Ren Zeping: To exceed the expected capacity of the Chinese economy at the bottom and starting point of the new cycle

Core point of view:

Benefiting from the strong L-type toughness on the demand side and the over-expectation on the supply side, the recent black and non-ferrous prices continued to rise, and the profits of the upstream and midstream enterprises improved significantly. It is expected that the performance of listed companies in the third quarter will increase significantly. In August, the PMI was 51.7%, up 0.3 percentage points from the previous month and the second highest level this year. Production, new orders, prices, etc. all rebounded, inventory, construction orders, etc. fell. In the first half of the year, real GDP increased by 6.9%. From January to July, the profits of industrial enterprises increased by 21.2%. Recently, in the recent sing-along economy of macro researchers, production capacity continued to clear, corporate profits improved substantially, the stock market stepped out of a structural bull market, the RMB exchange rate strengthened, and long-term interest rates rose. After more than six years of market clearing, superimposed supply side reform and environmental supervision, the Chinese economy is standing at the bottom and starting point of the new cycle. The core of the new cycle is: the third phase of the production cycle, production capacity clearing, industry concentration increase, the surplus is king, corporate profit improvement, bank non-performing rate decline, balance sheet repair, accumulation of energy for a new round of capacity expansion . We believe that the "new cycle", like all new things and opportunities, will go through four stages: "invisible", "look down", "can't understand", and finally "not too late."

Downstream property sales declined but land supply increased substantially, while exports slowed slightly but continued to recover. This week, 30-city real estate sales increased by 10% from the previous month. On August 30, the real estate sales of large and medium-sized cities were -40.7%, slightly lower than July's -40.4%. In August, the land supply of large and medium-sized cities increased by 40.0% year-on-year, significantly higher than July was -11.7% year-on-year, mainly affected by increased supply of land in first-tier cities, rising from -0.1% in July to 238.3%. In August, the auto market was stable. The retail sales in August increased by about 4.5% year-on-year. The first four quarters of year-on-year growth rates were 14%, 1%, 2% and 5% respectively. In terms of wholesale, the year-on-year growth rate in August was 7%. The growth rates were 18%, 9%, 7% and 1% respectively. In August, China's export container freight index was 21.3% year-on-year, down from 28.2% in July. This week, the Baltic Dry Index (BDI) slowed down, but it rose sharply in August.

The coal consumption in power generation in the middle reaches increased, and the price of steel has strengthened. This week, the average daily coal consumption of the six major power generation groups decreased by -4.5% from the previous month, but the coal consumption for power generation in August increased by 13.2% year-on-year, higher than 10.6% in July. The operating rate of blast furnaces in China fell slightly last week. As of August 25, daily crude steel output increased by 5.6% year-on-year in August, down from 6.7% in July. The average price of rebar this week was basically the same as last week. The price of rebar in August increased by 61.3% year-on-year, higher than 58.3% in July. Supply compression, the peak season is coming, steel prices are expected to continue high. Cement prices rose 1.3% month-on-week this week, up 27.4% year-on-year in August, down from 31.7% in July. The cement storage ratio in August was 65.3%, higher than the 62.7% in July. Cement is about to enter the peak season of September-November, and prices may continue to rise. The chemical products market continued to be stable. This week, the US dollar index fluctuated and was boosted by a slight correction in the second quarter GDP. In August, the implementation rate of the OPEC production reduction agreement rose from 86% to 96%. However, the hurricane hit a number of US refineries, causing crude oil surplus concerns. Crude oil prices continued to be weak this week, which was basically the same as the previous month, but rose by 7.3% in August. The supply-side capacity clean-up gradually landed, and the expected production and inventory decline led to the continuous increase in non-ferrous prices in August.

The price of vegetables has risen and the price of pigs has risen. The price of pigs rose slightly this week. In August, the price of vegetables continued to rise and the price of pigs narrowed. The NDRC warned that the supply of pork in the second half of the year may increase further. The overall price of pigs will still decline, and the price of Chinese herbal medicines will increase year-on-year. slow. The central bank said that the fiscal expenditures at the end of the month have further increased. After the hedging of the central bank's reverse repurchase, the total liquidity of the banking system is at a relatively high level. This is one of the reasons why the open market operation is not large in the near future. The net withdrawal funds for Monday, Wednesday, Thursday and Friday were 100 billion, 100 billion, 40 billion yuan and 50 billion yuan respectively. On Tuesday, a small net investment of 10 billion yuan was issued. The long-awaited special government bonds have been renewed, and the central bank has bought 600 billion yuan of special government bonds from the primary trading companies in the open market. This week's R007 interest rate was 4.0733%, up 48.93 BP from last week; DR007 interest rate was 2.933%, down 2.88 BP from last week. The one-year government bond yield was 3.3883%, up 2.73 BP from last week; the 10-year bond yield was 3.6265%, down 0.62 BP from last week. The renminbi continued to strengthen, with the central parity of the US dollar against the renminbi reaching 6.59.

Risk warning: Fed rate hike exceeds expectations; domestic currency tightening and financial deleverage exceed expectations; real estate regulation is too tight; reform is lower than expected; debt risk

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1. Downstream: the supply of land has increased substantially, and the export has dropped slightly but continued to recover.

This week, 30 large and medium-sized cities real estate sales increased by 10%. As of August 31, real estate sales in 30 large and medium-sized cities were -40.7% year-on-year, slightly lower than July's -40.4%; among them, first- and third-tier cities were -53.2%, -37.6% and -37.7%, respectively, lower than , below and above July -45.5%, -35% and -46.5%.

Land supply rose in August but the transaction area declined. In August, the turnover of land in large and medium-sized cities was -10.2% year-on-year, lower than 0.9% in July, with the first-line increase from -11.2% in July to -10.2%; the second-line fell from 28.7% in July to -28.6%. The third line increased from 1.6% in July to 4.6%. The year-on-year decline in land transaction area was mainly due to the decline in land acquisition in second-tier cities. In August, the land supply of large and medium-sized cities increased by 40.0% year-on-year, which was significantly higher than that of July--11.7%. The year-on-year growth rates of land supply in first- and third-tier cities were 238.28%, 26.87% and 43.62%, respectively, which was significantly higher than that in July. -0.1%, -15.4% and 22.6%.

The car market was relatively stable in August. In terms of retail sales, the growth rate in August was about 4.5%, and the growth rate in the first four weeks was 14%, 1%, 2% and 5% respectively. The growth rate of retail sales showed a trend of decreasing first and then increasing. In terms of wholesale, the growth rate in August was 7%, and the growth rate in the first four weeks was 18%, 9%, 7% and 1% respectively. Overall, the wholesale trend in August was smooth, due to the large amount of destocking in the previous period. The dealer's purchase pressure is small; however, compared with August last year, the growth pressure is slightly higher. In addition, according to the data of the National Federation of Passengers, the total output of narrow-seat passenger cars decreased by 4.6% in July and 2% year-on-year. The overall situation of the automobile market was good. In July 2017, the output of new energy vehicles was 63,000 units, a year-on-year increase of 73%. The total installed capacity of batteries was about 2.58 million degrees, a year-on-year increase of 103%, an increase of 20% from June. New energy vehicles are currently the core development focus of car companies. However, the current new energy vehicles are mainly based on the rigid demand of the city, and the pricing power is very strong, resulting in high prices. In order to adapt to changes in the market structure, some enterprises began to set their efforts in the low-cost new energy mini-car and small-car market, and began to expand the new energy market in third- and fourth-tier cities where charging facilities are more convenient to install. This has brought huge adjustments and changes to the domestic new energy vehicle market, and has gradually brought the price of new energy vehicles back to rationality.

Last week, the box office receipts of the movie dropped by 29.3%, and the number of movie visitors and screenings were -29.1% and -1.4%, respectively, and the film's popularity continued to cool. Year-on-year, the box office receipts and movie attendances in August were 84.98% and 72.75%, respectively, significantly higher than the 6.4% and 2.6% in July, mainly from the impact of the hot movie "Wolf 2". The number of screenings in August was 23.12% year-on-year, slightly higher than 22.0% in July.

The growth rate of textile raw materials slowed down year-on-year. The yarn price index in the China Textile Economic Information Index this week was basically the same as last week. August was 6.2% year-on-year, down from 8.4% in July. The price index on grey cloths was unchanged from last week, compared with 1.5% in August, down from 3.6% in July. In the Keqiao Textile Price Index, raw materials, grey cloths, apparel fabrics and home textiles increased by 0.45% and -0.01%, respectively, by 0.51%, up by 1.73%, which were higher than the previous three weeks by 0.44%, 0.04%, 1.08% and 1.96%.

In 2017, the sales growth rate of primary energy-consuming air conditioners, first-class energy-consuming refrigerators and smart TVs of key retail enterprises was higher than that of air conditioners, refrigerators and TVs by 29.9, 15.4 and 20.7 percentage points respectively. Among them, from January to July 2017, the overall sales of refrigerators was 45.597 million units, a slight increase of 0.9% year-on-year. Among them, domestic sales totaled 26.974 million units, down 7.6% year-on-year, and exports totaled 18.623 million units, up 16.4% year-on-year. Air-conditioning in 2017 The overall domestic retail market reached 56.22 million units, a year-on-year increase of 28.5%, and sales increased by 30.5% year-on-year, the highest sales record in history.

The container freight index decreased and the year-on-year slowdown, and the dry bulk index BDI rose sharply year-on-year. Last week, the Shanghai Export Container Freight Index (SCFI) was -2.4% from the previous month and 37.78% from August to August, up from 26.4% in July. China's export container freight index (CCFI) was -0.8% from the previous month and 21.3% from August, down from 28.2% in July. This week, the Baltic Dry Index (BDI) was -4.0%, compared with 69.84% in August, up from 28.1% in July and 41.5% in June. Last week, China's coastal dry bulk freight index (CCBFI) was 1% higher than that of August, and 9.5% higher than that in August, down from 19.9% ​​in July and 28.0% in June.

2, the middle reaches: power generation coal consumption increased, steel prices continue to rise

This week, the coal consumption of power generation decreased slightly, but it increased year-on-year in August. The average daily coal consumption of the six major power generation groups decreased by -4.5%. As of August 31, the average daily coal consumption of the six major power generations was 797,000 tons, down from 802,000 tons last week, up from 721,000 tons in July. The coal consumption for power generation in August increased by 13.2% year-on-year, higher than the 10.6% year-on-year in July. Since August, the temperature has dropped significantly, the highest temperature has dropped significantly, the proportion of domestic electricity consumption has decreased significantly, and the correlation between electricity consumption and industrial production has been further strengthened.

Domestic steel mills' profit ratio last week was 85.9%, which was flat for seven consecutive weeks, the highest since April 2017. Last week, the national blast furnace operating rate was 76.4%, a decrease of 1 percentage point from the previous month. As of August 20, the daily crude steel output increased by 5.6% year-on-year in August, down from 6.7% in July and 3.4% higher than in June. Under the contraction of supply, steel prices are expected to continue high as steel demand enters the peak season. The average price of rebar this week was basically the same as last week. August rebar prices rose by 61.3% year-on-year, up from 58.3% in July, mainly due to supply-side reforms.

The national cement price growth rate has slowed down. Cement prices rose 1.3% month-on-week this week, up 27.4% year-on-year in August, down from 31.7% in July. The cement storage ratio in August was 65.3%, higher than the 62.7% in July. September to November is the traditional peak season for the cement industry, with strong downstream demand and tight clinker supply. According to the peak production requirements, the production capacity will be greatly reduced by large-scale shutdown of kiln on November 15. Under multiple benefits, cement prices are expected to enter the autumn up cycle.

The chemical products market is stable and positive. There were 39 kinds of products with rising prices in the chemical sector this week. The top 3 commodities were styrene (up 9.10% from the previous month, up 30.54% from the previous year, up 10.39% from last week) and DMF (8.20% from the previous month). The growth rate was 34.03%, up 12.57 percentage points from last week. Acrylic acid (up 7.98% from the previous month, up 49.49% from the same period last year, up 8.76 percentage points from last week). There were 21 kinds of commodities with a decrease in the chain, and the top 3 products were phosphate rock (down 4.91% from the previous month, down 14.22% from the previous year, down 4.04% from last week) and chloroform (down 3.69% from the previous month and up 32.18 from the same period last year). %, down 10.65 percentage points from last week), and octanol (down 2.79% from the previous month, up 31.64% year-on-year, down 5.23 percentage points from last week).

3. Upstream: the dollar is weak, the oil price is falling, and the color is strong.

This week, the CRB industrial raw materials index increased by 0.52% from the previous month to 12% in August, up from 10.3% in July. South Central Industrial Index rose 0.25%, up 41.44 percent in August, higher than the 34.17 percent year on year in July; South China Agricultural 000061, attending stocks index fell 0.74%, up 2.36% in August, higher than 0.15% year on year in July.

Despite the strong US ADP employment data in August and the upward revision of GDP in the second quarter, the US dollar briefly recovered. However, the US PCE data released later was less than expected. In July, PCE fell for the fifth consecutive month, with a growth rate of only 1.4. %, the US dollar index fell rapidly after the data was released. The US dollar index rose slightly this week, up 0.09% from the previous month, and the US dollar index was -2.31% in August, down from -1.64% in July. At the annual meeting of the Jackson Hole Central Bank on Friday, Yellen’s speech did not mention monetary policy. The market has therefore increased the disagreement over whether the Fed will raise interest rates again at the end of the year. After Yellen’s speech, the US short-term interest rate futures rose slightly. The price of gold resumed rising in the face of weak dollar and geopolitical tensions. The COMEX gold price was -3.98% in August, higher than the 7.64% in July.

According to JBC data from the energy consultancy on August 31, the implementation rate of the OPEC production reduction agreement in August rose from 86% to 96%. Hurricanes hit the US state of Texas, and many refineries closed. Although the US and Mexico oil production also caused the market to worry about excess crude oil. This week, Brent crude oil prices fell by -0.06% from the previous month and rose by 7.27% year-on-year in August, up from 4.23% in July. EIA data showed that crude oil inventories recorded a decrease of 5.392 million barrels in the week ended August 25, which recorded a decline for 9 consecutive weeks, far exceeding the expected reduction of 1.808 million barrels, but the other three major inventories recorded an increase, the domestic domestic crude oil production Also increased by 0.2 million barrels to 9.53 million barrels per day.

Non-ferrous metals continue to rise. The supply side production capacity is cleared, the production limit is expected, and the inventory is declining, which drives the price increase. LME copper increased by 1.16% this week, compared with 36.1% in August, up from 23.1% in July, a sharp increase from July. LME aluminum prices rose by 0.81% on a week-on-week basis, compared with 23.7% in August, up from 16.8% in July. LME zinc prices rose by 0.71% on a week-on-week basis, compared with 30.6% in August, up from 27.5% in July.

4, the price: the price of vegetables rose, the price of pigs rose

This week, the average wholesale price of 28 key vegetables monitored by the Ministry of Agriculture increased by 2.9%, the Qianhai Vegetable Wholesale Price Index increased by 1.9%, and the Shandong Vegetable Wholesale Price Index increased by 2.6%. The average wholesale price of 28 key vegetables for monitoring in the Ministry of Agriculture, the wholesale price index of Qianhai vegetables and the wholesale price index of vegetables in Shandong were 4.5%, 1.0% and 13.8%, respectively, higher than, lower than and lower than July. 2.8%, 2.7%, and 18.1%.

The average wholesale price of pork in the Ministry of Agriculture increased by 0.8% this week, and it fell by 19.6% in August, up from -22.8% in July. The average retail price of pork in 36 cities increased by 0.31% from the previous week, and fell by 9.9% year-on-year in August, higher than the -11.3% in July. The National Development and Reform Commission issued the "Analysis of the price of pigs in the first half of the year and the analysis of the later trend", warning that the supply of pork in the second half of the year may increase further, and the overall price of pigs will still decline. The average retail price of beef and mutton in 36 cities was -0.2% and -2.4%, respectively, in August, which was higher than -1.0% and -2.8% in July. The average retail price of grass carp and carp in 36 cities was 9.5% and 4.0% respectively in August, down from 10.6% and 5.4% in July.

In terms of non-food, oil prices and drug prices both fell year on year. The national oil product price growth rate continued to fall, rising 5.2% year-on-year in July, slightly lower than 5.5% in June. China's Chengdu Chinese herbal medicines price index fell year-on-year, rising 8.4% year-on-year in August, down 0.9 percentage points from 10.3% in July.

5. Currency: exchange rate continues to strengthen, short-term interest rate rises

This week, the central bank's open market has a total of 560 billion reverse repurchase maturities, which expired 200 billion, 40 billion, 230 billion, 40 billion and 50 billion respectively from Monday to Friday. No repurchase and central bank bills expired.

Last Friday, the People's Bank of China did not conduct open market operations, and 130 billion reverse repurchase was due on the same day. On Monday, the central bank opened up the market for 60 billion 7 days, 40 billion 14 days reverse repurchase operations, and realized a net return of 100 billion yuan. On Tuesday, 50 billion 7 days reverse repurchase operation, a small net investment of 10 billion yuan. On Wednesday, the central bank opened up the market for 80 billion 7 days, 50 billion 14-day reverse repurchase operations, and net withdrawal of 100 billion yuan. On Thursday, the central bank did not carry out reverse repurchase operations, and realized a net return of 40 billion yuan on the same day. On Friday, the central bank did not start open market operations for the second consecutive day, and naturally returned 50 billion yuan. The central bank said that the fiscal expenditure at the end of the month has further increased. After the hedging of the central bank's reverse repurchase, the total liquidity of the banking system is at a relatively high level. This is one of the reasons why the open market operation is not large in the near future.

On the 29th, the Ministry of Finance announced the issuance of the 2017 Special National Debt (Phase I) and the 2017 Special Treasury Bond (Phase II), which are respectively a 7-year 400 billion coupon rate of 3.6% and a 10-year 200 billion coupon rate of 3.62%. The central bank issued an announcement on the afternoon of the 29th. In order to maintain the liquidity of the banking system is basically stable, the open-market business buyout transaction was conducted by means of quantitative bidding, and 600 billion yuan of special government bonds were purchased from the primary trading company of the open market business.

As of August 31, the 1-day inter-bank repurchase plus rights ratio was 3.1646%, up 22.87 BP from last week; the 7-day inter-bank repurchase plus rights ratio was 4.0733%, up 48.93 BP from last week. The 1-day deposit-type institution repurchase and entitlement rate was 2.8877%, up 3.62 BP from last week; the 7-day deposit-type institution repurchase plus entitlement rate was 2.933%, down 2.88 BP from last week. The one-year government bond yield was 3.3883%, up 2.73 BP from last week; the 10-year bond yield was 3.6265%, down 0.62 BP from last week.

The direct interest rate (monthly interest rate) of the Pearl River Delta Bill, the direct interest rate of the Yangtze River Delta Notes (monthly interest rate) and the interest rate of the bill transfer (monthly interest rate) increased by 0.1% from last week. Credit spreads increased for different periods this week. The credit spread of 1-year AAA corporate bonds increased by 16.42 BP, and the credit spread of 10-year AAA corporate bonds increased by 2.87 BP.

Against the backdrop of the continued weakness of the US dollar index, the exchange rate of the RMB against the US dollar went up in August, jumping to the best performing Asian currency in August. This week, the central parity of the US dollar against the RMB depreciated by 0.85%, the US dollar against the RMB spot exchange rate depreciated by 1.01%, and the offshore RMB appreciated by 0.71%. The onshore and offshore RMB exchange rate spreads narrowed from 0.021 last week to 0.0012. The US dollar against the RMB 1-year foreign exchange forward purchase price fell 10 BP, the RMB forward depreciation pressure decreased.