According to the Securities Times app, infrastructure sector stocks collectively fell. As of the time of publication, China Railway Construction Corporation (01186) fell by 6.27%, to 5.68 Hong Kong dollars; China Railway (00390) fell by 5.74%, to 3.94 Hong Kong dollars; China Communications Construction (01800) fell by 5.04%, to 5.09 Hong Kong dollars; CRRC Corporation (01766) fell by 3.95%, to 5.11 Hong Kong dollars.

SWHY pointed out that traditional infrastructure investment data still faces pressure, while a shift in central policies is expected to drive investment elasticity. Additionally, since the beginning of 2024, local financial pressures have gradually emerged, with local government investment slowing down. The issuance of special bonds began to increase in August, but it will still take time to implement them in specific projects. It is expected that enterprise revenue and profits in Q1-3 of 2024 will continue the trend of the first half of the year, still under certain pressure.

The bank believes that the necessary conditions for the construction sector to achieve excess returns include the formation of optimistic expectations about core drivers at the margin, with stock prices not yet fully reflecting this. Both the PE and PB ratios of the construction industry are currently at bottom positions. In October 2024, the Ministry of Finance mentioned in a press conference the plan to significantly increase the debt limit at once to replace local government existing hidden debts, the most extensive measure to support debt conversion in recent years. We believe that ongoing optimization of economic stimulus policies, combined with the Securities Regulatory Commission's mention of managing the market cap of companies trading below net asset value, will potentially lead to the valuation restoration of undervalued state-owned construction enterprises.