[Today's Guide]
○Keep optimistic about market
○Bottom line set for GDP growth during period of 13th five-year plan
○Shanghai's 13th five-year development plan to focus on reform and innovation
○Upstream lithium battery industries to see rapid growth
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[SSN View]
Keep optimistic about market
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The recovery of the A-share market has been attracting more into the market. The stable stock index and active trading of individual stocks have given great confidence to investors. The performance of individual stocks not fully dependent on indexes have brought investors back to the market pattern in 2012 to 2014 when the index performance is steady and even with fluctuations but the investment returns from individual stocks outperformed indexes.
Are there any significant risks in the following two months? Obviously, the so-called bearish actors in the following two months cannot be called risks in the market after the full stock market plunge significantly frustrated investors' confidence. It is widely recognized by well-known private fund managers and public fund companies in the industry.
In the future investment in A shares, it is advised to keep optimistic about the market and make more investments on growth stocks. Based on the current conditions of the macro economy, the central government will attach great importance on the renovation of rundown areas and introduce more policies on supporting the development of the real estate industry and vehicle consumption, which may increase investors' expectation on maintaining economic growth. But there are still problems in the medium and long term in cyclical businesses. It is still early to predict the trend of prosperity recovery and investment returns will be limited. Unlikely cyclical stocks, the possible supporting policies and internally driven industrial development will facilitate more and more capitals to be invested in growth industries represented by TMT. In addition, even we don't consider the changes in the fundamentals of industries and individual stocks and just observe the market based on investment themes and driving incidents, such industries as new technology, pan-entertainment and pan-health industry, including the Internet, tourism, sports, Internet-based health, games and film, which have been reported by domestic and overseas media, will see opportunities of catching attention and attracting more investments.
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[Authoritative Voice]
Bottom line set for GDP growth during period of 13th five-year plan
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The Fifth Plenary Session of the 18th Communist Party of China Central Committee meeting will study the formulation of the thirteenth five-year plan for national economy and social development. The GDP growth in the next five years is also widely concerned. It is acquired that reasonable economic growth indicators matched with the transformation and upgrading will still be set for the thirteenth five-year plan. It is proposed earlier that indicators including the growth of GDP should be weakened in the thirteenth five-year plan.
The thirteenth five-year plan starts from 2016 and ends at 2020. As to the targets to be achieved by 2020, it has been explicitly defined in the report of the 18th Communist Party of China Central Committee meeting that a well-off society should be built; the GDP and per capita income should be doubled compared with that of 2010, which is also a development goal to be further specified in the thirteenth five-year plan. Zhang Zhuoyuan, a leading expert, claims that an average annual growth rate of 6.5 percent during the period of the thirteenth five-year plan is a bottom line suitable for the new normal of China's economy.
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Shanghai's 13th five-year development plan to focus on reform and innovation
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SSN learns that the thirteenth five-year development plan of Shanghai will mainly focus on comprehensively deepening reform and opening-up, thoroughly implement innovation-driven development strategy, quicken economic transformation and upgrading as well as sharpen the city's core competitiveness. Shanghai will intensify efforts in deepening the integration of national strategies including the construction of four centers and the piloting zones of free trade zone (FTZ), "the Belt and Road Initiatives" and the Yangtze River Economic Zone, trying to achieve significant breakthroughs in constructing core functions of the four centers. Shanghai will carry out the "Internet Plus" action plan and "Made in China 2025" plan as well as strive to implement five strategies focusing on intellectual, high-end, integrated, platform-oriented and green development.
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[SSN Viewpoint]
Lithium batteries see surging investment, upstream industry to see rapid growth
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Thanks to continuously growing production and sales of new energy vehicles, the demand for lithium batteries has surged. Battery manufacturing enterprises above designated size around China saw their total profit up by 27.3 percent year on year in the first half of this year, and their profit is estimated to reach 125.0 billion yuan throughout the year. The share of power batteries has grown rapidly. According to SSN's preliminary statistics, enterprises, including BYD Company Limited (002594.SZ;01211.HK), FDG Electric Vehicles Ltd. (00729.HK) and Sichuan Chengfei Integration Technology Corp. Ltd. (002190.SZ), have increased investment in lithium batteries this year. It is estimated that the industry will see hundreds of billions investment in 2015. Manufacturing enterprises of upstream materials, such as separator, anode and cathode materials and electrolyte will embrace opportunities for market expansion.
Guangzhou Tinci Materials Technology Co., Ltd. (002709.SZ) is now in short supply for electrolyte for lithium batteries and is in busy rhythm of production. There are expectations for a price hike of its products. The company is also seeking cooperation with international clients, eincluding Sony Corporation (SNE,NYSE) and Laclede Group Inc (LG,NYSE). As the company's production capacity continues to expand, its performance is expected to release in the future. According to the company's vesting conditions for equity incentive, its net profit after deducting non-recurring profit and loss has to increase by 40 percent year on year. Based on the above-mentioned situations, the company's performance is expected to surge this year.
Shenzhen Capchem Technology Co., Ltd. (300037.SZ) is a leading electrolyte company in China. Its clients include international giants, such as Samsung SDI. Its shipments of power battery electrolyte have risen 40 percent in the first half year. Lithium hexafluorophate prices have jumped over 20 percent since this year, greatly shoring up the electrolyte industry. The company's latest performance forecast for the first three quarters shows that its net profit in the third quarter has remarkably improved on a month-to-month basis.
Beijing Easpring Material Technology Co., Ltd. (300073.SZ) is mainly engaged in the cathode material for lithium batteries. The company is increasing investment in NCA and other cathode materials for power batteries. It is learnt that the company is in full production of cathode materials for power batteries. The second phrase of Easpring project in Jiangsu, with an designed annual capacity of 2,000 tons cathode material, is under construction and might be completed in advance.
Cangzhou MingZhu Plastic Co., Ltd. (002108.SZ) has been aggressively developing lithium power battery membrane business in recent years and owns production capacity of 50 million square meter of dry membrane. Its 25 million square meter of wet membrane project is expected to be put into production in early next year, which will further improve the company's profitability. As the gross profit rate is nearly 70 percent, the lithium battery membrane business is becoming the company's important profit source with the production releasing.
[Industry Observation]
Impact of stock market fluctuation on Q3 reports of listed insurance companies may less than expectation
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China's stock market has suffered significant fluctuation since mid-June. As the insurance enterprises are allowed to allocate the equity assets including stocks, some market participants predict that the listed insurance enterprises may see poor profits in their Q3 reports. According to the survey by SSN, the adverse impact of the market fluctuation on the insurance firms may be better than the expectation.
It is learnt that four listed insurance companies are all large insurance enterprises in China, three of which are state-owned companies. In view of the whole situation, they began to participate in stability maintenance actions appealed by regulatory authorities at the end of June; namely, they didn't conduct obvious net selling in the third quarter. At present, the insurance companies categorize most of the equity investment into financial assets available for sales. This means that if they do not sell the assets with floating deficit, its impact will be only shown in balance sheet but not in profit statement. The floating deficit of equity investment will be gradually eased once the stock market is recovering in the fourth quarter.
[Information Radar]
Wolwo Bio-Pharmaceutical deploying online market, apps expected to launch during the year
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Sources said that Zhejiang Wolwo Bio-Pharmaceutical Co., Ltd.(300357.SZ) intended to enter the online market. The company's app-development work is on debugging stage, and apps are expected to be introduced to the market during the year. The company plans to carry out after-sales services through different channels after apps are put into use, with the target of enhancing user stickiness.
Wolwo Bio-Pharmaceutical will strive to achieve its operation target established at the beginning of the year, i.e. an operation revenue of 300,000,000 yuan and net profit of 130,000,000 yuan. The company makes greater efforts in building its marketing team and recruits more than 100 new employees. Moreover, the company's fund-raising investment project of 3,000,000 "dermatophagoides farinae drops" will put in to operation next year, solving its bottleneck problems of insufficient production capacity.
[Editor's Thought]
Hot themes not to end
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Rebound of Shanghai and Shenzhen stock markets accelerated last week, however, various sectors still experienced hugely-different performances under such circumstance. Theme stocks full of stories with policy support related to electro-mobiles, two-child policy, internet finance and Disney have quietly rose twice, or even set a new high when investors hesitated. Individual stocks lack of attention also rose by different levels, but depending on the indexes.
It may be learnt from such huge differences between sectors that generally speaking, capital with high risk preference entered into the market when rebound was not that clear, which focused on market attention of individual stocks, not their valuations or prices. Therefore, theme stocks with high exposure rate are easily chosen as the first choice by clever capital, not as leading stocks. Constant rise of leading stocks can incent wait-and-see capital to impulsively long, and meanwhile continuously spread the hotspots. Universal rise of Shanghai and Shenzhen stock markets last Thursday was just aroused by such impulse.
Hot themes will not end, but fade away and change. Theme stocks full of stories with policy support are always popular in A-share market. Although few theme stocks can realize the performances, investors still forwardly pursue next wave of hot theme stocks. In terms of aftermarket, it is not possible to constantly realize universal rise, however, structural trend is still likely to play a leading role. Hot theme stocks may repeatedly fluctuate, but they are worthy of investors' continuous attention as long as the policies are still not be implemented with factors supporting their uptrend.
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