The hottest economic growth and investment opportu

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Economic growth and investment opportunities restricted by bottlenecks introduction: China's economy is in the rising stage of the economic cycle. Although the central economic work conference in November last year set the GDP control target at 7% in 2004, it may reach 9.2% in 2003. The value investment concept of the securities market ran through the whole year. The A-share, B-share, H-share and treasury bond markets showed their bids in different ways

China's economy is in the rising stage of the economic cycle. Although the central economic work conference last November set the target of GDP regulation in 2004 at 7%, it may reach 9.2

%. Large cap stocks and blue chips are sought after by the market, while small cap stocks and underperforming stocks are snubbed by the market.

in 2004, the Shanghai and Shenzhen markets will continue to follow the main line of value investment, and the deviation of indicators has brought strong technical support to the market.

. Focus on Listed Companies in petrochemical, electric power, coal, transportation, port, automobile, aviation, food and other industries, and be cautious about steel, aluminum, cement and other sectors

optimistic about convertible bonds and funds, but short-term bearish on treasury bonds

I. 2004 is the rising stage of the economic cycle

1. Economic growth expectation in 2004: GDP is expected to grow by 9.2

% we are in an exciting era, At present, China's economic development is in the rising stage of the economic cycle. The first 20 years of the 21st century are an important strategic opportunity for China that must be firmly grasped and can make great achievements. Although the central economic work conference in November last year focused on stabilizing the economic policy in 2004, especially setting the GDP macro-control target at 7%, the same as in 2003. The policy is intended to regulate and control. The two most important measures to regulate and control local overheating are: (1) to protect cultivated land most strictly; (2) Curb the tendency of blind investment and low-level repeated construction in some industries, including steel, automobile, cement, electrolytic aluminum, textile and coal

although great efforts should be made to regulate and control, the growth will still be strong. From the economic situation in 2003, although the second quarter was impacted by SARS, the GDP in the first three quarters still reached 8.5%, which is expected to be more than 8.6% for the whole year. Economic growth has broken through the pattern of "seven up and eight down" and entered a rapid growth cycle. We expect that this year's economic growth will reach about 9.2%. The driving force for economic growth is still strong, and the inflation rate is expected to be 3%

in addition, we estimate from the power demand and power elasticity coefficient. According to the forecast data of the National Bureau of statistics, it is estimated that the installed capacity of new power generation in 2004 will be 35million kW. If calculated according to the annual average utilization hours of 5800 hours, the power generation can be increased by 2030 billion kwh. Based on the power elasticity coefficient of 1.31 in 2002, the GDP growth rate this year may reach 9.2%

2. The short-term driving force of growth: inventory investment and capacity investment

our optimistic judgment that China's economy will maintain sustained and stable growth in 2004 is based on two aspects: one is the increase in inventory investment caused by low inventory and low real interest rate, and the other is the substantial increase in capacity investment

(1) inventory investment growth since 1998, China's inventory has continued to decline, accounting for 0.1% of GDP in 2002. Although it can be explained from the perspective of improving market conditions, inventory adjustment has been in place, and increasing inventory is an important reason for the start of short-term economy. Therefore, as long as the expectation of future economic growth is optimistic and the real interest rate is low, the inventory increase will accelerate. In 2003, inventory growth began to accelerate, and it is expected to reach 1% of GDP in the whole year. Among them, the increase in the inventory of industrial finished products was 2.2% in October2002, and has increased to 11.4% by August 2003, while the increase in the inventory of raw materials of bulk products lags behind. It is expected that the inventory recovery will continue until 2005, when the adjustment will be basically in place

since 2000, China's real interest rate has been lower than the nominal interest rate for most of the time, which also reflects that consumer demand is bound to rise. In addition, with the relatively obvious decline in the cost of enterprise inventory investment, after the drastic reduction of excessive inventory investment in the last few years of the 1990s, we can be optimistic that the inventory investment will inevitably rebound in the next two years

(2) capacity investment growth

based on the continued economic growth, the optimistic expectations of enterprises for the current economic boom cycle and the rise of real demand, and the low cost of capital, the capacity investment in 2003 was huge. In 2003, the production capacity investment of steel increased by 127%, the automobile investment was 110%, the cement investment was 124%, the electrolytic aluminum investment was 189%, the textile investment was 110%, and the coal investment was 64%. Due to the characteristics of heavy industry investment cycle, especially the characteristics of self demand, it will promote economic growth

3. Long term factors of growth: continuous reform of economic structure

the short-term driving force of economic growth comes from the increase of inventory and production capacity investment. In the long run, the continuous reform of economic structure is the fundamental factor to promote economic growth. In, the economic growth was mainly driven by the investment of urbanization and the export of industrial products. In 2004, it began to enter a transformation period, which will be driven by the upgrading of urban consumption and domestic manufacturing. In 2004, the state strengthened the strict monitoring of land use, the pace of urbanization investment gradually slowed down, and the consumption upgrading of urban residents became the main driving force. According to the law that consumption lags behind economic growth by one year, it is expected that China will begin to enter the consumption boom period in 2004

at present, there are 500million urban residents in China. The per capita GDP is more than 2000 dollars, and the middle class with per capita income more than 3000 dollars is forming and gradually expanding. Its huge consumption potential is the core driving force of China's economic development, and the consumption hot spots will be concentrated in automobile, housing, 3C in one consumer electronics products (3C, namely communication, computer and consumer goods) and services

4. Major policy adjustments: the focus of tax reform will shift from external demand to domestic demand. 2004 will be a year of great efforts in tax reform. The rural tax reform will be carried out nationwide. The state will reduce the agricultural tax rate and abolish the tax on special agricultural products, so as to reduce the burden on farmers and increase their income

in addition, the state has changed the order of stimulating economic growth from relying on external demand to revitalizing domestic demand, and lowered the export tax rebate. In 2004, the export tax rebate was reduced by an average of 3 percentage points. Exploring how to change the production-oriented value-added tax into consumption oriented value-added tax and encouraging enterprises to increase investment in fixed assets is also an aspect of tax reform

the impact of tax reform on different enterprises is different. The transformation from production-oriented value-added tax to consumption oriented value-added tax will undoubtedly stimulate the investment in fixed assets and increase the value creation of the whole society. Capital intensive and technology intensive enterprises have higher income than other types of enterprises, and the increase rate of enterprise profits is: r=0.0974 × (1-M) × D/P × 100

%, where R is the growth rate, M is the minority shareholders' equity, D is the annual depreciation fee, and P is the net profit

5. Uncertain factors: low inflation expectations and food prices are the key

recently, some economists' understanding of inflation has been quite different. The National Information Center has predicted that the inflation rate will be about 1% in 2003 and 2% in 2004, belonging to slight inflation

in terms of prices, we believe that the main reason for pushing prices is the rise in food prices. At present, the proportion of food consumption of urban residents and rural residents is 37.7% and 4 respectively. "See you every day" is a way for Xiao Deng to communicate with his partners. It is more than 6.2%. Therefore, weighted has a great impact on CPI, accounting for 35% of the consumer price index in 2002. Among the food prices, the food price is undoubtedly the most important. The food price with 100 prices will drive up the whole price. Due to the global grain failure, China has a huge grain production gap. We believe that it is more likely that the grain price will continue to rise, so the inflation rate may be higher than expected

in terms of time, since the country will actively suppress demand in 2004, it will not cause cost driven price increases, and prices may fall back in the second quarter of 2004. Therefore, the real pressure of inflation in 2004 was smaller than expected. However, from the month on month comparison in 2003, the price rise was too fast, and the pressure of price rise in the first half of 2004 will be greater than that in the second half

II. Looking for opportunities in the contradiction between growth and bottlenecks

1 Investment theme: looking for opportunities in growth and bottlenecks

(1) select industries whose prosperity is on the rise

the prosperity of the industry indicates the industry operation and growth trend, and is also an important basis for us to judge the overall macroeconomic situation. Industry boom at present, domestic instrument enterprises basically operate well with three teams composed of R & D, sales and after-sales teams, and the industry in which the boom changes in the rising stage means that the growth and operation of enterprises are in good condition, which is the industry we focus on and select. From the perspective of the prosperity of primary industries, industry, transportation, warehousing and postal services are in an obvious upward cycle. Extending to secondary industries, ferrous metal smelting and calendering processing industry, nonferrous metal mining and dressing industry, coal mining and washing industry, air transportation industry, oil processing and coking industry, transportation equipment manufacturing industry and other industries show an upward trend, with a prosperity index of more than 130. These industries will become the key recommended objects in 2004

(2) the growth of the industry's sales profit will become an important analysis indicator

the industry's sales profit is an important indicator for us to understand the industry's performance. With the arrival of the economic cycle, the prices of a large number of cyclical industries are rising rapidly, and the rise in prices will inevitably bring double growth to the profits of enterprises. At the same time, we have also noticed the changing trend of the enterprise's gross profit margin. The decline of the gross profit margin is usually caused by the increase of the enterprise's costs or the sharp market competition, which we avoid. Unless it occupies a large market and has certain monopoly resources

as of october2003, the performance of stocks in industries with relatively high gross profit margin, such as oil exploitation, transportation equipment manufacturing, coal production and supply, non-ferrous metals and electric power, was significantly stronger than that of stocks in industries with low gross profit margin, such as electronic manufacturing and textile

(3) face up to the risks and opportunities restricted by bottlenecks

while the economy grew at a high speed in 2004, potential problems and contradictions began to emerge: the development zone is hot and urbanization is too fast, so the strictest cultivated land protection is needed to solve the food problem, overheated investment and occupation of cultivated land; Iron and steel is expected to have serious overcapacity in 2005; Serious overcapacity of automobiles in 2007; In 2005, there was a serious overcapacity in cement and in 2004 in electrolytic aluminum; Textile overcapacity in 2004

the biggest infrastructure bottleneck: power and transportation. At present, the satisfaction rate of coal transportation vehicles is 57%, and the transportation of basic raw materials also has the same problem. In addition, water resources, environmental protection, safety and resource development (oil, iron ore, non-ferrous metals, etc.) are also major issues restricting sustainable economic development

on the whole, there are many potential contradictions, making it more difficult to operate macro policies. Therefore, it will be difficult to maintain growth and curb overheating. While sharing economic growth, we should pay attention to the opportunities brought by the imbalance between supply and demand caused by bottleneck constraints. At the same time, we should also pay attention to the investment opportunities brought by consumption upgrading. From the above analysis, we suggest to focus on:

· real estate companies with performance support, location advantages and a large number of land reserves

· consumer products related to urban consumption upgrading, such as automobiles, food, consumer electronics and related products

· natural monopoly related to urbanization and assets

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