Market Review
From April 11 to April 22, 2022, the Shanghai Composite Index fell by 5.07%, the Shenzhen Component Index fell by 7.59%, the gem index fell by 10.64%, the Shenwan light industry manufacturing / commercial trade index fell by 6.90% / 0.29% respectively, the Shenwan textile and clothing / food and beverage index rose by 0.48% / 2.52% respectively, and the Shenwan light industry manufacturing / textile and clothing / commercial trade / food and beverage index was -1.76 / + 5.62 / + 4.85 / + 7.66pct respectively compared with the Shanghai and Shenzhen 300 index, It ranks 13 / 2 / 4 / 1 among 28 shenwanyi industry indexes respectively.
Weekly topic: export chain is the best hedging and defense asset at present
From June 2020 to March 2022, the RMB continued to appreciate, mainly due to: 1) China’s effective epidemic control and stable economic fundamentals; 2) Strong export demand and expanding trade surplus; 3) The US dollar index fell, and the monetary policies of China and the United States were misplaced. The appreciation of RMB has a negative impact on the performance of export enterprises, mainly including: 1) the appreciation of RMB leads to the decline of settlement price and reduces the gross profit margin of export enterprises; 2) The appreciation of RMB leads to the rise of commodity export prices, which has a long-term impact on the reduction of overseas demand; 3) Exchange rate fluctuations produce exchange gains and losses and affect the net interest rate of export enterprises. We calculate the impact of exchange rate changes on the gross and net interest rates of export enterprises in 2021. According to our calculation results, exchange rate changes are the main factors affecting the gross and net interest rates of export chain enterprises, and have a greater impact on the net interest rates.
Since March 2022, the RMB has tended to depreciate. We believe that the devaluation trend of RMB is sustainable. The main reasons include: 1) the situation of epidemic prevention and control in China is still severe, causing negative disturbance to the economy; 2) The expectation of the central bank’s RRR reduction is on the ground and the Federal Reserve’s rapid table contraction and interest rate increase are superimposed. The trend of RMB devaluation may continue; 3) In the face of export pressure, the central bank may abandon the target of RMB exchange rate to ensure export growth. Even under the influence of covid-19 epidemic and the turbulence of international political situation, the market demand of core importing countries is weak, Chinese export enterprises face great risks, and the income growth may decline. The improvement of profit margin brought by RMB devaluation will still boost the performance. The exchange rate of our overseas enterprises is relatively flexible, which has a large impact on the profit rate of our overseas enterprises.
We believe that the following two types of companies have core advantages: 1) for enterprises with competitive products or services that can hedge by transmitting cost pressure to the downstream under adverse circumstances, the core indicators are high growth in operating revenue and small decline in profit margin. We suggest paying active attention to Anker Innovations Technology Co.Ltd(300866) , Keeson Technology Corporation Limited(603610) , Quanfeng holdings in garden machinery industry, Hl Corp (Shenzhen)(002105) in outdoor sports industry, Jieya shares in personal care industry and Focus Technology Co.Ltd(002315) , cross-border e-commerce industry; 2) The core indicator of the enterprises with the largest performance flexibility after the devaluation of RMB is that the proportion of overseas business is relatively high and the net profit margin is low. We suggest paying active attention to Anker Innovations Technology Co.Ltd(300866) , office and home industry Zhejiang Walrus New Material Co.Ltd(003011) , garden machinery industry Joy Kie Corporation Limited(300994) , outdoor sports industry Tianjin Yiyi Hygiene Products Co.Ltd(001206) , personal care industry Xiamen Jihong Technology Co.Ltd(002803) , cross-border e-commerce industry.
Risk tips
The risk of macroeconomic growth falling short of expectations; Covid-19 epidemic impact; The business condition of the enterprise is lower than the expected risk; Risk of rising raw material prices; Exchange rate fluctuation risk; The competition pattern intensifies.
