Since the beginning of the year, the A-share market has continued to fluctuate and adjust, and the popular tracks in the early stage have "stalled", but the breeding sector has stepped out of an independent market. Although from the performance data, some breeding companies have more floating losses, from the performance of individual stocks, many breeding stocks have increased by more than 20% this year. At the same time, relevant funds have also been sought after by various funds. The share of breeding ETF (159865) has increased by more than 1 billion since the beginning of the year, and the scale has exceeded 2 billion yuan at one fell swoop.
Under the complicated internal and external situation, the recent performance of A-share market is weak, and the pig cycle has become the investment direction unanimously favored by institutional investors. Analysts believe that the downturn in pig prices combined with rising costs, the pig industry continues to suffer substantial losses, and there is sufficient power to remove production capacity. Pig production capacity may bottomed out in the second and third quarters of this year, when pig prices will enter a cyclical upward channel.
breeding ETF (159865) bucked the market and "sucked money"
Since December last year, the adjustment of market shock has intensified. Data show that as of March 4, the CSI 300 and gem index fell by 8.26% and 20.99% respectively in the past three months, and the CSI animal husbandry index rose 6% against the market.
Data as of March 4, 2022
The breeding ETF (159865), which tracks the CSI livestock breeding index, also performed well, with an increase of more than 6% in recent three months and more than 20% in recent six months. The secondary market is active in trading and capital inflow. As of March 4, the latest share of breeding ETF (159865) was 2.493 billion, an increase of nearly 90% compared with 1.331 billion at the end of last year, and the scale exceeded 2 billion yuan at one stroke.
According to the data, as of March 4, the breeding ETF (159865) had a net capital inflow for five consecutive trading days, with a total net inflow of nearly 300 million yuan. In the past two months, the net inflow exceeded 900 million yuan, with a net flow rate of 74%.
For the recent rebound in the breeding sector, analysts said that the stock price is positively correlated with the pig price, but the stock price is often ahead of the pig price. With the subsequent rebound of pig prices, it is expected to further support the trend of breeding index.
pig cycle inflection point approaching
Overall, the core logic of the breeding sector lies in the reversal of the pig cycle. It is generally believed that the pig production capacity is expected to bottom out in the second and third quarters of this year, when the pig price will enter the channel of cyclical rise.
"Valley expensive hurts people, valley cheap hurts farmers". Among many industries, the cyclical change of pork industry price is the most obvious. High meat prices stimulate the enthusiasm of farmers, resulting in an increase in supply and a decline in meat prices, thus cracking down on the enthusiasm of farmers, leading to the deregulation of production capacity, and the reduction of pig supply leads to an increase in meat prices.
Statistics show that as of March 1, more than 25 A-share listed companies have released performance forecasts among those that have arranged pig breeding, production and processing. From the results, it is estimated that Jiangxi Zhengbang Technology Co.Ltd(002157) will lose 18.2 billion yuan in 2021 and Wens Foodstuff Group Co.Ltd(300498) will lose 13.337 billion yuan. In addition, New Hope Liuhe Co.Ltd(000876) , Tech-Bank Food Co.Ltd(002124) , Fujian Aonong Biological Technology Group Incorporation Limited(603363) and other estimated losses are also more than 1 billion yuan (individual stock information is only for reference and does not constitute investment suggestions or commitments).
Affected by the "escalation of the situation in Russia and Ukraine", the uncertain factors of global food security have increased, accelerating the rise of Shenzhen Agricultural Products Group Co.Ltd(000061) futures prices, and the prices of corn and soybean meal in China have jumped. The downturn in pig prices and the increase in the cost of feed raw materials such as corn and soybean meal will lead to increased losses in the breeding industry and sufficient power to remove production capacity.
Citic Securities Company Limited(600030) believes that the worst performance of Chinese listed companies has passed, and breeding stocks are facing emotional and performance repair. From the perspective of the large cycle, the current pig cycle has basically ended the rapid downward stage of pig prices, is entering the bottom stage, and may usher in the upward stage of prices in the future.
how much space does the breeding industry have
In fact, smart funds have begun to layout the pig cycle in advance. The aquaculture sector has stepped out of the shock upward trend since its phased bottom in September last year.
Some analysts believe that pig breeding is a typical supply driven market with strong certainty on the demand side. When the whole industry falls into a loss, the bottom of the whole industry will become more and more clear. The market is convinced that the reversal is only a matter of time, and investors are willing to come forward to ambush.
So how much space is there for the aquaculture sector that has experienced a rebound in the early stage?
In this regard, Guotai Junan Securities Co.Ltd(601211) believes that the current breeding sector is still in the value of the regression stage, rather than the cycle of bubble stage, is in the most decisive stage of investment, still relatively low head market capitalization and position level means a significant upward space.
Changjiang Securities Company Limited(000783) Chen Jia, chief analyst of agriculture, forestry, animal husbandry and fishery industry, believes that if we take the stock of fertile sows as the increase of pig price in the historical pig cycle, in reverse thinking, the stock of fertile sows decreased by 6% from July last year to January this year, while the inflection point of de breeding of historical fertile sows is between 20%, which indicates that the median line has not yet been reached. Therefore, whether in terms of time or space, it now belongs to the stage of actively arranging the pig cycle.
Liang Xing, fund manager of breeding ETF (159865) and its feeder fund, believes that with the continuous decline of the month on month data of the number of fertile sows and the deep loss of the industry, the market has further established the confidence of clearing the breeding industry. Before the fundamentals of the reversal of the pig cycle come, the market may continue to see through and will not finish the market in one breath. At present, the bottom of pig prices and the accelerating pace of capacity removal are the better time points for configuring the pig breeding sector. Investors can buy the breeding ETF (159865) and its feeder fund in batches by bargain hunting, and layout the leading companies in the breeding sector.
Note: the operation time of China's stock market is relatively short, and the past performance of funds and indexes does not represent the future. Relevant opinions are for reference only and do not constitute any investment suggestions or commitments. If you need to buy relevant products, please pay attention to the relevant provisions on investor suitability management and make risk assessment in advance. And select the fund products with the corresponding risk level according to their own risk tolerance. (CIS)
