A-shares are still weak. The GEM index has once again hit a new low, and the Shanghai Index has not been rescued. Meanwhile, the Hong Kong stock market was better; the Hang Seng Index rose 0.78% throughout the day. As leaders in the two regions, the situation is slightly more manageable.
The supervisory authorities continued to benefit over the weekend, and the Securities Regulatory Commission further optimized the securities lending mechanism. Specifically, the first is to completely suspend the lending of restricted shares, which will be implemented from 1/29; the second is to adjust market-based securities agreement declarations from real-time use to next day, limiting the efficiency of securities lending, which will be implemented from 3/18. Optimizing the securities lending mechanism is a concrete implementation measure for the “investor-centered” concept. Shorting has been curtailed to a certain extent. As a result, the market expects the intraday closure rate to increase greatly after the policy is implemented. However, there will also be side effects. Under the latest new securities lending regulations, bulk transactions, and fixed arbitrage funds may choose to leave the market one after another because they cannot do risk-free arbitrage. Currently, quantitative and arbitrage funds are relatively active in the market, and future restrictions on this part may be detrimental to market liquidity.
In the current market, in fact, simple securities lending and shorting operations are rare, because after all, points are in a relatively low position, and it is very rare to dare to go short on a large scale. This is considered to have closed a loophole in the system, but it does not directly provide an incentive to do more. Moreover, the direction of the current bailout is that institutions and retail investors do not have any positions. The positive feedback brought about is that the index will be relatively resistant to falling, but the negative one is that it will cause a blood-sucking effect, and other weak varieties will accelerate their decline and chase strong varieties.
For Hong Kong stocks, the benefits of weekend real estate are considered a stimulus. Guangzhou liberalized purchase restrictions on housing of 120 square meters or more, which meant that improved housing ushered in an increase. Guangzhou real estate stock Yuexiu Real Estate (00123) opened sharply higher, but then declined. The general rise and fall in real estate stocks reflects investors' wait-and-see attitude: whether Beijing, Shanghai, and Shenzhen will follow suit in the future, and whether the introduction of this policy will lead to an increase in related sales.
However, there are two types of real estate that have performed better. The first is Zhuguang Holdings (01176), a leader in urban village renovation: the company has quite a few old reforms in Guangzhou. In 2024, the urban village renovation process of Lijiao will be accelerated across the board. On the morning of January 12, the reconstructed house No. 34 in Lijiao Village, located on Nanzhou Street, Haizhu District, Guangzhou, was officially crowned. Currently, a total of 6 reconstructed houses have been capped one after another, and the renovation process of Lijiao's urban village is progressing at an accelerated pace. At present, the contract rate for private homes in the whole village of Lijiao is close to 80%. Construction of 7 reconstructed plots and 4 financing plots has been fully started, and the first batch of reconstructed houses has been successfully completed. Second, there are state-owned enterprises with good performance and strong dividends, such as Poly Property (00998), CNOOC Properties (02669), and China Resources Land (01109).
On the morning of January 29, 2024, the Hong Kong High Court held a liquidation hearing for China Evergrande (03333). In the end, the judge ruled on the spot that China Evergrande would be liquidated. Today, China Evergrande (03333), Evergrande Auto (00708), and Evergrande Property (06666) suspended intraday trading. By the time of suspension of trading, the three companies had declined by 20.87%, 18.21%, and 2.50%, respectively.
On behalf of Evergrande's liquidator, Evergrande's liquidator, Hong Kong managing director of Alvarez & Marsal (Alvarez & Marsal), said that every effort will be made to make Evergrande Group's business sustainable. The first task is to preserve, restructure and continue to operate the existing business as much as possible, and will systematically preserve the value of the group, thereby increasing Evergrande's chances of repayment to creditors and equity holders. She revealed that within the framework of the current liquidation process, any possible restructuring plan will be considered. Next, she will meet with management to understand the Group's current situation and discuss next steps, hoping to minimize the impact on relevant stakeholders.
Evergrande Shawn responds to China's Evergrande being ordered to be liquidated: it will steadily advance key tasks such as securing the handover of buildings. It should be difficult to reorganize again later; I look forward to a smooth transition. Overall, the impact of this news on the market has weakened marginally.
The market value assessment of central enterprises has finally come up with a relatively detailed plan. The State Council's State-owned Assets Administration Commission's assessment and allocation work meeting held on the 29th pointed out that in 2024, the State Council's State-owned Assets Administration Commission will fully implement the “one enterprise, one policy” assessment for central enterprises, that is, coordinate common quantitative indicators and individual enterprise differences, and add targeted assessment indicators reflecting the ability to create value based on enterprise functional positioning, industry characteristics, and major tasks. “One enterprise, one policy” signs personalized business performance responsibility letters to guide enterprises to achieve high-quality development. Assessment targets for efficiency indicators are set in stages, and additional points are given to enterprises that outperform the growth rate of the national economy, special awards for improving quality and efficiency are simultaneously set up, and additional points are given to enterprises that have made outstanding contributions to guide central enterprises to actively determine challenging goals. It will also explore the inclusion of brand value in the assessment, encourage enterprises to improve their internal skills and external image, continuously improve brand added value and reputation, and accelerate the construction of world-class enterprises.
Simply put, every company in a central enterprise has a different KPI, and they also refer to benchmarks such as market and market conditions to flexibly add items such as brand and high added value. There are still subjective judgments here, so there is a problem of lack of transparency, which will make it more difficult to invest.
In any case, the logic of varieties with higher monopoly and dividends will be stronger. For example, China Tower (00788), which has continued to rise recently, has the characteristics of a high moat, good cash flow, and strong sustainability; China Express (03969): The company's dividend payment ratio remained around 50% in 2019-2022. The company is expected to maintain a high dividend payment ratio in the future, and as the company's net profit continues to grow steadily, the company's dividend ratio may continue to rise.
The market is also hyping up the risk of the US election. Trump's latest approval rating is 47%, ahead of Biden's 44%, and the seven key swing states are currently biased against Trump. The risk is that if Trump is re-elected, punitive tariffs may be restarted, international aid may be tightened, domestically, tax cuts may be promoted, and new immigrants may be restricted. Trump has indicated that he will adopt new punitive tariff measures against countries such as Mexico and Canada, or further consider imposing a general benchmark tariff of 10% on all imported goods from the US (about 3.9 trillion US dollars) to protect the US manufacturing industry. Foreign Ministry Spokesman Wang Wenbin presided over a regular press conference on January 29th. The reporter asked. According to reports, former US President Trump and his advisers discussed the possibility of imposing a unified 60% tariff on all imported Chinese goods. What comments does the Chinese side have on this? “We are not commenting on unconfirmed information.” Wang Wenbin emphasized. Under weakness, the market will always take advantage of the downside.
Today, although the Hang Seng Index has closed down to around 100 billion dollars, the volume of transactions has shrunk to around 100 billion dollars. While the bulls are focusing on central enterprises, they are also triggering a decline in other varieties. If this pattern of rising and falling one after another is formed, then it will still return to the stock game. It is difficult for the market to continue without growth. There are still a few days until the end of the month, and this embarrassing situation is expected to continue unfolding.
Some provinces have set specific targets for urban village renovation, guaranteed housing construction, etc. Megacities such as Guangdong and Beijing plan to raise and build 190,000 guaranteed housing units this year. Guangdong announced that it will raise 10,000 additional affordable housing units for sale, no less than 180,000 affordable rental housing units (units), and start new construction to renovate more than 1,100 old urban neighborhoods. Beijing plans to raise 70,000 affordable rental housing units and complete 80,000 affordable housing units of various types. Shanghai announced the launch of 10 urban village rehabilitation projects. In addition, among other provinces, Shandong aims to start construction of 8,000 affordable housing units in 2024 and raise 47,000 new affordable rental housing units. Anhui aims to add 70,000 new affordable rental housing units (units) in 2024.
The reason for the recovery in infrastructure investment growth in December was due to the issuance of trillion treasury bonds and the accelerated implementation of infrastructure investment projects. Currently, two batches of project lists have been issued, and the total amount of treasury bonds issued is about 800 billion yuan. February is expected to usher in a peak downstream construction season, and the implementation of infrastructure investment projects will accelerate. Supported by special bonds and trillion treasury bonds, infrastructure investment is expected to continue to grow at a high rate this year, and demand for cement can be expected to pick up.
The main varieties are: Western cement (02233), conch cement (00914), China Building Materials (03323).
[Individual Stock Mining]
China Resources Gas (01193): Natural gas sales price adjustments in many places, comprehensive service business maintains rapid growth
Dezhou raised the highest sales price of natural gas for non-residential pipelines in some regions. Natural gas sales prices have been adjusted in Shanghai, Yangzhou and other places. China Resources Gas's retail natural gas sales increased by 10.4% in November, and retail gas sales are expected to increase by at least 7% in 2023. Due to many mergers and acquisitions, the company's retail gas sales growth was superior to that of peers.
Comment: Price adjustments help local gas companies channel gas source costs downstream and mitigate inversion of natural gas purchase and sales price conflicts and maintain rapid growth in the comprehensive service business. The company's industrial and commercial gas sales maintained steady growth compared to the same period last year. Industrial gas sales reached a low double-digit percentage annual growth rate in the second half of the year even in a single month. Furthermore, based on the optimization of the gas sales structure, gas supply to residents has improved compared to last year, and sales in the commercial industry, which supports higher profits, have increased significantly compared to last year, and gross margin has improved markedly.
Supported by a slight improvement in commercial and industrial demand, the company's natural gas volume growth climbed from 6.9% year-on-year growth in 1H23 to 7.6% in 10M23. Taking into account the higher volume of natural gas during the heating season and the decline in the 4Q22 base, the company is expected to be able to achieve an 8% increase in gas volume in fiscal 2023. The company's Tianjin project JCE lost 780 million yuan in 2022. The company is still in subsidy negotiations with the Tianjin government, hoping to make up for the loss.
On the positive side, gas prices for residents in Tianjin were adjusted in September, which is expected to help recover some of JCE's losses. Since this year, natural gas consumption has shown restorative growth due to domestic economic recovery, and “coal to gas” in the industrial sector may accelerate again and reverse this year's weak trend. As international gas prices bottomed out and rebounded, overseas Changxie resale profits are expected to recover in 2023Q4 and 2024.
China Gold International (02099): Two of its gold mines resumed production, and the mid-term trend of gold prices is still upward
China Gold International announced that the company's Changshan Hou Gold Mine (Changshan Hou Mine) began to fully resume normal production and operation on January 3, 2024; the Jiama copper-gold polymetallic mine, which belongs to it, has gradually resumed production on December 15, 2023. According to data from the State Administration of Foreign Exchange, by the end of December 2023, the central bank of China reported 71.87 million ounces of gold reserves, an increase of 290,000 ounces over the previous month. This is also the 14th month in a row that China's central bank's gold reserves have increased. Gold prices showed an upward trend due to the real interest rate of the US dollar and the continued large-scale purchases of gold by central banks.
Comment: The company said that it has formulated a step-by-step plan for the full resumption of work. The resumption of work at the first phase of the mineral processing plant is the first step in the overall plan. Preparations for the development of deep resources at the Changshan Trench Mine are progressing in an orderly manner, and significant progress has been made. The resumption of work at the Jiama mine is due to the treatment of some underground empty mining areas and the resumption of operation and production of the first phase of the mineral processing plant, processing 6,000 tons of minerals per day.
For the year ended December 31, 2022, the Changshanchou Gold Mine had a total amount of 4.35 million ounces of proven and controlled gold resources, and it is estimated that the total amount of gold resources was 1.06 million ounces. The Jiama copper polymetallic mine has a total proven, control+ inferred copper resources of 6.814 million tons, a total of 5.73 million ounces of gold, 313.86 million ounces of silver, 608,600 tons of molybdenum, 796,600 tons of lead, and 571,800 tons of zinc. The Jiama mine tailings depot has been fully repaired and reinforced. Currently, the Guolanggou tailings dam has been fully completed, the safety assessment report has been completed, and is awaiting government inspection and approval. The review process for subsequent tailings discharge plans is also underway during the same period. With the gradual resumption of polymetallic ore production, the company's performance is expected to fully benefit from the resonant rise in copper and gold prices.
Ruisheng Technology (02018): Vision Pro pre-sale is extremely popular, and automotive acoustics are progressing rapidly
On January 19, the Apple Vision Pro pre-sale situation was extremely popular. The pre-sale server was crowded out after 5 minutes of starting the pre-sale on Apple's official website, and it was announced that the inventory was exhausted in 18 minutes. 2 hours after the subscription was opened, the delivery date was already scheduled for March or even April. Apple Vision Pro will launch in the US on February 2.
Comment: Currently, the Vision Pro supply chain has an annual production capacity of 1 million units, and supply chain production capacity is limited. Hot sales of products are expected to drive supply chain expansion. Vehicle acoustics are progressing rapidly, and AR/VR is providing new growth. The company previously announced that it plans to acquire 100% of the shares of PSS, an overseas car audio solution provider, in batches to further deepen its layout in the automotive sector. In terms of AR/VR, the company can provide 2p/3P pancake lenses. At the same time, the company's products also include various AR-HUD customized diffusers, DLP optical machine lenses, and various optical core optical components such as compound lenses. The company's acquisition will help the company's automotive acoustics business expand its product & customer portfolio, and combine the company's advantages to bring about integrated vertical integration with audio amplifiers, tuning, etc.
The company's plastic lens product structure continues to be optimized. 1H236p lenses account for more than 10% of shipments. It is expected that 2H23 will further increase. Shipments in the optical module business will increase by 121.5% year-on-year in 2022. Small-scale mass production of OIS products has begun, WLG glass-plastic hybrid lenses are progressing smoothly, and 1G5P and 1G6P lenses are steadily mass-produced and delivered. The market share is expected to continue to increase. The company's precision structural parts business continued to grow. 1H23's revenue increased by more than 40% year on year. The growth was mainly driven by: Dongyang Precision's Yangzhou Phase II plant successfully started construction in the first half of the year, speeding up layout at home and abroad and actively seeking new project opportunities; the company is the exclusive supplier of the Xiaomi 13 Ultra cooling project, participating in R&D and helping to implement “annular cold pump technology”. It is expected that folding screen hinges and cooling panels will open up room for long-term growth.
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