Key investment points:
In November, the profit growth rate of industrial enterprises decreased, but the structure improved
Profit growth fell, but the structure improved. From January to November 2021, the total profits of Industrial Enterprises above designated size increased by 38.0% year-on-year, the previous value was 42.2%, the average growth in the two years was 18.9%, and the previous value was 19.7%. The year-on-year growth rate in November was 9.0%, the previous value was 24.6%, the average growth rate in two years was 12.2%, and the previous value was 26.4%. The pulling effect of the middle and upper reaches on profits has weakened. In terms of price, PPI rose to 12.9% year-on-year in November, slightly lower than that in October. In November, the profit of the mining industry increased by 248.4% year-on-year, continuing the rapid growth trend since the beginning of the year, but the growth rate was significantly lower than that of the previous month, the driving effect on the profit growth of industrial enterprises was weakened, and the profit growth rate of coal, ferrous metal smelting and non-ferrous metal smelting decreased. Downstream profit contribution increased. In terms of industries, the profit situation of 22 industries has improved over the previous month, of which the middle and downstream industries account for more than 80%. From the profit contribution of upstream, middle and downstream, the downstream profit accounted for 50% in November, an increase of more than 10 percentage points over the previous month.
The profit growth of consumer goods manufacturing industry has accelerated significantly. In November, driven by factors such as the stable recovery of consumer goods production and price recovery, the profit of consumer goods manufacturing industry increased by 13.6% year-on-year, significantly accelerated by 10.0 percentage points over the previous month, and the growth rate rebounded for two consecutive months, 4.6 percentage points higher than the average level of industries above designated size.
Inventory growth continued to rise. At the end of November, the cumulative year-on-year growth rate of finished goods inventory was 17.9%, an increase of 1.6 percentage points over the previous month, and showed a rebound upward trend after a decline in September. The inventory growth rate has increased for two consecutive months, which may still be driven by the epidemic and price factors. In the future, with the peak decline of PPI, enterprises may gradually enter the active destocking stage.
On the whole, due to the continuous promotion of the measures to ensure supply and stabilize prices, the effect of the policy to help enterprises rescue has been shown, the rapid rise in the prices of some raw materials in the upstream has been initially curbed, the cost pressure of downstream industries has been alleviated, and the profit structure shows the characteristics of improvement. It is expected that the overall profit growth rate will show a downward trend next year, but the decline will not be too fast. Due to the decline of cost pressure, the profits of downstream manufacturing industry will continue to improve.
The working conference of the people’s Bank of China will be held in 2022
The working conference of the people’s Bank of China in 2022 was held by video on the morning of December 27. The meeting defined eight aspects of work for next year. In the general direction of monetary policy, we should comprehensively use a variety of monetary policy tools to maintain reasonable and sufficient liquidity, enhance the stability of the growth of total credit, increase support for the real economy, and maintain a basic match between the growth of money supply and social financing scale and economic growth. We will improve the formation and transmission mechanism of market-oriented interest rates, promote the steady decline of comprehensive financing costs of enterprises, and continue to transfer profits from the financial system to the real economy. We will enhance the flexibility of the RMB exchange rate and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.
On the whole, the meeting continued the spirit of the economic work conference and the regular meeting in the fourth quarter. The monetary policy will meet the needs of steady economic growth and is slightly loose on the whole.
National Development and Reform Commission: expand high-level opening to the outside world and promote high-quality economic development
On December 27, 2021, the national development and Reform Commission and the Ministry of Commerce issued the Special Administrative Measures for foreign investment access (negative list) (2021 version) and the Special Administrative Measures for foreign investment access in the pilot free trade zone (negative list) (2021 version). This revision has cleared the manufacturing items in the negative list of the pilot free trade zone.
The 2021 negative list of foreign capital access further shortens the length, improves the management system and improves the accuracy. The negative lists of the country and the pilot free trade zone were further reduced to 31 and 27, with the reduction rates of 6.1% and 10% respectively. The main changes are: (I) further deepening the opening of manufacturing industry; （2） The pilot Free Trade Zone explores to relax the access to the service industry; (III) improve the accuracy of the negative list of foreign capital access; (IV) optimize the management of the negative list of foreign capital access.
In conclusion, the Special Administrative Measures for foreign investment access (negative list) (2021 version) and the Special Administrative Measures for foreign investment access in the pilot free trade zone (negative list) (2021 version) have further reduced the regulations, reflecting the unchanged direction of China’s expansion of opening up.
The financing balance decreased. On December 24, the financing balance of A-Shares was 1714.963 billion yuan, a month on month decrease of 8.945 billion yuan; The balance of margin trading was 1831.98 billion yuan, a decrease of 9.58 billion yuan month on month. The balance of financing minus securities lending was 1597.946 billion yuan, a month on month decrease of 8.309 billion yuan.
Money market interest rates fluctuated. On December 27, Bank Of Shanghai Co.Ltd(601229) inter-bank offered rate Shibor overnight interest rate was 1.7780%, down 6.20bp, Shibor one week was 2.3120%, up 36.90bp. The weighted interest rate of pledged repo of deposit institutions was 1.7692% overnight, down 2.79bp and 2.4156% a week, up 51.64bp. The 10-year maturity yield of China national debt was 2.8128%, down 0.75bp.
European and American stock markets rose. On December 27, the Dow Jones Industrial Average closed at 36302.38 points, up 0.98%; The S & P 500 index closed at 4791.19 points, up 1.38%; The NASDAQ index closed at 15871.26 points, up 1.39%. European stock markets, French CAC index closed at 7140.39 points, up 0.76%; Germany’s DAX index closed at 15835.25, up 0.50%. In the Asia Pacific market, the Nikkei index closed at 28676.46, down 0.37%.
The dollar fell. On December 27, the dollar index fell 0.06% to 96.0724. The euro rose 0.08% against the dollar to 1.1327. The dollar rose 0.47% against the yen to 114.8850. The pound rose 0.40 per cent against the dollar to 1.3444. The spot exchange rate of RMB against the US dollar closed at 6.3725, depreciating by 0.04%. The spot exchange rate of offshore RMB against the US dollar closed at 6.3753, depreciating by 0.02%. The central parity rate of RMB against the US dollar closed at 6.3686, up 0.01%.
Gold rose, crude oil rose and Futures Copper rose. On December 27, Comex gold futures rose 0.15% to close at US $1812.80/oz. WTI crude oil futures rose 2.96% to close at US $75.94/barrel. Brent crude oil futures rose 4.01% to close at US $78.62/barrel. COMEX copper futures rose 1.37% to close at US $4.4655/lb.
