting to promote the construction of major projects, and completed an investment of nearly 300 billion yuan by the end of the year. The construction of the "4-transfer and 4-direct" ultra-high voltage project will be started within the year, and the preliminary work of "1-transfer and 5-direct" projects will be accelerated. We continue to be optimistic about the important role of grid investment in stabilizing growth and new infrastructure, and grid investment is expected to be implemented at an accelerated pace. Specifically: 1) UHV construction has accelerated. In the second half of the year, multiple UHV DCs may be approved and started construction, which may bring considerable revenue growth to leading UHV core equipment companies. 2) Distributed smart grid drives the development of distribution network intelligence and microgrid business, distribution network investment has grown steadily, and the level of intelligence has continued to improve. 3) As an important tool to promote power grid transformation and upgrading, the growth rate is expected to reach 15%. Recommended: 1) A leader in power grid automation that benefits comprehensively from intelligent power grid upgrades and transformation and ultra-high voltage DC equipment; 2) A leader in primary equipment that benefits from product and market expansion for a long time.
photovoltaic manufacturing: In China, the installed capacity of photovoltaics in June 2022 was 7.17GW, a month-on-month increase of 5% and a year-on-year increase of 131%. From January to June, the cumulative installed capacity of domestic photovoltaics was 30.8GW, a year-on-year increase of 179%. We counted that the domestic photovoltaic module bidding volume from January to July has reached 83GW, an increase of 181% year-on-year, reflecting the strong demands of new energy development by power enterprises and central enterprises this year. According to Solarzoom, China's module exports in June 2022 were 15.38GW, up 5% month-on-month and 85% year-on-year, and overseas demand remained strong. Looking forward to the demand for the whole year, we are optimistic about the increase in demand in 2022 by more than 55% to 85-90GW, including 30GW (+40% YoY) for household use + 15-20GW (+100% YoY) for industry and 40GW (+60% YoY); overseas, we are optimistic about the increase in demand by 140-150GW, a year-on-year increase of 30-40%, of which Europe has increased by 60-100% to 40-50GW, and the United States remains the same as 25GW, and emerging markets are blooming at multiple points. Investment advice: We expect the supply ring of silicon material link in 3Q22/4Q22 to increase by 14%/28%, which is expected to drive the industry to start construction and accelerate the upward trend.
Wind Power Manufacturing: Starting from 2H22, wind power is expected to officially enter the acceleration period of a round of construction. The projects in the early stage are expected to enter the centralized installation process with the improvement of grid connection procedures and supporting facilities. Shipping in all links of the industrial chain returns to a strong state. It is expected to reach the highest level of equipment shipment in history in the third and fourth quarters of this year, and the upward trend of prosperity has been established. At the same time, with the rapid decline in prices of upstream bulk raw materials, especially steel products, the profitability of the upstream parts industry chain is expected to continue to improve in the second half of the year. Looking ahead to the whole year, we expect that the domestic market will realize the installed capacity of more than 55GW (+17% year-on-year) and the bidding demand of more than 80GW (+48% year-on-year), which corresponds to stronger installed capacity demand next year, especially in the offshore wind power sector, the installed capacity in 2023 is expected to reach more than 12GW, a significant rebound from this year's 5-6GW. We recommend focusing on 1) towers, submarine cables and whole machine links with better business models and greater business space, and 2) leading fan parts companies that continue to benefit from the global trend of large-scale fan and the decline in raw material prices.
Risk: medium- and long-term contract implementation of electric coal is weaker than expected.
Steel
steel supply contracted in July than expected
7 pig iron production was 70.49 million tons, a year-on-year, and crude steel production was 81.43 million tons, a year-on-year. In July, the average daily crude steel output was -13.2% month-on-month to 2.66 million tons (the monthly output data used to calculate the daily average output is obtained by decreasing cumulative output), and the decline exceeded market expectations. The main reason was that the supply continued to shrink under low profits and the industry strengthened self-discipline and actively controlled the production rhythm (the average blast furnace operating rate of 247 steel mills nationwide was 76.2%, 7.2ppt month-on-month). The cumulative output of pig iron/crude steel from January to July was 511/609 million tons, a year-on-year -4.5/-6.4%, and the decline narrowed. Against the background of the National Development and Reform Commission's clear announcement that it will continue to reduce crude steel production in 22 years, the current crude steel production level is close to the average crude steel production level in August to December under the assumption of the assumption of the average crude steel production level (82.64 million tons) from August to December, and the subsequent supply rebound space is limited.
Real estate is in a sluggish economy, downstream demand recovery is slower
1) Real estate sales have fallen, and infrastructure investment continues to increase. Judging from the macro data in July, the downstream economic climate of construction steel continues to be differentiated, and the overall demand level is still weak. In terms of real estate, the growth rate of sales area and sales in July was -10.6/-7.4ppt month-on-month, and the growth rate of newly started and construction area was -0.3/+3.8ppt month-on-month. The supply-side credit risk led to slow recovery of real estate prosperity; in terms of infrastructure, infrastructure investment in July rose 9.1% year-on-year in the month, up 1.0ppt month-on-month, and infrastructure investment continued to increase. We observed that the average weekly apparent consumption of typical construction steel threads in July was 3.08 million tons, a year-on-year-on-year growth rate of +9.2ppt month-on-month. The overall level is still weak but the decline continues to narrow.
2) The manufacturing industry represented by automobiles continues to recover. 7 manufacturing investment increased by 7.5%, with a growth rate of -2.4ppt month-on-month. Specifically, benefiting from policies to encourage automobile consumption, automobile production and sales continued to rebound. The month's automobile production increased by 31.5% year-on-year, with a growth rate of 4.7ppt month-on-month; the month-on-month sales of excavators -33.2%, with a growth rate of 2.8ppt month-on-month. Overall, with the continued efforts of the stable growth policy, the overall prosperity of the downstream steel industry showed a weak recovery, with the apparent consumption of the five major varieties in July -6.3% year-on-year (vs. The apparent consumption in June -8.1% year-on-year). Looking forward, as the industry gradually ushers in the peak season of Golden September and Silver October, projects that were suspended due to epidemics/weather and other factors in the early stage are expected to resume work, and demand is expected to be filled.
3) Steel exports fell in July. 7 steel exports fell 11.8% month-on-month to 6.671 million tons, up 17.7% year-on-year. The main reason is the weakening overseas demand and the clearance of export orders due to the epidemic in the early stage, which is consistent with our previous judgment. Looking forward, under the impact of multiple adverse factors such as inflation, currency tightening and weakening demand, overseas demand is likely to weaken in the future. In addition, we have observed that my country's steel FOB export price advantages and additional profits have declined since August. We believe that steel export demand will continue to be under pressure from August to December.
Supply and demand are expected to improve in the peak season, driving the rise in steel prices. 1) supply side, in the context of the National Development and Reform Commission’s clear announcement that it will continue to reduce crude steel production in 22 years, the subsequent supply rebound space is limited; combined with the current inventory being at a historical low (the total inventory of five major steel varieties in the past week is 17.02 million tons, an average of -2.6% in the same period in the past six years), looking forward, we believe that inventory is expected to be further sold as supply and demand improves, supporting the rise in steel prices. 2) On the demand side, infrastructure projects have recovered recently. We have observed improvements in building-related indicators such as cement/asphalt/infrastructure bidding; looking forward, we believe that as the industry gradually ushers in the peak season of Golden September and Silver October, projects that were suspended due to epidemics/weather and other factors in the early stage are expected to resume work, and demand is expected to be filled.
industry chain profits are rebalanced, and steel mill profits are expected to be restored.htmlIn early 77, the profits of the black industrial chain were basically concentrated in coking coal and iron ore, and have improved recently. In the past week, the gross profit of the main steel varieties thread/hot rolling ton (considering one-month inventory) was 474/97 yuan respectively, up 133/140 yuan month-on-month. Looking forward, we believe that subsequent industrial chain profits are expected to be rebalanced. The main reasons include: 1) Compared with steel prices, the globally priced iron ore/coking coal prices are subject to global flows. The tightening of nature and the downward pressure on PMI are more obvious; 2) There have been obvious signs of weakening supply and demand for iron ore and coking coal recently: on the demand side, the cumulative production of pig iron in regions other than China in June was -5.9% year-on-year, down 0.1ppt from May. The high energy prices and the weak terminal demand are still under pressure; on the supply side, the new iron ore capacity of the four major mines was put into production one after another, and the import volume of coking coal returned to normal levels as the domestic and foreign price difference returned to normal levels and the improvement of Mongolian coal customs clearance.
risk: real estate economic recovery is lower than expected; the global economy is accelerating.
Nonferrous
1. Nonferrous strategy environment
Three elements of the nonferrous industry, namely demand, supply and monetary factors, are undergoing some favorable changes. The favorable sub-variety sorting is gold, new energy metals (lithium, cobalt, rare earths, nickel), and industrial metals (aluminum, copper).
Demand: is still relatively sluggish from the top down, which is mainly due to the evolution of overseas economy in the direction of recession. In terms of domestic demand, the policy of stabilizing growth has seen marginal improvements at the infrastructure level, but real estate demand is still relatively sluggish. However, we believe that as the overseas economy gradually benefits from the gradual slowdown in monetary policy tightening and the continued advancement of the policy of stabilizing growth, and the gradual arrival of the peak season in the third and fourth quarters, demand is expected to improve marginally.
Supply: The negative impact of overseas epidemic and logistics has been gradually lifted, and the supply impact brought by the Russian-Ukrainian conflict is actually eased marginally, and the supply of widespread bulk goods is actually increasing marginally. Some production cuts, such as the recent reduction in European zinc smelting, are more caused by European power shortages, but this is not very sustainable in the context of a recession in demand.
Currency: The US CPI in July was 8.5%, peaking and falling, and it was lower than the market expectations of 8.7%. In addition, the US GDP growth rate in the second quarter once again grew negatively month-on-month, triggering a recession expectation of the US economy. The Fed's July interest rate hike will be 75bp in line with expectations, but there are some dovish statements about the pace of future interest rate hikes.
We believe that the severity of the US recession pressure will be a necessary condition for the Fed to slow down interest rate hikes, and the easing of US inflation pressure will be a sufficient condition for the Fed to slow down interest rate hikes. Judging from some of the above major changes, this necessary condition has been strengthened and sufficient conditions are being met.
We believe that even if the data on these two logical clues may still be repeated in the future, the Fed's policy focus from "pressing inflation" to "anti-recession" is shifting, and the Fed's slowdown in interest rate hikes is the general trend. This will guide the gradual reduction of US Treasury yields, which will help the stabilization and rebound of nonferrous commodity prices at the financial level.
However, this marginal easing at the monetary level is only at the second-order guiding level, and is just a slowdown in interest rate hikes. It can enhance the price center of non-ferrous bulk commodities, but it is not enough to achieve a resonance of rebound in demand and monetary easing to promote a strong rebound in base metals. The most favorable thing is gold, which has the simplest financial attributes, benefiting from the decline in real interest rates.
2. By variety, new energy metals are expected to usher in a peak season price increase
1. Lithium: The supply increase is limited, and the price increase range of entering the peak season is
7 in July, the land price of spodumene is US$4,720/ton, which is the same month-on-month. The prices of industrial carbon, electric carbon and hydrogen lithium are 455, 475, and 457,500 yuan/ton, respectively, and the monthly monthly price is +0.47%, +0.21%, and +0.88%. Looking at the supply side of
, the increase in domestic lithium salt production in July was limited, and the main change lies in the import volume. In July, the domestic lithium carbonate production was 31,600 tons, the same month-on-month, while the domestic lithium hydroxide production was 20,400 tons, a month-on-month; according to customs data, China's lithium carbonate imports in June were 28,000 tons, a month-on-month increase of 193%, mainly from Chile, and overseas imported lithium carbonate may gradually enter the market from July to August.
From the demand side, the demand for the downstream battery industry chain is improving. In the positive electrode stage, in July, China's ternary positive electrode material production was 54,825 tons, a month-on-month increase of 4% and a year-on-year increase of 45%; China's lithium iron phosphate production reached 94,694 tons, a year-on-year increase of 211% and a month-on-month increase of 28%. In the battery process, my country's power battery production totaled 47.2GWh, an increase of 172.2% year-on-year and 14.4% month-on-month. Among them, the production of ternary batteries was 16.6GWh, accounting for 35.1% of the total output, an increase of 107.7% year-on-year, and a decrease of 9.4% month-on-month; the production of lithium iron phosphate batteries was 30.6GWh, accounting for 64.8% of the total output, an increase of 228% year-on-year, and a decrease of 33.5% month-on-month.
We expect that due to the supply of raw materials, domestic lithium salt production will remain basically stable in the third quarter, so the supply side increase is limited. The growth of terminal demand is expected to gradually spread to the material factory link, accelerating the inventory consumption of material factories and the procurement demand for upstream lithium salts. As the industrial chain maintains low inventory, it is expected to drive lithium prices to return to the upward trend.
2. Cobalt: The expectation of storage and storage is gradually rising, and the cobalt sector is expected to be in good condition. It is recommended to pay attention to
at the bottom. Recently, the expectation of storage and storage of cobalt metals has gradually risen. From the direct price performance, the cobalt market in China United Jinhuang has increased by 12.3% from the early trading of August 8 to 337,000 yuan/ton (as of 16:00 on August 9), and the highest rose to 353,000 yuan/ton.
Cobalt salt plant has unsustainable losses, and its profits in smelting and processing have bottomed out and rebounded. Current profits in cobalt salt smelting and processing have bottomed out and rebounded. We estimate that the smelting profit of cobalt tetroxide in early August was just about the brink of break-even, with an average loss of 46,800 yuan/ton in 2Q22; the smelting profit loss of cobalt sulfate in early August has dropped to less than 50,000 yuan/ton, and the smelting profit of cobalt sulfate in early August has dropped to less than 50,000 yuan/ton, with an average loss of 92,700 yuan/ton in 2Q22. The cobalt salt plants suffered a large loss in the second quarter, mainly because there is a price difference between cobalt prices at home and abroad. The domestic cobalt price at the sales end fell first, and the overseas MB cobalt price and discount coefficient at the cost end lagging down, squeezing the profits of smelting and processing in the midstream. Looking forward, we believe that the huge loss status of cobalt salt plants is unsustainable, which may support the price upward trend. At the same time, the overseas crude cobalt discount coefficient has fallen back to about 30% off recently, and the cost-end pressure of cobalt salt plants is expected to ease.
looks forward, we think we can be optimistic about the price of cobalt. First, although domestic new energy vehicle production and sales in July were affected by seasonal factors, they remained at a high level overall, and the off-season was not slow. Second, Q3-Q4 is about to enter the peak consumption season, and the industry's prosperity is expected to be further strengthened. Third, under the background of stable domestic growth, traditional cobalt demand such as cemented carbide and high-temperature alloys are expected to recover, driving cobalt prices to stabilize and rebound.
3. Rare earths: Both supply and demand are weak in July, and the peak season in the third quarter is expected to stabilize and rebound
This month, rare earth prices rebounded slightly after falling. This month, the price of praseodymium-neodymium oxide was 825,500 yuan/ton, down 11.66% month-on-month; the price of dysprosium-oxide was 2.355 million yuan/ton, down 5.61% month-on-month; the price of terbium oxide was 13.85 million yuan/ton, down 2.12% month-on-month. On the supply side of
, the monthly output of praseodymium neodymium oxide, dysprosium oxide and terbium oxide were 5400, 170 and 31 tons, respectively, month-on-month, -3.09%, -5.03%, and -3.13%, respectively. The output continued to decline slowly, and the overall oxide production was relatively stable. Considering that the indicators in the second half of the year have not been announced and the increase in overseas supply is limited, the overall output is expected to be weak and stable. On the demand side of
, domestic automobile production in July was 2.455 million, a slight decrease of 1.76% month-on-month; the production of new energy vehicles was 617,000, a 4.58% month-on-month increase. Overall demand in July was lower than expected, orders for large NdFeB factories were reduced to varying degrees, and orders for small factories were even fewer. In addition, the epidemic this year has a great impact on the economy, and the market's pessimism has increased.
replenishment sentiment, due to weak terminal orders, demand is lower than expected, and the market is more sensitive, resulting in the overall industrial chain being relatively cautious in procurement, and the fear of highs continues to increase. While large NdFeB factories mainly use long-term contract orders, and the spot purchasing power for the market has declined, while small NdFeB factories lock in orders to replenish the goods, with limited demand and insufficient order sustainment, and the overall market metal liquidity declined.
We expect that due to the supply of raw ore, rare earth oxide production will remain basically stable in the third quarter. With the arrival of the "Golden September and Silver October", terminal demand is expected to drive the growth of demand for magnetic materials and rare earths, and rare earth prices are expected to usher in an upward turning point.
4. Copper: Demand is still relatively weak and supply pressure remains, mainly benefiting from the improvement of financial attributes
demand side. From the perspective of operating rate, according to SMM survey, the operating rate of copper foil enterprises in July 2022 was 80.54%, a sharp decline of 13.89 percentage points month-on-month. In July, the operating rate of fine copper rod making enterprises was 74.37%, an increase of 4.93 percentage points month-on-month and 2.43 percentage points year-on-year. It is estimated that the operating rate of fine copper rod making companies will be 75.7% in August.
TC/RC is currently not US$74.6/ton, +2% monthly, and the supply of copper concentrate remains relatively relaxed.
In the short term, the US CPI fell more than expected in July, and the recession has not yet arrived, and copper prices ushered in a certain rebound window. Domestic demand expectations improved in the second half of the year, with stable domestic growth still expected and the supply and demand side being tight, and copper prices may continue to rebound in the short term.
In the long run, the global PMI in July has hit a new low since July 2020. , the PMI of major euro zone countries fell below 50 beyond expectations, indicating that the risk of European economic recession is near. In combination with the ICSG disclosure, the copper market's supply in January-May 2022 is 43,000 tons, we believe that the new copper concentrate production in the second half of the year will continue to climb to full production, and copper prices will remain under pressure for a long time.
Chemical
Due to the decline in international crude oil prices and sluggish terminal demand, the PPI of chemical raw materials and chemical products manufacturing, chemical fiber manufacturing, rubber and plastic products industries in July fell by 2.1%, 1.4% and 0.6% month-on-month respectively. Judging from the chemical product price index, due to the impact of falling international crude oil prices and weak off-season demand, the current China Chemical Product Price Index fell 6.9% month-on-month in the same period last month. This price index is currently in the 49% quantile since 2012. At present, Brent crude oil futures prices are still at a high level of nearly $100 per barrel, resulting in the profits of most chemical products that use crude oil-related products as raw materials still face certain pressure. We believe that the worst stage of profitability of midstream chemicals may have gradually passed, but the subsequent recovery of profits still depends on the improvement of domestic demand. In terms of investment strategy, we are optimistic about TDI with the logic of product price increase, some targets of chemical + new energy, and leading companies driven by capital expenditure in medium and long-term growth.
Chart: China Chemical Product Price Index
Source: Wind, CICC Research Department
First, the supply side device is suspended, and it is optimistic that the TDI price will rise. According to Tiantian Chemical Network, Covestro Germany's 300,000 tons/year TDI device has force majeure due to chlorine leakage. Covestro expects that all liquid chlorine supply will be restored after November 30. Since Covestro's 300,000 tons of production capacity accounts for 8.6% of the global production capacity, we expect that the suspension of Covestro's TDI devices will lead to tight global TDI supply, and TDI prices are expected to rise. Secondly, overseas energy costs soar, reconstruct the TDI cost curve: European natural gas prices rose sharply under the background of the Russian-Ukrainian conflict. Referring to the BASF and BC situation, we expect the European TDI energy costs to increase by about 4 times compared with the previous one, corresponding to the increase of TDI costs by about 1,000 euros/ton. At the same time, Germany's natural gas supply is facing challenges, and we expect the operation of installations including MDI and TDI to continue to be tested. We reiterate our optimism about the TDI prosperity: In 2021, domestic TDI consumption and exports totaled about 1.25 million tons, and the capacity utilization rate of 87% is already a relatively high level. In 2022, the industry has no new capacity, and some backward production capacity is expected to withdraw, and the industry's effective supply is around 1.22 million tons. Since the Wanhua Yantai 300,000-ton unit was put into production in 2019, the industry has been sluggish for three consecutive years. The current competitive landscape has stabilized. With the recovery of demand, we are optimistic about the TDI economic reversal.
Second, it is optimistic about the first-tier chemical leaders with strong certainty in medium and long-term growth. Currently, leading chemical companies have a high valuation of cost-effectiveness. At the same time, leading chemical companies have planned large capital expenditures in the next few years. We believe that they will drive leading enterprises to continue to grow in the medium and long term, so we are optimistic about the investment opportunities brought by the certainty of the medium and long-term growth of front-line chemical leaders.
Risk: Macroeconomic downward risks, the improvement in demand for traditional chemicals is lower than expected, and the growth in demand for new energy materials is lower than expected.
Machinery
Construction machinery
base rotation, project starts to resume after the epidemic, and maintaining prosperity overseas drives the year-on-year growth rate of excavator sales to positive.In July 2022, my country's excavator sales were 17,900 units, a year-on-year increase of 3.4%, and the growth rate turned positive for the first time since April 2021; of which the domestic sales were 9,300 units, a year-on-year decrease of 25%, and the decline continued to narrow by 10ppt month-on-month; the export sales of excavator were 8,700 units, a year-on-year increase of 73%, and the growth rate increased by 14.6ppt month-on-month. Judging from the
extension model, the sales of large/medium/small diggers in July fell by 36.1%/42.2%/12.8% year-on-year respectively. The declines of medium and small diggers narrowed, while medium and medium diggers still maintained a large decline, reflecting that real estate still has dragged down.
In terms of the number of utilization hours, Komatsu's utilization hours in July 2022 were 100.1 hours, a year-on-year decrease of 5.4%, a decrease of 7.6ppt month-on-month, an increase of 5 hours month-on-month, reflecting that the actual margin of construction in downstream has improved. The social financing data in July, especially medium- and long-term loans, indicate that the capital demand of various market entities is limited, and the amount of bank financing for real estate and infrastructure is still insufficient, especially the recovery of real estate demand will still take some time.
In the short term, we expect the marginal improvement trend of demand in the 2H22 industry to not change, but there is no sign of ease in the pressure on real estate. Inadequate funds make it difficult to see a significant improvement in the start of construction in the short term. If the industry wants to continue to rise, it still depends on the interpretation of key variables such as real estate; in the medium term, we expect internationalization and electrification to open up the industry's growth space in the future. In terms of general equipment, in terms of PMI trend, the PMI of the manufacturing industry in mid-July was 49.0, a month-on-month decrease of 1.2ppt, returning to the boom line. In July, the output of metal cutting machine tools and industrial robots decreased by 14.8%/8.8% year-on-year, and the cumulative decrease of 10.1%/11.5% from January to July.
According to micro-enterprise data, in July, the revenue of Delta Electric, an industrial automation company, increased by 29.43% year-on-year, while the previous value was an increase of 22.71%. Its new energy business contributed a large structural contribution to revenue, but Yadeke's revenue fell by 12.2% year-on-year, while the previous value was a decrease of 2.9%, and the growth momentum showed a downward trend.
combined with factors such as credit, representative product output, and representative company revenue, the current macroeconomic prosperity is limited, weak real estate, and slow consumption recovery have put a certain suppression on the overall demand of the manufacturing industry. Looking forward, we expect the industry's prosperity to rise steadily in the third quarter, and the specific rebound range still needs to be observed.
In the long run, my country's independent brand robots and core devices still have a lot of room for improvement in the market share. We recommend that individual stocks with less impact on the industry's prosperity, strong domestic substitution logic or relatively good downstream prosperity.
lithium battery equipment
According to the China Association of Automobile Manufacturers, my country's new energy vehicle sales in July 2022 were 593,000, a year-on-year increase of 1.2 times; according to the China Automobile Power Battery Industry Innovation Alliance, my country's installed power battery capacity was 24.2GWh, a year-on-year increase of 114.2%. The high prosperity of downstream applications of
has driven battery factories to maintain rapid expansion of production. Since the second half of last year, we have seen overseas battery production capacity expand at an accelerated pace, and European battery factories represented by Northvolt and ACC have accelerated their expansion. In the first half of this year, Volkswagen completed the 20GWh equipment bidding. We expect Northvolt and ACC will also have 10-30GWh equipment bidding in the second half of this year. At the same time, with domestic battery factories such as CATL and Yiwei Lithium Energy going overseas, we expect overseas equipment bidding demand to double this and next two years.
In 2022, domestic second-tier battery factories enter a stage of accelerated production expansion. 1H22 AVIC Lithium Battery, Yiwei Lithium Energy and other manufacturers have expanded production in large scale. In addition, BYD has further increased equipment external procurement, especially in the front and rear links, and partially increased external procurement of chip lamination machines. With the accelerated expansion of production by second-tier manufacturers, we expect that on the one hand, the annual order scale of equipment factories will be higher than expected at the beginning of the year, and on the other hand, the order customer structure will be diversified, which will relatively help improve profitability.
With the expected slowdown in order growth, optimization of human efficiency management, and the increase in the scale of single-class equipment, we expect equipment factories to be in the profit improvement channel from 2H22.
Photovoltaic equipment
Sil wafer prices in July have a jump in comparison with June. At the end of July, the prices of 166mm/182mm/210mm silicon wafers were 6.31/7.58/10.01 yuan per piece, respectively, and at the end of June, the prices were 5.73/6.78/9.13 yuan per piece, respectively, an average year-on-year increase of about 10%. The price of battery cells increased slightly compared with June, and the price of three-size single crystal PERC battery cells at 1.28 yuan/W at the end of July.The popularity of
silicon wafer expansion remains unabated. We estimate that the newly announced production expansion plans of Tianhe, Gaojing and Shangji are expected to release 15 billion yuan of single crystal furnace orders and 1.2 billion yuan of slicer orders. Previously, the market continued to worry that overcapacity of silicon wafers restricted equipment demand, but we believe that silicon wafer equipment is expected to benefit fully under the influence of the gap in supply of large-size silicon wafers + accelerated industry demand + downstream silicon wafer manufacturers expand production and seize the share. The profitability of
battery cells has rebounded + the number of new entrants has increased. We believe that the expansion of battery cells this year is expected to exceed expectations. The profitability of the battery cell segment has rebounded recently, and the large-size PERC production capacity has a good profit effect. We believe that it is expected to drive the expansion of battery cell production this year beyond expectations. In addition, new entrants are actively expanding production: Haiyuan composite 600MW ingot single crystal HJT+ electroplated copper production line is expected to be put into production in December; Junda Co., Ltd.'s first phase of 8GW N-type TOPCon battery is in the trial production stage; Baoxin Technology expects 2GW HJT batteries and modules to be trial production from June to July next year; Mubang Hi-Tech announced that it plans to invest in the construction of the 18GW TOPCon battery project. We believe that these are expected to bring orders of battery cells across various routes beyond expectations.
Risk: downstream industry demand is lower than expected, domestic and foreign epidemics are repeated, and the competitive landscape is deteriorating.
Technology hardware
Overall view: Optimistic about the month-on-month improvement trend in the second half of the year, Apple's industrial chain is relatively prosperous
In the first half of this year, in the context of sluggish demand, consumer electronic products, especially mobile phone markets, experienced a double-digit decline in shipments, and Android terminal brands faced greater inventory pressure. After entering the second half of the year, the market expects to enter the peak season of consumer electronics and may usher in marginal improvement. Recently, investors are also very concerned about when the mobile phone market will bottom out and rebound. We will give you the following brief report on the overall mobile phone market data and outlook. From the perspective of terminal shipments of
, the global market may improve month-on-month. According to IDC data, global smartphone shipments in the second quarter were 286 million units, a year-on-year decline of 8.7%, slightly narrowing from 8.9% in 1Q22. We believe that the decline in the second quarter continues to reflect the negative impact of global inflation and macroeconomic downturn on mobile phone demand, and high inventory still puts pressure on mobile phone terminal manufacturers. In the domestic market, shipments in the second quarter were 67.2 million, a year-on-year decline of 14.7%, an increase from the -14.1% decline in 1Q22. We expect domestic mobile phone shipments to continue to decline since July. But looking forward to the second half of the year, we judge that after entering the peak season of consumer electronics, the demand side may recover, which may bring about a month-on-month improvement in the market in the second half of the year.
points to brand, Apple is in good prosperity, and demand for Android brands continues to be sluggish. According to the recent public information of , the market expects that Apple's new iPhone 14 series will perform well this year, and the prices of high-end models may increase. We noticed that during this year's 618 promotion, the iPhone 13 had very good sales performance, reflecting the market's recognition of the Apple brand. Android brands are facing great pressure. Global shipments of Xiaomi, vivo and OPPO have all declined by double digits in 2Q22. IDC said that in addition to external factors such as the rebound of the epidemic/prevention and control that affect consumer budgets, the lack of sufficient differentiation of mid-to-high-end products is also an important internal factor.
supply chain perspective, pay attention to investment opportunities in the Apple industry chain, and the Android industry chain still needs to observe the pace of inventory clearance. is based on Apple's expectations for new phones in the second half of the year, and we recommend that investors pay attention to investment opportunities related to Apple's industry chain. In terms of the Android industry chain, we judge that we still need to continue to observe the clearing of inventory through channels, especially the pace of clearing of inventory through overseas inventory. In addition, we are optimistic about the continued iteration and maturity of folding screen winder products, which will increase consumers' demand for replacement.
new trend: Optimistic about folding screens to enhance consumers' enthusiasm for changing phones, and pay attention to opportunities in the ARVR industry chain. last week Xiaomi and Samsung successively released new folding screen phones. We believe that folding machines are the biggest innovation of smartphones in the context of slowing innovation in the mobile phone industry, and are also the field of competition between Android brand manufacturers in the high-end market and Apple. In addition, there are some new changes in the ARVR industry. The market is concerned about the pace of launching new ARVR products such as Meta, pico, and Apple. Investors are advised to pay attention to the catalysis brought about by the release of key new products in the ARVR industry.
comprehensively, although the epidemic disrupted the shipment pace and global mobile phone shipments declined year-on-year in the first half of the year, we believe that the sluggish short-term demand will not change the long-term trend. Judging from the logic of month-on-month improvement, the worst period has passed, and the inventory level is expected to gradually decline with the joint efforts of the upstream and downstream. In the second half of the year, the release of new products by Apple and other manufacturers is expected to drive the improvement of shipments month-on-month.
Risk: The epidemic recovery is lower than expected, Sino-US trade frictions intensify, and individual stock performance does not meet expectations.
Automobile
Data:
According to data from the China Association of Automobile Manufacturers, automobile production and sales in July reached 2.455 million and 2.42 million respectively, a decrease of 1.8% and 3.3% month-on-month and a year-on-year increase of 31.5% and 29.7%, the highest value in the same period in previous years. Among them, passenger cars were sold 2.174 million, a year-on-year increase of 40%. Commercial vehicles were sold 246,000, a year-on-year decrease of 21.5%. In July, the sales of new energy vehicles were 593,000, an increase of 1.2 times year-on-year.
1-July car sales totaled 14.477 million units, a year-on-year decrease of 2%. Among them, passenger cars sold a total of 12.529 million, an increase of 8.3% year-on-year, and commercial vehicles fell by 39.3% year-on-year. The prosperity of new energy vehicles continues, achieving a total sales of 3.194 million vehicles, a year-on-year increase of 1.2 times, and the penetration rate reaches 22%, an increase of about 9ppt from 2021. Interpretation of
:
production and sales in July were not slow, exports increased significantly year-on-year, and the strength to add warehouses continued to be strong. 7 is the traditional off-season. Driven by the easing of the epidemic, improving supply chain and implementing the policy of halving purchase tax, production and sales in July increased by a high year-on-year and slightly declined month-on-month, and remained the same historical average on the basis of a high base, among which fuel vehicles maintained positive growth of more than 20% year-on-year. In terms of exports, 226,000 exports (including complete vehicles and CKD) were exported in July, up 76%/+19% year-on-year, and exports accounted for 10.6%; among which new energy vehicles accounted for 21.8%, and independent brands accounted for 76.1%, driving a strong growth in exports. In terms of inventory of
, considering import and export, the channel inventory increase in July remained above 100,000 vehicles, maintaining a month-on-month increase. Car companies have room to add warehouses. In order to make up for the production and sales gap between April and May, car companies have strong willingness to add warehouses. Looking forward, we believe that the month-on-month growth of terminal demand is gradually entering the peak season. With the easing of chip shortage, continuous inventory increase and the tail effect of stimulus policies, we are optimistic about wholesale sales in the third quarter. From August to September, the year-on-year growth rate of wholesale is expected to remain 20+%.
eliminates the impact of Tesla's production line adjustment, and new energy has maintained a high prosperity. htmlIn July, the wholesale of new energy passenger car declined slightly month-on-month, with production and sales both increasing by about 1.2 times year-on-year. The penetration rate of new energy wholesale reached 26.4% in July, up 9.8ppt year-on-year. By brand, Tesla's wholesale sales were only 28,000 vehicles affected by the transformation of its factory production line in Shanghai, -64% month-on-month; among the new forces, Wei Xiaoli's sales decreased, while Nezha/Zero Run sales increased month-on-month and exceeded 10,000 consecutively. We believe that after excluding Tesla's short-term disturbances, it is estimated that the new energy wholesale end has increased by 7.5% month-on-month, and the penetration rate has increased by 1.7ppt month-on-month, maintaining a high prosperity. The share of independent brands of
continues to increase, and traditional independent efforts are made to new energy. 7's wholesale market share of independent brands was 49.8%, up 3.4ppt year-on-year; from January to July, the cumulative share of independent brands was 48.0%, up 5.9ppt year-on-year, mainly contributing to the incremental contribution of new energy brands. Traditional independent/second-tier new forces have launched cost-effective and rich pure electric and hybrid models, which have achieved significant increase in the new energy market. BYD/Changan Passenger Cars/Chery wholesale sales have increased by 21.3%/-3.1%/+7.9%/+25.9% month-on-month.
Investment advice: 3-4 industry production and sales support, but the valuation level is not low. Traditional car companies need to find expectations gaps and stronger marginal catalysis.
looks forward to next year. We believe that halving the purchase tax may have an overdraft effect, and the increase in new energy is relatively certain (expected to be between 2.5 and 3 million vehicles), so the sales pressure of fuel vehicles is very high, and we are more optimistic about car companies related to strong new energy. The current valuation of new car companies has fallen below 3.5 times this year's EV/Rev, with little downward risk. Looking at the next year, there is a lot of room for subsequent sales with the new car model to be launched, and we suggest the layout opportunity.
Risk: The effect of automobile consumption stimulus policies is lower than expected, and demand rebounded lower than expected after the epidemic eased.
Home appliances
6 Since June, the domestic epidemic has improved, logistics has recovered, and domestic sales of home appliances have recovered.The strong demand for air conditioners continued to drive high temperatures in July further boosted the demand for home appliance consumption. According to the latest data from the Bureau of Statistics, the total retail sales of home appliances in July was 80.8 billion yuan, a year-on-year increase of 7.1% (higher than the overall retail sales growth +2.7%). It is the fastest growth rate in the month excluding the peak-staggering effect of the Spring Festival in February since this year, and further expanded compared with the year-on-year growth rate in June. From January to July, the total cumulative retail sales of home appliances was 527.8 billion yuan, a year-on-year increase of 1.4%, further expanding compared with the cumulative year-on-year growth rate from January to June.
High temperatures continue to stimulate air conditioner retail in many places across the country. html Since mid-June, a large-scale high-temperature weather has hit, and the range of high-temperature weather in the past four weeks has further expanded. The continuous high temperature in East China, Central China, North China and some southwest areas stimulates air conditioner retail. According to data from Aowei Cloud Network, the online and offline retail sales of air conditioners in July increased by 25% and -6% year-on-year respectively, with the growth rate of online retail turning sharply, and the decline in offline retail sales narrowed. W32 (8.1-8.7) air conditioner online/offline retail sales increased by 46.9%/+15.9% year-on-year. In July, the online retail sales of Midea, Gree, Haier and Hisense increased by 33%, +9%, +40%, and +31% year-on-year respectively. The online retail sales of Midea, Haier and Hisense both increased significantly, mainly due to the high base of online retail in the same period last year.
Recently, the prices of major raw materials such as copper, aluminum, and steel have fallen from their highs. Considering that home appliance companies generally saw a round of price increases at the end of the first quarter and the beginning of the second quarter, we expect that under the trend of falling raw material prices, the profitability of home appliance companies in the third quarter is also expected to improve significantly.
The sluggish demand in Europe and the United States still has a negative impact on exports, but the depreciation of the RMB exchange rate is conducive to the profit recovery of the home appliance export business. In terms of exports, according to data from the General Administration of Customs, in July, the amount of my country's electrical appliance exports (in US dollars) fell by 7.7% year-on-year, but the decline narrowed compared with June. According to the 1H22 observation released by overseas home appliance companies, Europe is facing greater pressure to decline in demand. Judging from the 1H22 performance that A-share home appliance companies have released, the performance elasticity brought about by exchange rate depreciation has begun to be reflected in export-oriented companies.
html Since the end of May, with the marginal improvement of the epidemic situation and logistics recovery, coupled with the pull of the 618 online promotion, some of the suppressed consumer demand has been released, and demand for white goods, kitchen appliances, cleaning appliances, small household appliances, etc. has begun to recover. The high temperatures in summer have further boosted air conditioning retail consumption since the end of June. Judging from the performance of listed companies in the 1H22 home appliance industry, some low valuations and obvious marginal improvement in operations benefit from the exchange rate depreciation and cost reduction of some targets have begun to reflect. We are optimistic about the subsequent profit elasticity of the related targets.risk: market demand fluctuation risk; market competition intensifies risk; raw material price fluctuation risk.
Computer
1-July software industry high-frequency data analysis
Judging from the growth of the software industry revenue and total profits in January-June of the Ministry of Industry and Information Technology, the overall revenue growth of the industry in the first half of this year was relatively stable. Even in March-May, the industry's revenue growth rate did not significantly decline. However, in contrast, the total profit indicator showed a continuous improvement stage from January to June. We believe that behind this is the high cardinality, seasonality, and moderate staff optimization.
tracks key apps. As of the end of July, according to QuestMobile data, the monthly and daily active users of Kingsoft WPS Office's mobile terminals are generally stable, but with the arrival of summer, it has declined slightly from the peak at the end of June. The daily active users' data of iFLYTEK input method declined significantly after rising at the end of June, with a drop of about 10%-15%.
We have continued to organize the order data of the medical information industry. According to the overall data from January to July, the orders of several leading manufacturers we tracked increased by 15% year-on-year, with a total order volume of more than 3 billion yuan. From the branch perspective, Neusoft Group's growth rate is relatively impressive due to its small proportion of East China business and a small impact from the Shanghai epidemic. The total winning orders from January to July 2022 were nearly 600 million yuan, an increase of 58% year-on-year; Weining Health and Wanda Information both recovered in short-term June, but due to the epidemic in Shanghai, the overall order amount from January to July Weining Health was basically the same as the same period last year, and Wanda Information increased by 13% year-on-year.Judging from the performance of large orders, according to our statistics, the leading companies had a total of 58 orders of more than 10 million yuan in January-July 2022, including 32 and 26 each in 1Q22, April-July. The signing of large orders since the second quarter has also been affected by the epidemic.
htmlIn July, each fund also disclosed its interim reports, and we sorted out the institutional holdings in the industry. We counted that the proportion of CICC software and service sectors in active equity-oriented funds fell to 1.89%, a decrease of 0.32ppt month-on-month, setting a new low. Nevertheless, we believe that the current valuation of the computer sector has reached a low level.In the monthly data interpretation of July 2022, we believe that the current hype around strong sectors such as intelligent driving, new energy, and service robots is difficult to sustain. It is recommended that everyone pay attention to companies whose impact of the 2Q epidemic is limited and enters the performance improvement cycle. In early August, we focused on pointing out that in the current context, there is a strong demand for switching high and low from the previous strong sectors. We focus on undervalued companies in the fields of specialty and pan-domestic and pan-industrial software. Practice has proved that some of the more powerful intelligent driving and dual-carbon targets in the early stage have significantly rebounded in the past two weeks.
We maintain the current view. In the overall sector, we believe that the interim report market remains to be seen, but as the interim report passes, the sector gradually enters a low base cycle. We expect that with the release of third-quarter results at the end of October, combined with the policy high-incidence period at the end of the year, the sector is expected to usher in a recovery.
Risk: The epidemic is repeated; the policy implementation speed is lower than expected; fiscal pressure increases.
Transportation
Express: National Post Bureau data shows that the national express delivery business volume in July was 9.645 billion pieces, up 8.0% year-on-year, better than the year-on-year increase of 5.4% in June. The business volume has recovered. We believe that it is mainly due to the steady recovery of supply as the epidemic slows down; the industry average single ticket price is 9.31 yuan per piece, up 0.6% year-on-year. We believe that since the fourth quarter of last year, express delivery prices have returned to rationality under the regulatory structure, and have maintained a stable trend this year. It is recommended to pay attention to the continuous improvement of express delivery companies. Since early August, due to the impact of the epidemic in the region, Yiwu's express delivery business volume has declined to a certain extent. Wang Dongsheng, deputy director of the Yiwu Postal Administration, said on August 8 that the average daily express delivery volume of Yiwu has dropped by about 5 million pieces, and according to our estimates, accounting for about 2% of the national express delivery business volume. We believe that the current Yiwu epidemic has limited impact on the national express delivery business volume and the follow-up remains to be seen.
Highway: 7 road freight is still suppressed by the epidemic but has improved month-on-month. According to G7 data, the national vehicle freight flow data in July fell by 18% year-on-year and 2.29% month-on-month. Among them, Shanghai in major epidemic areas fell by 26% year-on-year in July, and the year-on-year decline narrowed by 22ppt compared with June, with a significant improvement on the month-on-month. In terms of freight rates, freight logistics and transportation continued to be smooth, and the market supply and demand sides further improved, driving the freight index to maintain a rebound trend. In July, China's highway logistics freight index rebounded by 0.47% compared with the previous month, an increase of 3.2% over the same period last year.
In-city delivery: html In 77, the monthly active users on the same city will be in the same city will be in the same city will be in the same city, the monthly active users will be in the same month-on-month and year-on-year, the monthly active users on the supply side will be in positive growth on the same month-on-month, and the monthly active users on the supply side of the transportation capacity will be in the same month-on-month. In terms of retail in the same city, the monthly active users of the platform were polarized month-on-month, and most platforms showed positive growth year-on-year. In terms of vehicle-to-cargo matching, thanks to the impact of the improvement of the epidemic in various regions and the resumption of work and production, the driver's monthly active users on the main freight platforms on the vehicle side increased month-on-month and year-on-year. The total monthly active users on the main freight platform on the vehicle side increased by 35.89% year-on-year and 27.29% month-on-month. The monthly active users on the main freight side also showed an upward trend. The total monthly active users on the various platforms increased by 32.38% year-on-year and 27.20% month-on-month. The monthly active users in the same city showed differentiation year-on-year, and the monthly active users of drivers and cargo owners on the main freight platforms decreased slightly month-on-month.
Cross-border Logistics: In terms of air freight, the overall freight rate in July fell slightly month-on-month. TAC Shanghai Pudong export air freight index rose 28% year-on-year and 4% month-on-month, and China-Hong Kong export air freight index rose 17% year-on-year and 1% month-on-month. As air freight capacity supply gradually rebounded to pre-epidemic, global freight rates gradually switched from capacity supply to trade demand-driven. According to Clive data, global air freight capacity in July still had an 11% gap compared with the same period in 2019.In terms of transportation volume, the current cargo flights and cargo volume at Shanghai Pudong Airport have basically returned to the normal level before this round of epidemic. In terms of shipping, freight forwarding prices continued to fall, with the Baltic freight index falling by 24% year-on-year and 11% month-on-month.
Aviation Airport: Judging from the operating performance of Baiyun and Xiamen Airports, domestic passenger throughput in July fell by 10% and 25% year-on-year, and increased by 34% and 71% month-on-month respectively; although the epidemic situation in some areas has recurred, as the epidemic situation in major transportation hub cities tends to ease, the domestic summer transportation operation performance of the aviation industry has gradually recovered. The international line is still operating at a low level, but the recent recovery of direct flights between China and the UK, modification of flight circuit breaker policy, and shortening of entry isolation time in Hong Kong, China has made the international line "small fast running" relaxation. We recommend continuing to pay attention to the development of the epidemic and changes in travel policies.
Shipping: Shipping among all sub-sectors, foreign trade integrated transportation: the freight rates of the US-Western Line and the European Line have both declined. We need to pay attention to changes in the demand side of Europe and the United States after the monetary policy is gradually tightened. Domestic trade and transportation: The growth rate of transportation capacity slowed down, freight prices in July fell month-on-month and maintained at a high year-on-year level. Dry bulk cargo: The BDI index has continued to decline since mid-July, among which the BCI index of the large ships has dropped significantly. From July 28 to August 12, the BDI index has closed below 2,000 points for many consecutive days. At present, the international market is subject to wait and see. Oil Transportation: The freight rates of crude oil tankers continued to rebound in July, with freight rates of small and medium-sized ships and large ships rising significantly; in addition, freight rates of finished tankers fell. We need to pay attention to the rise in freight rates of small and medium-sized crude oil tankers and refined oil since the conflict between Russia and Ukraine. Since the recent decline in international crude oil futures, we need to pay attention to the potential recovery of large-ship transportation demand.
Port: In 77, the container throughput of the eight major coastal container hub ports increased by 12.7% year-on-year. Among them, foreign trade increased by 14.5%. We believe that it reflects that the overall recovery of manufacturing imports and exports after the epidemic has gradually been controlled; domestic trade increased by 7.1% year-on-year, reversing the year-on-year decline in the first three months. We believe that the repeated domestic epidemic has had a certain impact on corporate production and terminal throughput, but it has been repaired in July.
We recommend focusing on four categories of opportunities under the background of post-epidemic repair, global supply chain, and unified market: 1) opportunities for post-epidemic repair and supply and demand improvement in the aviation airport sector; 2) opportunities for improvement in the express delivery sector structure; 3) opportunities for leading companies segmenting the logistics track; 4) opportunities for individual stocks in the defense sector.
Risk: The scope, degree and duration of the repeated impact of the epidemic exceeded expectations; economic growth was lower than expected; a sharp rise in oil prices led to higher costs.
Food and beverage
consumption recovery trend continued in July. According to data from the National Bureau of Statistics, the total retail sales of consumer goods in July increased by 2.7% year-on-year, a year-on-year growth rate fell by 0.4 percentage points from the previous month and a month-on-month increase of 0.27%. The overall recovery trend is still continuing. By category, retail sales of grain, oil and food in July increased by 6.2% year-on-year, down -13.5% month-on-month, and retail sales of beverages, tobacco and alcohol increased by 3.0% and 7.7% year-on-year, negative double-digit growth month-on-month. We believe that although monthly data shows that the pace of consumption recovery has slowed slightly month-on-month, the general trend of recovery is still there. We recommend paying attention to liquors that are about to usher in the peak season of Mid-Autumn Festival, beer that performs well this summer, and the quick-freezing industry that is still in the expansion period.
Liquor: Manufacturers prepare for the Mid-Autumn Festival through channels, and the trend of liquor demand has not changed month by month, and real estate liquor may be the first to meet demand recovery. With the implementation of more scientific epidemic prevention policies (iteration codes, mutual recognition of nucleic acids, etc.), although liquor consumption has shown a weak recovery since July, the recovery trend has not changed. According to our channel research, consumer demand in Anhui and Jiangsu markets has recovered significantly, and the mid-range price growth rate is relatively fast. We believe that real estate wine is expected to take the lead in receiving demand recovery. The vast majority of wine companies are optimistic about the economy in the second half of the year, and the annual target has not changed. As the peak season of Mid-Autumn Festival approaches, many wineries have introduced policies to promote terminal sales, increase market expenses, prepare for the Mid-Autumn Festival, and help the annual goals be completed as scheduled. In July, new social financing was 756.1 billion yuan, significantly lower than the market expectations of 1.4 trillion yuan, an increase of 319.1 billion yuan less than the year-on-year.CICC Macro Group believes that under the background of repeated epidemics and exposure of credit risks of real estate developers, monetary policy will remain loose and liquidity will remain abundant; we believe that liquidity easing is expected to promote the increase in the price of high-end liquor, and start a new round of industry price upgrades after the economy recovers. We believe that under the influence of factors such as marginal liquidity and valuation gradually switch to 23 years, the valuation of the 2H22 liquor sector is expected to continue to recover.
Beer: Consumption has gradually recovered after the epidemic, and the recovery of demand for tourism and other demand drives the sector to improve month-on-month. 1) Under the influence of the epidemic in the first half of the year, the beer sector showed certain resilience, and the diversification of channels supports the main line of high-end development has been steadily advancing. On the one hand, the impact of the epidemic in the first half of the year was regional, and the sales of national beer leaders were limited; on the other hand, the epidemic promoted the development of non-real beverage channels, and the main line of high-end is gradually advancing with the support of diversified channels. 2) We expect the impact of the epidemic on the current drinking channels in the second half of the year may further narrow. The recovery of demand for tourism and other needs will drive the recovery of current drinking channels. At the same time, the high temperature in summer will also promote beer consumption. We expect beer to continue to improve in the third quarter, and the overall sales for the whole year are still expected to remain flat. 3) The overall raw material price has reached a turning point, and the cost pressure may ease from the fourth quarter of this year to next year. Since the beginning of the year, the costs of barley/aluminum/carton/glass bottles and other products have changed by 24.7/22.8/2.7/-13.2% year-on-year. With the current price of aluminum, other packaging materials has declined significantly, and the overall cost is basically within a controllable range. We expect overall costs may be on a downward trend next year, which can boost the industry's gross profit margin.
Volkswagen Products: As the epidemic improves, demand in various sectors has gradually recovered, and cost pressure has slowed down. We recommend paying attention to two main lines: 1) With the recovery of B-side catering, industries that can significantly recover from demand, such as quick freezing. 2) Related companies with controllable cost side. As prices of palm oil, PET, raw milk, etc. decline, profits in industries such as snack foods and soft drinks have room for growth.
Risks: weak demand, fluctuations in raw material prices, and food safety risks.
Media
Game/Advertising/Cinema/Book and other industries have all improved month-on-month. As the epidemic prevention and control work stabilizes and the supply of summer content gradually becomes richer, we believe that the overall situation is slow and improving, but the intensity is relatively weak; in terms of the capital market, the film leader Bona Film Group received approval on July 29 after a year and a half after the IPO, and will be listed on the A-share market on August 18. The drama leader Ningmeng Film and Television IPO on the Hong Kong stock market on August 10. The artist brokerage leader Lehua Entertainment passed the listing hearing on the Hong Kong Stock Exchange and is expected to be officially listed on the Hong Kong main board in September. We believe that after the tax check storm, epidemic pressure, and pan-entertainment supervision, leading companies have formed stronger operating capabilities. With the warmth of capital and post-epidemic recovery, the industry is expected to gradually recover from the bottom, and the overall strength may depend on the richness of high-quality content supply, demand recovery and global overseas progress.
Digital Media: The video platform has entered the peak content season, and Tencent Animation Singles Yuewen IP contributed a high level. In terms of videos, the supply of high-quality content on various platforms has been released in the summer. Tencent Video "Stars and Hans are brilliant, the moon rises to the sea", Youku "Agarwood is like shavings, and Agarwood is heavy in flowers", Mango TV "Pi 2", iQiyi "Clan Lan Jue" and other top dramas performed well, driving the growth of users on various platforms. According to QuestMobile, in July 2022, iQiyi/Tencent Video/Mango TV/Youku MAU was 453/418/275/252 million people, a month-on-month increase of 3.0%/2.8%/9.0%/9.7%. Mango TV announced that it will raise member prices from August 9. This is the second round of price increase in Mango TV after the beginning of the year. The basic monthly card/continuous monthly card/season card/continuous seasonal card/continuous seasonal price has been increased by 20%/16%/15%/9% respectively. The adjusted price ties with iQiyi, lower than Tencent Video and Youku. We believe that competition in the long video industry is becoming more benign, and the trend of gradual increase in subscription prices is relatively clear. Tencent Video Animation held an announcement on August 9, and released a total of 100 domestic animation works in 9 major sectors, covering key IPs such as "Douluo Continent", "Glory of Kings", "Fighting Break the Sky", and "Da Feng Fen Fighting Gengren". According to our statistics, the animation adapted from online novels accounted for 55.4%, and the novels adapted from China Literature Group accounted for 73.2% of the online novels adapted from online novels.In addition, it is reported that Hou Xiaonan, president of China Literature Group and vice president of Tencent Online Video, has served as the general manager of Tencent Animation Business Department, and is fully responsible for the business and team management of the department. We believe that comics, as an important form of visual adaptation of IP under China Literature Group, are of great significance to the three-level upgrade of copyright operation of China Literature. China Literature Group and Tencent’s 300 comic reform cooperation plans are expected to continue to advance to promote diversified IP monetization.
Social Community: The summer effect boosts user traffic, and Kuaishou upgrades creator service and service provider capabilities. For users, according to QuestMobile data, the overall user trend of social community platforms in July was improving, among which the user scale and usage time of short video platforms Douyin (MAU +1.6%/DAU +1.7%) and Kuaishou (MAU +7.5%/DAU4 +4.2%) both showed significant improvements, and the performance of users of community platforms and live broadcast platforms also rebounded.
Online Games: New games are launched to promote the industry’s recovery, pay attention to the long-term performance of new games after they are launched; the fourth batch of domestic online game version numbers are issued this year. According to Qimai data, in July 2022, the spending of mobile game APP on iOS (calculated only by iPhone) increased by 4.6% month-on-month compared with the previous month and a year-on-year decrease of 2.6%. We judge that the main reason is that new games in the summer season have been launched, driving the overall activity of the game market. Among them, "Dark Zone Breakthrough" (Tencent), "League of Legends Esports Manager" (Tencent Riot Games) and "Obi Island: Dream Country" (Gibit Biol Family Interaction) ranked in the top three iOS game download list this month. Many manufacturers have launched online or tested games, including "Fantasy Tower" (developed by Perfect World, distributed by Tencent in major overseas regions, launched on August 11), "In the Name of Shining" (developed by Zulong Entertainment, public beta on July 24). From the policy perspective, the State Administration of Press and Publication issued the fourth batch of versions since 2022 on August 1. A total of 69 games have been approved this time, including Sanqi Interactive Entertainment's "Overworld", "Little Ant Country", Gibit and Celadon games "Super Meow Star Plan", Gibit's "Switch" and Gibit's "Swisp". We believe that many new games have been launched recently, and there are versions/event updates in stock games, which may drive the game industry to recover; the policy side actively guides, and the domestic game market has basically entered a healthy and stable development stage on the supply side, and the game industry is expected to achieve high-quality development in the direction of going overseas.
marketing advertising: The gradual recovery of the advertising market from June to July continues. In the industry, according to CTR, the expenditure on advertising markets in June fell by 9.2% year-on-year and 6.9% month-on-month, continuing the positive growth trend of May month-on-month. We judge that July may continue to be a slightly positive trend. According to media, elevator LCDs increased by 3.9% from January to June, an increase of 1.1ppt from the year-on-year growth rate in January to May, with a slight recovery; elevator posters increased by 7.7% year-on-year, a decrease of 0.2ppt from the year-on-year growth rate in January to May; cinema video advertising fell by 51.2% from the same year-on-year decline, an increase of 3.6ppt from the year-on-year decline in January to May. By industry, advertisers in multiple consumer product tracks have been relatively continuous in the elevator media: among them, the 1H22 spending on elevator LCDs and elevator posters in industries such as beverages, foods and alcoholic beverages has maintained a growth trend year-on-year. According to the "2022 China Advertiser Marketing Trend Survey" report released by CTR this month [3], advertisers' confidence in the economic situation in 2022 has declined compared with last year, but it is still higher than at the beginning of the epidemic in 2020. We judge that the recovery of advertising demand is gradually improving, and it is recommended to continue to pay attention to the possibility of demand recovery and external incentive policies.
Film and Television Theater: Ningmeng Film and Television, Bona Film and Lehua Entertainment has made progress in capitalization, and movie viewing subsidies and scheduled schedules have accelerated the recovery of the film industry. film leader Bona Films received approval one and a half years after the IPO on July 29, and will be listed on the A-share market on August 18. The leading drama series Ningmeng Film and Television was listed on the Hong Kong Stock Exchange on August 10. The leading artist brokerage company Lehua Entertainment passed the listing hearing on the Hong Kong Stock Exchange and is expected to be officially listed on the Hong Kong main board in September. We believe that after the tax check storm, epidemic pressure, and pan-entertainment supervision, the leading companies in the film and television industry have formed stronger operating capabilities. With the capitalization warm wind and recovery after the epidemic, the industry is expected to gradually recover from the bottom. In addition, on August 11, the State Film Administration issued a notice on launching the 2022 Film Consumption Season, encouraging film producers and distributors to actively place high-quality films, and jointly issued 100 million yuan in movie ticketing coupons for movies such as Maoyan, Taopiaopiao, and Douyin.We believe that the industry's supply and demand have continued to improve in the near future, and the theater's operating rate has basically remained at around 85%. In July, the national box office without service fees increased by 8.5% year-on-year, and the frequency of film scheduled is gradually accelerating. The films to be screened include "Miniu Big Eyes: Prequel of Despicable Dad", "Her in the World", etc. "No Name" and "The King of the Sky" are expected to be released on National Day. We believe that the accelerated schedule of content on the supply side, the recovery of operation of theaters on the channel side, and the issuance of movie viewing subsidies on the demand side are expected to accelerate the recovery of the film industry. It is recommended to continue to pay attention to the industry's recovery process and key content performance.
Book Publishing: The physical store channel of the book market continued to improve in July, and the summer vacation drove the growth of book sales and book-related short videos and live content consumption. Overall market situation of : According to the opening information, the physical store index of the national book retail market in July 2022 was 171.5, which changed by -32.5%/+34.5% respectively on the same period last year, continuing the marginal improvement trend since May. In terms of short video and live content consumption: According to huge amounts of mathematical data, the average daily viewing volume of short video content related to Douyin Book publishing increased by 22.4% month-on-month, and the average daily viewing number of live content related to live content increased by 20% month-on-month, and the two showed a complementary trend. We judge that the month-on-month improvement of physical stores in the book market is mainly due to the marginal improvement of the domestic epidemic and the orderly operation of offline stores. At the same time, students usher in the summer holiday in July, which has also greatly improved the consumption of extracurricular reading needs of relevant groups and book-related short videos and live content. In addition, we believe that the overall supply, demand and breadth of short video and live broadcast content in the book publishing industry is on the rise, and the value of short video channels is continuously verified. It is recommended to continue to pay attention to the layout progress of publishing companies' own channels and short video channels.
Risk: The epidemic has repeatedly exceeded expectations, the macroeconomic prosperity has declined, and industry regulatory policies continue to become stricter.
[1]http://m.fangchan.com/data/133/2022-06-08/6940216035006288226.html
http://m.fangchan.com/data/133/2022-07-12/6952529185852428916.html
http://www.fangchan.com/data/133/2022-08-05/69612450150 08154311.html
[2]https://www.shjx.org.cn/userfiles/files/20220714105236523610137.pdf and https://zjt.fujian.gov.cn/xxgk/zxwj/202207/t20220713_5952971.html
[3]The survey targets were companies with marketing and advertising behaviors in 2022, and the respondents were middle and senior management responsible for marketing or advertising in the company. The survey time is from January to April 2022 (quantitative research) and from February to March 2022 (qualitative research). Quantitative research sample size N=304, and qualitative research sample size N=14.
Article source
This article is excerpted from: "Interpretation of Economic Data and Asset Allocation in July" published on August 16, 2022
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