"Not this weekend, still on the outside." At the other end of the phone, li bin's voice was a little tired. "I'm afraid I haven't been able to get together these days. Luo qin has been working a lot lately." 'he added. Heard here, China securities journal reporters opened the market software, steel stocks as expected rose. Steel, billed as the worst sector of 2019, led the way last week. The industries of li bin and luo qin are all inextricably linked with steel. When they are busy, steel stocks are easy to get out of a wave of prices, over the years have been successful.

Construction machinery, cement stocks have long been the wind, steel stocks have been awakened. Under the theme of stable investment, infrastructure market has become a good voice to puncture the 2019 cycle stock winter.

The worst plate is going back

Before last week, when it came to which section of the a-share market suffered the most this year, steel ranked second and nobody ranked first. However, in recent days the steel stock painting wind greatly changed. Shenwan steel industry index last week rose 4.74 percent. With the Shanghai composite index down 0.21% this week, the former laggard has become a leader.

Until now, steel stocks have been weak for a reason. Data show that the first three quarters, steel (shenwan) plate net profit declined by 46% year-on-year. Poor performance has kept share prices down. "The price of iron ore is too high, and profits are suddenly hit the bottom." Earlier this month, a steel mill representative complained to reporters at the black industry derivatives summit 2019.

Profit margins are falling, which is what the capital markets are concerned about; Production continues to rise, which is what the industry is worried about. If the demand is difficult to support, the industry is afraid of disorderly competition. In the first 10 months, pig iron output from enterprises above designated size rose 5.4 percent year on year to 675 million tons, 3.7 percentage points faster than the same period last year, according to the national bureau of statistics. Don't forget that supply-side structural reform is still progressing. The annual target of cutting overcapacity in six key industries in hebei province has been basically met, xinhua reported Tuesday. As of July 14, the province had reduced its steel production capacity by 14.025500 million tons. Against this backdrop, the expansion in steel production is odd.

"After producing so much steel, we have never seen steel thrown into the sea. All the steel is sold and the inventory of the enterprise is reduced. This shows strong demand, driving the growth of steel production." At the summit, diao li, deputy director of the finance and assets department of the China iron and steel association, gave his opinion.

Chi jingdong, vice chairman of the China iron and steel association, said on a separate occasion that China's apparent steel consumption in the first 10 months of this year is estimated to be 782 million tons, an increase of about 7 percent year on year. Consumption growth is even faster than production, which proves that demand is strong. Steel inventories in major cities had fallen to 7.8 million tons by Friday, the lowest level in nearly a decade, data showed. When demand is high and inventories are low, prices have the power to rise. Since late October, rebar futures have risen, and now have hit a new high of nearly four months. So, steel stocks rebound obviously has the backing.

Luo qin works for the enterprise mainly for the metallurgical industry to provide power equipment, big customers from steel mills. "Luo qin has had many projects recently. Her boss asked her to work more overtime." Li bin said. Li bin is also a trapeze artist himself. He is an engineer at an architectural planning and design institute. Steel, investment, growth, understand this interlocking logic, you know why they can act as a "leading indicator" of steel stocks.

Infrastructure construction "chorus"

Where does the demand come from? The increase in steel sales in the first 10 months was mainly due to an increase in investment in fixed assets, which accounted for about 83% of the increase in consumption in the first 10 months and only 15% in manufacture-related growth, according to chi.

Strong sales of steel is not a case, cement production and sales of the two characteristics are also very obvious. In the first 10 months of this year, China produced 1.907 billion tons of cement, up 5.8 percent from a year earlier, 3.2 percentage points higher than the same period last year, according to the national bureau of statistics. Production is going up and prices are going up, which shows the demand. China cement network data showed that as of Friday, the national cement price index stood at 162.41 points, up 13% from its low in August and almost back to its absolute high since records began. Construction machinery has continued high boom performance. Data show that in the first 10 months of this year, domestic excavator production rose nearly 17 percent year on year, continuing to maintain a "double-digit" growth rate after three consecutive years of high growth. Without the intrusion of large price increases in raw materials, the increase in production, sales and prices of products in these two industries can be more directly translated into profit growth. Data show that in the first three quarters of this year, the net profits of a-share cement manufacturing (shenwan) and construction machinery (shenwan) listed companies increased by 20% and 81% respectively.

Spring river water warm duck prophet. In the a-share market this year, conch cement, huaxin cement and shangfeng cement have performed quite well, and the construction machinery sector has soared by more than 50% as A whole. With the awakening of steel stocks, the traditional infrastructure sector is shifting from performing "solo" to "chorus", becoming a good voice to Pierce the winter of the cycle stocks in 2019.

The executive meeting of the state council in June pointed out that stabilizing investment is an important aspect of the "six stability" work. In the field of fixed asset investment, the resilience of real estate investment this year has exceeded expectations, but its sustainability is in doubt. At a meeting of the political bureau of the CPC central committee in July, it was made clear that real estate should not be used as a short-term stimulus. In the stable growth, stable investment, stable housing demand, infrastructure is high expectations, will also be a key variable affecting the subsequent trend of the relevant plate.

At the policy level, important documents such as the master plan for a new land-sea corridor in the west, the guiding opinions on accelerating the construction of railway private lines, the outline for building a strong country of transportation, and other documents have been issued, which have identified the direction for steady growth of infrastructure construction. Infrastructure approvals by the national development and reform commission and local projects have also ramped up. In the third quarter, the national development and reform commission (NDRC) approved 35 fixed-asset investment projects with a total investment of 317.2 billion yuan, mainly in areas such as transportation, according to NDRC data. Since the fourth quarter, guizhou, zhejiang, jiangxi and shandong provinces have accelerated the construction of major projects, and some provinces have increased the number of key construction projects and investment quotas for the year.

"We need to implement projects that are reasonable and effective and that are related to people's livelihood. This is my understanding of the current policy attitude." Li bin said that recently the news network always mentioned a word - effective investment.

As a matter of fact, the executive meeting of the state council in June already elaborated on the focus of stabilizing investment: we should find the right entry point, seize the major projects that can meet people's expectations, help expand domestic demand and promote consumption, but will not lead to redundant construction, expand effective investment, and strive to achieve the effect of stabilizing growth, adjusting the structure, and benefiting people's lives.

"Apart from high-speed rail, this year, people are paying more attention to the renovation of old residential areas and the construction of water conservancy projects." Li said these projects fit the themes of development and people's livelihood.

In addition, China securities journal reporters learned that the guidance on the development of the western region in the new era and the documents on the revitalization and development of the northeast in the new era will be implemented at a faster pace, which is expected to become a new driving force for economic growth.

Multichannel fund transfusion

"There are a lot of reserve projects, but the key is not enough funds." 'infrastructure projects generally have a long investment cycle and it is difficult to recover the funds quickly,' Mr. Li said. "Before, we did a lot of PPP projects and introduced some social funds, but our institute also invested a lot of money in them. Now we continue to work on new projects. Money is a big problem." He said.

Once again, the issue of funding is critical. In this regard, the recent management hit a "one-two punch".

In September, the executive meeting of the state council made it clear that the new quota of some special debts for next year should be assigned ahead of schedule.

Mingming, chief fixed-income analyst at citic securities, said the new quota of special debt may reach 3.3 trillion yuan to 3.35 trillion yuan next year. "If a quarter of the special debt goes to infrastructure construction next year, the growth rate of full-caliber infrastructure construction may rise to about 6 percent." Clearly expected.

Allowing special bonds to be used as eligible capital for major projects and reducing the minimum capital ratio for some infrastructure projects will also provide a source of energy for infrastructure development. According to shenwan hongyuan estimates, the adjustment of the project capital ratio is expected to leverage 341.5 billion yuan to 455.3 billion yuan of incremental funds. Assuming that inland rivers, coastal areas, roads, railways and ecological and environmental protection projects can all achieve a 5% reduction in the proportion of capital, it is estimated that 1.19 trillion yuan of incremental funds can be leveraged.

On May 20, the people's bank of China (pboc) announced a 5 basis point decline in the five-year LPR, which will further strengthen the support of credit to the real economy. Market analysis shows that the loan term of infrastructure construction is long, and the financing cost is more linked to the LPR over 5 years. The reduction of the LPR over 5 years can play the role of supporting economy with infrastructure investment.

Guo lei, chief macro analyst at guangfa securities, said construction projects have shown signs of picking up, and new special bonds will be issued early next year, adding that the growth rate of infrastructure investment is expected to be gradually restored in the next few quarters. Infrastructure investment is likely to rise slightly in the first half of next year, said lian ping, chief economist at bank of communications, adding that financial institutions' support for infrastructure investment will be evident in the first quarter of next year.
 

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