The construction machinery and infrastructure sector rose, while construction machinery and Liugong's stock price hit a nine-year high. Shantui shares rose more than 7%, Guangfa Fund construction machinery ETF rose more than 4%, and Cathay Pacific Fund Infrastructure ETF, Yinhua Fund Infrastructure ETF, and Huaxia Fund Infrastructure 50 ETF rose more than 2%.
Since this year, the Guangfa Fund Construction Machinery ETF has risen by more than 17%, while Cathay Pacific Fund Infrastructure ETF, Yinhua Fund Infrastructure ETF, and Huaxia Fund Infrastructure 50 ETF have risen by more than 10%.
The Guangfa Fund Construction Machinery ETF tracks the China Securities Construction Machinery Theme Index. The index selects 50 securities of listed companies representing the construction machinery sector whose business involves construction machinery manufacturing, spare parts manufacturing, etc. as index samples to reflect the overall performance of construction machinery-themed listed company securities. The constituent stocks include Weichai Power, Sany Heavy Industries, Xugong Machinery, Zhonglian Heavy Industries, Hengli Hydraulic, and Liugong.
The top ten weights of the China Securities Construction Machinery Theme Index
Cathay Pacific Fund Infrastructure ETF, Yinhua Fund Infrastructure ETF, and Huaxia Fund Infrastructure 50 ETF track the China Securities Infrastructure Index. The index selected 50 securities of listed companies in infrastructure-related fields such as infrastructure construction, professional engineering, construction machinery, and housing construction as an index sample to reflect the overall performance of infrastructure construction listed company securities. The constituent stocks include China Railway, China Construction, China Power Construction, Zhonglian Heavy Industries, etc.
The top ten weights of the China Securities Infrastructure Index
The construction machinery and infrastructure sector rose. According to news, the March PMI data improved significantly, and the manufacturing boom is expected to pick up.According to data released by the Service Industry Survey Center of the National Bureau of Statistics and the China Federation of Logistics and Purchasing on March 31, China's manufacturing purchasing managers' index (PMI) was 50.8% in March, up 1.7 percentage points from the previous month, indicating a recovery in manufacturing sentiment. Meanwhile, the March production index and new orders index were 52.2% and 53.0% respectively, up 2.4 and 4.0 percentage points from the previous month. The overall improvement was significant. In addition, the new export orders index and the import index were 51.3% and 50.4% respectively, up 5.0 and 4.0 percentage points from the previous month.
According to data released recently, sales of 24,980 excavators of various types were sold in March, down 2.34% year on year. Among them, 15,188 units in China were up 9.27% year on year, higher than the 6% growth rate previously expected by CME.
Dongwu Securities pointed out that domestic sales of excavators in March exceeded expectations by +9% year-on-year, the peak season was corrected, and the renewal cycle was getting closer. The construction machinery and equipment renewal cycle may be approaching, and a series of large-scale equipment renewal policies are expected to boost the market recovery.
In addition, seven departments including the Ministry of Industry and Information Technology recently jointly issued the “Implementation Plan to Promote Equipment Renewal in the Industrial Sector”, which proposes that by 2027, the scale of investment in industrial equipment will increase by more than 25% compared to 2023, the penetration rate of digital R&D and design tools and the numerical control rate of key processes will exceed 90% and 75%, respectively. Major industrial provinces, cities and key parks will cover the full digital transformation of industrial enterprises. Production capacity below the energy efficiency standard level in key industries has basically reached the energy efficiency level, and the level of intrinsic safety has improved markedly, and the promotion and application of innovative products will accelerate , the share of advanced production capacity continues to increase.
Galaxy Securities believes that large-scale equipment renewal support policies are being implemented one after another, and that central bank refinancing is expected to leverage trillion dollars of investment.
Since the fourth meeting of the Central Committee on Finance and Economics proposed large-scale equipment upgrades and trade-in of consumer goods on February 23, relevant policies and financial support have been implemented one after another. On March 1, the State Council reviewed and approved the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”.
On April 7, the central bank set up a 500 billion yuan reloan for technological innovation and technological transformation, which will provide credit support for technology-based small and medium-sized enterprises in the start-up and growth stages, as well as digital, intelligent, high-end, and green technological transformation and equipment renewal projects in key areas. The reloan interest rate is 1.75%, and the term is 1 year. It can be extended 2 times, each time for 1 year. The distribution targets include 21 financial institutions including China Development Bank, policy banks, state-owned commercial banks, China Postal Savings Bank, and joint-stock commercial banks.
On the one hand, this reloan is a supporting financial support policy for large-scale equipment upgrades; on the other hand, it is a continuation of the original 400 billion yuan reloan policy for scientific and technological innovation and the 200 billion yuan special reloan for equipment renewal and renovation. The central bank will issue reloans to financial institutions at 60% of the principal amount of the loan. Assuming that the enterprise lends at a ratio of 70%, this reloan is expected to leverage an investment scale of more than trillion dollars.
Recently, seven departments including the Ministry of Industry and Information Technology jointly issued the “Implementation Plan for Promoting Equipment Renewal in the Industrial Sector”, which proposes that the scale of investment in industrial equipment will increase by more than 25% by 2027 compared to 2023, focusing on promoting the upgrading of machine tools that have been in service for more than 10 years in the industrial mother machine industry.
Galaxy Securities said that the policy will guide a new round of large-scale equipment updates, and a new round of Jugra cycle is expected to begin to take on new quality productivity. With the marginal improvement of macroeconomic indicators, the procyclical general equipment sector represented by general machine tools and tools is expected to start.
According to the Zheshang Securities Research Report, starting from December 1, 2022, construction machinery and other non-road mobile machinery will begin to implement the “National 4” emission standards. Large-scale equipment upgrades are expected to promote the upgrading of construction machinery and equipment, promote the clearance of old “country one” and “country two” models, and speed up the process of cutting the “country three” to “country four” stocks. 2015 is the end point of the excavator launch cycle. Based on the 8-10 year renewal cycle, it is expected that demand for renewal will bottom out in 2024, and we look forward to the start of a new renewal cycle.
Huachuang Securities believes that since the beginning of 2023, the country has gradually introduced a number of policy combinations in real estate, infrastructure, and major projects. It is expected that with the gradual implementation of policies, downstream demand is expected to recover. In terms of exports, China's construction machinery exports have shown a rapid growth trend in recent years. Currently, there is still plenty of room for improvement in overseas markets, especially the high-end European and American markets. With the improvement of the comprehensive strength of domestic OEMs and the deepening of overseas layout, the overseas market is gradually becoming an important part.
